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The Letting Agent Fees Ban in the UK

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On the 1st June 2019, the government introduced legislation making it illegal for letting agents and landlords charge fees to tenants. Even if the tenancy agreement was signed before 1st June 2019, as of 31st May 2020 letting agents are not allowed to charge any non-permitted fees, for instance, check out or renewal fees.

Here we explain what the fees ban means for letting agents, landlords and tenants.

Letting Fee Ban Act

What are letting agent fees for?

Up until June 2019 letting agents were legally permitted to charge tenants fees for administrative services such as tenant reference checks, tenancy renewals and check-in and check-out procedures. By charging tenants the admin fees letting agents were able to offer landlords a lower fee and still maintain a good level of service.

Typically, tenants would pay between £200 and £300 per tenancy in fees. However, some rogue agents were charging much higher letting fees and were not transparent about what the fees were for.

What is the Tenant Fee Ban?

The Tenant Fee Ban Act 2019 makes it illegal to charge additional admin fees to tenants when they move into a new property or renew an existing contract.

The new laws are designed to protect tenants from unfair fees and reduce the cost to tenants of moving between rented properties. For tenants, the ban comes as a welcome relief.

To maintain their revenues, most estate agents have increased their letting and management fees to make landlords accountable for these costs.

What can letting agents and landlords charge for?

Under the Tenant Fees Act all fees are prohibited except for the following ‘permitted fees’. If letting agents or landlords want to be able to charge these fees, they must be stated in the tenancy agreement.

  • The rent is the agreed amount paid by the tenant to the landlord to rent a property. The Tenant Fees Act does not permit a higher rent for part of the tenancy term. For example, landlords cannot charge £900 for the first month’s rent and then reduce the figure to £700 from month two onwards.
  • Holding deposits to reserve the property and proceed with the tenant reference applications are capped at one weeks’ rent. This deposit can only be retained for up to 15 days, unless agreed otherwise in writing.
  • Tenancy deposits must not exceed the equivalent of five weeks’ rent where the annual rent is less than £50,000, or six weeks’ rent where the total annual rent is £50,000 or above.
  • Replacement of lost keys can be charged but is limited to the cost of replacement keys. Landlords are not permitted to charge an additional fee on top of the cost of the key cutting service. Landlords must be able to provide a receipt for the costs incurred.
  • Interest on late rent payments can be charged at 3% above the Bank of England base rate for each day from the date that the rent falls due until the date it is paid. Letting agents and landlords can no longer charge for administration costs incurred by chasing late rent payments.
  • Changes made to the tenancy agreement at the request of the tenant can incur a cost of up to £50 to cover administration costs. If landlords want to charge more than this, they must provide written evidence that their expenses were more than £50. For instance, early termination fees can be equivalent to the loss of rent incurred. Landlords cannot charge for renewing or extending a tenancy.

Letting Fee Ban Act Deposits

Are deposits changing as part of the Tenant Fees Act?

Holding deposits

A holding deposit is a payment to the landlord or letting agent to reserve a property. The maximum holding deposit allowed is up to one week’s rent. Landlords and letting agents have 15 days from payment of the holding deposit to complete their tenant checks, if the landlord decides against allowing the applicant to rent their property, they should return the money in seven days.

If the application is successful, the holding deposit should also be paid back within seven days, but in practice, it is normally put towards the first months’ rent or the security deposit.

Security deposits

The Tenant Fees Act caps security deposits at five weeks’ rent, where the annual rent is below £50,000. For properties with a yearly rental value of over £50,000, security deposits are capped at six weeks.

If your existing deposit is above this amount, your landlord must return the excess amount.

The impact of the ban on landlords and agents

The Tenant Fee Ban Act makes landlords accountable for all of the costs of renting out their property.

Most letting agents have increased the letting fees they charge to landlords to cover their administrative costs. Because the lettings industry is highly competitive, and landlords are free to shop around, letting agents will not be able to charge inflated fees.

For landlords, the real fee increase will vary but is generally relatively small. For example, a landlord whose fees increased by 1% on their property rented out for £1,500 per month will be paying an extra £15 per month.

In areas such as London, where demand for rental accommodation outstrips supply, rents are increasing slightly as landlords seek to recoup some of their additional costs.

What if I’ve been charged a banned fee?

If you are charged a fee that you do not think is legal, you should raise this with your landlord or agent. Professional letting agents will be aware of the legislation, if there has been a legitimate mistake, they should refund the charge within 28 days, or be able to show you why they are entitled to charge you a fee, for example, if you have lost the keys to the property.

We recommend that you always use a professional letting agents who are members of The Property Ombudsman (TPO) or The Property Redress Scheme. This gives you peace of mind that you have a clear route to resolve any complaints or issues.

If you are a landlord looking for guidance to let in London, contact Assetgrove, and we’ll be happy to help you.

Neil Jennings

Neil is the Operations Director at Assetgrove Lettings, London's Leading Rent Guarantee Company, providing Landlords with no voids, property maintenance, fee-free property management and stress-free service.

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