Landlords Be Aware: Letting Fees Banned From 1st June 2019
BEWARE: The Changes Are Coming..
In February the Tenant Fees Act 2019 was given approval with Royal Assent, which will bring into effect, major financial changes for ASTs (Assured Shorthold Tenancies) in the PRS (Private Rental Sector), affecting Tenants, Students Lets and Licence Agreements, impacting on the revenue stream for Agents and Landlords with regard to the fees that may be charged.
The changes will be implemented for all new ASTs from the 1st June 2019. For existing tenants these changes will be introduced as and when contracts are renewed, with all ASTs covered by 1st June 2020.
Currently tenants and third parties assisting tenants rent a property, can be charged for a number of items some of which are listed here. However, from the 1st June this all changes.. Landlords and Agents failing to comply can face substantial fines, be banned from their business and in some situations find themselves with a criminal record…
Referencing
Credit Checks
Administration Costs
Assessing Guarantors
Services (Cleaning, Gardening etc.)
Tenancy Renewal Fees
Inventory Check In / Out
Changes Requested By Tenant Restricted to £50 Charge In General, (for more complex changes fees must be considered “reasonable”)Other changes being introduced are:
Holding Deposits Capped – 1 Week’s Rental Value
Security Deposits Capped – 5 Week’s Rental ValueLandlords / Agents will still be able to charge for late rental payments, lost keys and early terminations requested by the tenants, but all fees must be considered as “reasonable” and must not exceed the loss the landlord my suffer as a consequence of early termination.
One thing landlords will not be allowed to do is charge a higher rent than normal at the beginning of the tenancy and then reduce the rent when the fees have been covered, so the likelihood is that they will just increase the annual rent to compensate for the increase to their overheads thereby having a negative impact on new tenants.
Dangers Of Non-Compliance
Landlords / Agents who fail to comply with these new rules, are liable for fines of £5,000 for an initial breach and a criminal record if found guilty twice within a 5 year period. However, local authorities can fine the guilty party up to £30,000 and ban them for life, instead of a criminal prosecution.
The Future
Over the last couple of years, with the changes the government has introduced regarding tax relief, plus all the new rules and regulations, licences etc, landlords and agents in the private rental sector have had a real tightening of the belt.
In an article by the NLA they suggest that the introduction of this act will cost the private landlords sector a total of £83 million in the first year alone. However, Agents will be much harder hit with a total cost of circa £157 million.
The impact is going to add to the reduction in margins that landlords receive and the reduction of these yields will, no doubt, have a further negative impact on the market and is likely to create a spate of sales by disgruntled landlords who decide that the amount of work involved to managing tenants, for the returns received, is not worth the effort.
This is likely to have a knock on effect for Agents, who will potentially end up reducing staff and increasing their fees to landlords, which in turn could fuel the problems, causing some landlords to end their contracts and start to manage their properties themselves, or worse, cause even more landlords to just evict their tenants and sell, thereby creating more homeless people, who will probably end up paying higher rents to live in the same area.
Is the Government’s plan to clean up the private rental market going in the right direction..? Time will tell..
From 1st June 2019 - Letting Fees Banned
