As part of the new legislation which came into force on 1st June 2019, we have compiled a list of tips for letting agents to navigate the Tenant Fees Act 2019.
It is important to note that for existing tenancies which were in place prior to the enforcement of the ban, that these do not fall under the scope of the legislation until 1st June, 2020. This means that unless a tenancy is renewed before this date, those fees which were tied to this tenancy agreement can continue to be charged. However, any fee which is taken after 31st May 2020, regardless of the start date of the tenancy, will be regarded as a prohibited payment, and will have to be paid back to the tenant within 28 days.
If a tenant fails referencing checks, despite providing factually accurate information, letting agents must still refund the holding deposit. For the letting agent to retain the holding deposit, the tenant must have provided misleading or false information, and the agent will have to be able to submit evidence of this. For example, an agent can still hold the holding deposit if a tenant states that their annual salary was higher than that which they actually receive.
Also, under the Act, letting agents are required to show their fees schedule, redress scheme membership and Client Money Protection membership on their website and in their office. This also extends to advertisements on property portals such as Rightmove, third-party websites and social media sites.
As tenancy deposits can now no longer exceed five weeks worth of rent, this does not mean that tenants with pets won’t be considered. Provided that the details are clearly expressed on advertisements and understood by the potential tenant, higher amounts of rent can be charged to accommodate tenants with pets. The rent for tenants without pets must also be clearly advertised.
Under the ban, it is also stated which payments are permitted, and those that are not. Permitted payments include the Green Deal charge, communication services, utility payments, Council Tax, termination of tenancy payments, novation or assignment of tenancies, payment on variation, default fees, the refundable capped holding deposit and rent payments. If a payment is not on the list, then it cannot be charged. Property management software, such as that created by inventory base, can help landlords and letting agents navigate these policy changes.
Under the Tenant Fees Act, you also cannot charge tenants directly for contractor appointments and callouts, even if this is due to the tenants’ own fault or if they have not previously allowed the contractor access. This means that the landlord must pay for these appointments. However, deductions can be made from the tenant’s deposit where appropriate if the necessary clauses have been included within the tenancy deposit. Damages can also be claimed in Court if works had to be conducted due to a tenant’s actions.
Although tenant’s deposits are now capped according to the new legislation, there is no impact on the way in which deposit deductions are currently operating. As long as there has been a breach of the tenancy agreement, which is covered within the deposit clause and the agent or landlord has suffered a loss, then an amount from the deposit can be deducted. This amount, however, should reflect the loss to the agent or landlord and should be a reasonable sum.
Any breach of the Tenant Fees Act 2019 can result in severe punishments, including a fine up to £5,000. Further breaches of the fees ban within five years of an offence will be treated as a criminal offence, and could come with an unlimited fine. If an individual is given two financial penalties within a period of 12 months, they could be entered into a Database of Rogue Landlords and Letting Agents. If a Prohibited Payment is made by the tenant, it must be refunded within seven days.
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