Are You Charging Illegally? Tribunal Verdict on Tenant Fees
Do you know what the Tenant Fees Act is? And did you know that there’s been an important update about in recent days?
Worried about the cost of your upcoming remortgage or just looking to expand your portfolio? Let us know and we’ll be able to find the right expert for you.
As a landlord, there’s lots of legislation that you need to be aware of and abiding by. If you don’t, you could find yourself falling foul of big fines that put your investment at risk.
What is the Tenant Fees Act?
The Tenant Fees Act came into force on 1st June 2019 and was designed to protect tenants from unfair fees and reduce the costs of moving between rental properties.
Under this legislation, it was illegal for a letting agent to charge a tenant fees when they rent a new property or renew their tenancy; and deposits were also capped, reducing the amount of money that tenants have to pay up front.
This impacted both tenancy deposits and holding deposits. The tenancy deposit was capped at no more than 5 weeks’ rent, where the total annual rent is less than £50,000, or 6 weeks’ rent where the total annual rent is £50,000 or above. The holding deposit, to reserve a property, was capped at no more than 1 week’s rent.
Moving, whether renting or buying, is a stressful and expensive time, but the Act meant that no additional costs can be added onto the tenant.
What is the latest update to the Act?
Almost five years after the Act came into force, there has been an important update.
This all started when Sheldon Kaplan rented a property on Daubeney Road in Hackney with three other people in 2022. This was for a fixed term of twelve months, coming to an end in October 2023 when three of the four tenants gave notice.
Tenant Dugald Johnson wanted to stay on in the property and found three more tenants to take over the tenancy from the tenants who were moving out.
The letting agent, London firm Blakestanley, charged the current renters to reference the new applicants. Blakestanley assured the tenants that the fee WAS allowed under the 2019 Tenant Fees Act, but unfortunately for them, Sheldon Kaplan is a property lawyer specialising in tenant and landlord law, and he challenged the £21.60 he was charged, taking the firm to a First Tier Property Tribunal.
The case revealed a grey area in the Act; Blakestanley’s legal team had looked at the official guidance on the Act and believed that the situation was a ‘change of occupancy’ rather than a new tenancy. Therefore, the fee was allowed because ‘all existing tenants remain joint and severally liable for the rent and the terms of the contract until the whole process has been carried out and a new tenancy is signed’. But the Tribunal found that ‘those leaving the property are not liable for the costs of referencing’ and the charge was refunded.
What can a landlord charge?
The Act protects ALL tenants, so even if you don’t work with a letting agent, you as a self-managed landlord need to be aware of what you can and can’t legally charge your tenant.
Here is what you CAN charge:
- Rent. This goes without saying, but of course, you can charge your tenant rent! Make sure the amount is clear in your tenancy agreement and that you take the necessary legal steps to increase it, should you need to in the future
- Tenancy Deposit. As we said, you can charge the refundable deposit, but it is CAPPED. You cannot charge more than 5 weeks’ rent where the total annual rent is less than £50,000, or 6 weeks’ rent where the total annual rent is £50,000 or above
- Holding Deposit. Again, we’ve said this already, but it bears repeating. Yes, you can charge a holding deposit, but this is capped at NO MORE than 1 week’s rent
- Payments associated with early termination, when this termination is requested by the tenant
- Costs incurred for the variation, assignment or novation of a tenancy. This is capped at £50, but if your reasonable costs have been higher than this, you can charge it
- Fees. This includes a default fee for any late payment of rent and replacement of lost keys etc.
- Utilities etc. This includes communication services, TV licence and Council Tax
While the letting agent was in error on this occasion, this was a grey area in the Act which has been clarified by this Tribunal. If you have any concerns about self-managing your property, it might be worthwhile considering working with a letting agent. If you are at all unsure about this, book a call with us and we can talk you through your options.
Did you know anything about the Tenant Fees Act? Are you worried there are other bits of legislation that you don’t know about that could trip you up? Let us know in the comments below.
