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A guide to the tenant fee ban

Published: 29th May 2019

A guide to the tenant fee ban

By this point it is probably widely known that as of June 1st there will be a ban on fees being charged to tenants. While this is often referred to as a ban on fees being charged by lettings agents, it actually has a much wider scope.

All charges are banned unless specifically permitted

Under the new legislation, there is a schedule of fees which it is permitted to charge to tenants, basically, you can think of it as a whitelist of permitted items.

At the current time, this list comprises fewer than a dozen items (including the rent itself) and there are numerous restrictions limiting the extent of the fees which tenants can be charged.

Examples of fees which are, currently, often charged to tenants but will henceforth be forbidden including lettings agent fees, referencing fees, inventory fees and end-of-contract cleaning fees. This means that landlords will need to factor these costs into the rent they charge.

The law actually forbids anyone being charged prohibited fees in respect of a tenancy

Although we are using the term “tenants” for convenience, the law actually refers to a “relevant person”, which extends the protection both to guarantors and to people working on behalf of the tenant.

Prohibited fees apply even when a contract agrees otherwise

Contracts cannot overrule the law, hence landlords cannot pass on prohibited fees to tenants just by putting said fees into a rental contract.

The provision would be unenforceable and any attempt to enforce it would leave the landlord open to the schedule of penalties set out in the legislation, but the rest of the tenancy agreement would remain in force.

Penalties for charging prohibited fees start at £5000 per offence

The law is somewhat contradictory on what constitutes an offence.

On the one hand, the guidance states that landlords who demand excessive deposits on multiple properties will be treated as only having committed one offence. However, it also says that if a set-up fee is charged to cover referencing, inventory, right to rent checks and check-in costs, this would constitute five separate offences. Although, if relevant, they would all be considered a first offence and hence charged at the lowest rate of £5000 per offence.

There are variable penalties for a second (or subsequent) offence, the default fine is £30,000 but offences may also be subject to court proceedings and courts may issue unlimited fines and/or banning orders.

NB: These penalties are in addition to any action taken on or on behalf of tenants to recover any prohibited fees charged. There is, however, some good news on this front in that the recovery method is by means of a tribunal and hence there are limits to the costs which may be charged, which will hopefully make this an area of little interest to “no win no fee” lawyers.

Penalties may be levied on company officers

Landlords holding property through a limited company may be held personally liable for penalties if it is determined that the prohibited fees were charged with “the consent, connivance of or to be attributable to any neglect on the part of, an officer”.

If you would like to discuss any property investment opportunities or are looking to sell your investment, feel free to call us on 0161 464 7530 or email us on enquiries@hopwoodhouse.com 

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