New act will see tenants' fees rolled into the rent

What does this mean for you and any let properties you have? Are your houses complying with legislation or are you exposing yourself to financial penalties?

The act will affect all new tenancies from June 1, 2019, and all existing tenancies from June 1, 2020. The aim of the act is to reduce the costs that tenants face at the outset, during and at the end of a tenancy.

All payments made by a tenant to a landlord or landlord’s agent will be prohibited unless the payment is expressly permitted under the act. Permitted payments include rent, a tenancy deposit, a holding deposit, payments in the event of a default, payment on variation of a tenancy, payment on termination (surrender) of a tenancy, payments for council tax and payments for utilities.

Payments that are precluded from all new tenancies from June 1 include tenant application fees, tenancy set up costs, referencing charges, inventories, end of tenancy cleaning fees, and general service charges, among others. From June 1, 2020, the act will also apply to all existing tenancies, and therefore if you have a tenancy in place which requires a tenant to pay for the redecoration of a property at the end of the tenancy, or pay for a check out, or pay a fixed service charge per month for gardening services, these will be invalid and unenforceable.

All such costs must be included in the monthly rent. Writing a specific payment into a tenancy or contract does not provide a way around the new legislation.

The act also limits the tenancy deposit that a landlord can hold to five weeks’ rent. From June 1, 2020, any deposits held in excess of five weeks’ rent must be returned to tenants. This cap rises to six weeks’ rent if the annual rent is in excess of £50,000.

A breach of the fees ban will be a civil offence with a financial penalty of up to £5,000. Successive breaches may constitute a criminal offence with an unlimited fine.

For some landlords, the act may have no effect. However, if you have one or several let properties where tenants have been in situ for some time, you need to ask yourself whether the tenancy agreement is up to date. How much deposit do you hold? Will you need to return some of the deposit by June 1, 2020?

If your tenants are paying a service charge, can you agree to remove the service charge but increase the rent by a proportionate amount? Are there any inclusions in the tenancy agreements that are prohibited payments?

While reviewing your agreements, it would also be a good time to ensure all tenants have been given a copy of the Energy Performance Certificate, gas safety certificate if applicable and the Government How to Rent Guide, without all of which you will be unable to serve a section 21 notice if you require possession of a property.

Sarah Howie, of Howie, Kent & Co