Waterlooville Landlords - How The Tenant Fee Ban Will Directly Effect You
On 1st June 2019 the Tenant Fee Ban will come into force. This legislation is pretty much what it says on the tin, no fee’s can be charged to tenants. This legislation works on the basis of if the fee isn’t listed as an allowable fee then it’s prohibited. The allowable charges are as follows:
Holding deposit equivalent to one weeks rent is all that is now allowed. This is a fee to secure the property whilst tenants are going through referencing. This can only be held for 15 calendar days, after this period written consent is needed from the prospective tenant(s) to hold the deposit longer and that the funds will be allocated towards the first months rent. If written consent isn’t provided by 15 calendar days or the tenants pull out of the offer the holding fee needs to be refunded to the tenant(s) within 7 days.
There are circumstance where the holding deposit doesn't need to be refunded. You will require signed proof false details have been provided by the tenant(s) causing the application to fail, therefore the application process needs to be water tight. For example, if the tenants fail right to rent checks, provide false or misleading information, or where the landlord has tried their best to get the information needed but the tenant fails to provide the information within 15 days.
Capped at 5 weeks worth of rent, no additional pet deposit is allowed on top of this. To work out 5 weeks rent, use the below formula
(£800 has been used for this example)
£800 x12 = £9600 (yearly rent)
£9600/52 =£184.615385 (weekly rent)
£184.615385 x5 = £923.07 Deposit allowed to charge
To make sure you are calculating the deposit correctly, follow the link to TDS website which will calculate the deposit allowed for each specific property https://www.tenancydepositscheme.com/depositcap
If a 6 week deposit is already held there are two option:
1. When the Tenancy is renewed onto another fixed term period the deposit needs to be reduced to the allowable 5 weeks rent. Check with the scheme holding the deposit, they will have a system in place to release the additional unauthorised deposit.
2. If the tenancy is left to run on a contractual periodic tenancy these regulations will take affect for pre-existing tenancies on 1st June 2020.
Previously we have been able to charge for sending chase letter for arrears, this is now prohibited. Once tenants fall 14 days into arrears you can charge 3% above base rate for each day the rent is overdue until it’s paid. For example if tenants pay 11 days late, a late payment charge is prohibited but once 14 days in arrears you can charge 3% above base rate.
If tenants lock themselves out, snap a key in the lock you can't now tell them to call a locksmith to sort it out, this is a prohibited payment. The cost of the keys or a security device can be passed to the tenant to pay, anything that can’t be evidenced by a receipt will be a prohibited payment. The legislation does not allow for a landlords time to go and give a spare keys to a tenant out of business hours if they should lock themselves out.
Surrender of Tenancy
Where a tenant requests to break the tenancy earlier than the natural expiry date, fee’s equivalent to the loss incurred as allowed. Charges such as referencing, tenancy drafting, check in etc. are prohibited these costs can not be shown as a loss. Instead, you will be able to charge the equivalent of the rent lost due to the unforeseen void period. As the void period will not be knows at the point of charging, it’s likely landlords and agents will start to refuse early termination.
Change of sharer
If tenants request to do a change of sharer, the normal costs of referencing and reset up the new tenancy would have been charged, this is now prohibited. A £50 payment is what the legislation allows, if the cost is to go over £50 this needs to be evidenced via an invoice/receipt.
Novation of Contract
For example if tenant ask if they can get a pet and the answer is a yes a £50 fee is able to be charged, if the answer is a NO, no fee can be charged.
Where the tenant has breached the Tenancy Agreement and caused damage as a result, then landlords may still seek compensation via deductions from the deposit or court action.
Third party payments
A number of third party payments can be required as part of the tenancy agreement. Most can be used by landlords and agents, but some are exclusive to landlords.
Landlords and agents
1) A contractual clause insisting on the tenants paying the television licence is an acceptable payment
2) A clause insisting on the tenant paying the council tax is an acceptable payment
1) A clause requiring the tenants to pay for the landlord's costs from a specific service provider for utilities is a permitted payment.
2) A clause requiring tenants to pay the landlord's cost for a specific communication service (phones, broadband, cable/Sky TV) is permitted for landlords.
If the landlord seeks to charge more than the billed costs for these services then any excess will be considered a prohibited payment.
The legislation has thought of loop holes and has written in that the rent can’t be increased for the first month/3 months to cover fee’s and will then drop to X amount.
If you are now worried about allowing pets in your property, the legislation does allow a rent increase, the price difference needs to be advertised clearly, for example:
£800pcm without pet
£825pcm with 1 dog or cat
This rent will be for the lifetime of the tenancy. Don’t forget, you can’t now specify that tenants get the property professionally cleaned via a company and fumigated at the end of the tenancy. To make sure the property is left in a professionally cleaned condition this needs to be done before the tenancy commences with the property condition listed upon the Check In Report for the tenants to leave the property in the same condition at the end of the tenancy.
Please make sure all the above default fee’s allowed in the legislation are within the Tenancy Agreement signed by all parties otherwise they are non enforceable. A contractors call out charge for issues caused by tenants can’t be passed back to a tenant to pay, the fee has to deducted from the deposit at the end of the tenancy. For example, tenants are to lock themselves out of a property and a locksmith is needed, the fee for the locksmith and work can’t be passed to the tenant to pay. The landlord is to pay the contractor and deduct the cost from the tenants deposit at the end of the tenancy. My advise is to send the tenants a copy of the receipt and get written permission for this fee to be deducted as and when the tenancy does come to an end. If the tenancy doesn't end for 2 years following the mishap tenants can deny knowing about this deduction and can cause the loss of the deduction from the deposit leaving you out of pocket. If a landlord doesn’t wish to wait this long for the refund, the cost the tenants can be taken to court for damages where a judge can award the refund, but please note this will cause a very fractious and sour relation between the landlord and tenant.
The penalties involved in getting this wrong are:
Returned prohibited payment within 28 days
Can’t issue a section 21 notice until the fee is returned
£5000 first offence
£30,000 second offence in a 5 year period or the beginning of criminal proceedings
If you have an questions on the Tenant Fee Ban or any property related questions please don't hesitate to contact me.