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Tenant Fees Ban | What Landlords and Tenants Need to Know

Posted by Hanna Liversidge on 11th July 2019
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In today’s article, we’re going to be talking about the tenant fees ban – who’s paying for it, who is benefiting, and what changes are going to impact both the tenant and the landlord.

You can view the video I created on this subject on my YouTube channel here.

The recent tenant fees ban took effect on the 1st of June, and it’s had major impacts to the lettings or rental business here in London and in the UK, because this dramatically reduces the amount of upfront fees that landlords or lettings agents could charge tenants. So tenants are definitely going to win off of this recent fee ban. I’m going to run through the charges that a lettings agent or landlord can actually charge tenants it’s restricted to.

Number one – rent – this simply states that the total amount of rent that can be charged to a tenant is now capped.

Number two – the refundable security deposit held for damages, that’s actually now being capped to five weeks rent for tenancies up to £50,000 per annum and six weeks rent for tendencies in excess of £50,000 per annum. A lettings agent can no longer charge tenants up to eight weeks or two months security deposit which could have happened in the past.

Number three – a refundable holding deposit. That’s now restricted to one week’s rent that would be taken at the time of marketing the property. If you were a tenant or an applicant that was interested in the property and it was taken to secure your holding in that property subject to tenant referencing and administration process. So, now the amount is capped at one week’s rent.

Number four – capping the cost associated with making changes to the tenancy agreement at £50. What it means is there are significant costs that tenants used to pay that they no longer can be charged for and the biggest one was the tenant referencing or admin fee. That was anywhere from £250 to £400 at the start of a tenancy and that was to do credit checks, right to rent checks, draw out the tenancy agreement, and that was a cost that most tenants would be expected to have paid.

The other significant cost that tenants used to have to pay that they’re no longer going to be responsible for paying are any costs associated with an inventory report. Here in the UK most landlords will have an inventory check-in report that’s compared to a check-out report at the end of the tenancy to compare and that’s then the basis to make any claims to use the security deposit to check for damages. That fee for the inventory check-in or check-out can no longer be charged to tenants.

The third major cost the tenants used to have to be able to be charged was say an extra deposit for a pet that can no longer be charged to tenants.

As you can see, this is great news for tenants, who have definitely benefited from this new legislation and a lot of tenants tenant associations are cheering the changes however some others are saying it’s just going to lead to an indirect way for landlords to increase the rents to tenants because they’re now going to have to absorb those significant costs that most lettings agents are charging and so tenants might be not seeing it in terms of the upfront cost but they might see it in higher rents over time. Some have even suggested that it could increase rents anywhere from £100 to £200 per annum and if you stay over time and if you stay in a property over time you’re going to end up paying those costs anyway.

That just gives you a little bit of a highlight of how these changes are going to affect both the landlord and the tenant.

Having worked internationally it’s definitely something that perhaps brings the UK more in line with what American tenants might be used to paying where they’re not used to paying any kind of admin fee or inventory check-in fee and it will need to be a cost that the landlords are going to have to pay going forward, but for many landlords it really is an additional cost that makes owning a property that much more challenging, yields are certainly suppressed in London where landlords don’t really earn a great return on owning investment properties here merely because the cost of buying the property relative to the rent they achieve can be quite low.

If you add these additional costs, it’s definitely going to strain landlords who, on top of these changes, are also bearing the brunt of reduced deduction of mortgage interest expense against their taxes so they’re being hit from several sides as well.

I hope that explains the recent tenant fees ban, if you have any questions make sure to put them in the comments below, I’ll respond to everything, and if there’s any other topics related to you renting, selling, buying property in London that you want to know about, I’d love to hear from you.

 

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