The new Tenant Fees Act

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The Tenant Fees Act, which came into force on 1 June 2019, is likely to have a profound impact on landlords, managing agents and their tenants in relation to the charging of fees and administration costs for rentals.

Under its terms, all tenant payments are banned by default unless the Act specifically makes allowances for them. So, for example, tenants and landlords won’t have to pay fees for gathering references or taking inventories. The Act also limits the amount asked for as a deposit to a maximum of five week’s rental value, and limits holding deposits to one week’s rent.

What’s listed in the new Act?

The new Act basically puts a cap on tenants being charged anything other than the rent, the tenancy deposit, and where applicable, a holding deposit. However, certain fees are still included and they kick in if the tenancy agreement is broken.

Two of the three applicable fees are classed as ‘default’ fees (the third is applicable for contract amendments). Landlords must include notification of these fees into tenancy agreements. They are:

  • Lost keys – a minor infringement, but one that is still included in the Act.
  • Changes to Tenancy – landlords can now charge up to £50 for changes in the terms of tenancies, such as allowing pets or adding a new tenant to the agreement. It doesn’t apply to tenancy renewals or any changes to the length of an agreement.
  • Late Rent Fees – this is the major change covered by the Act. Landlords now have the right to charge a fee for rent payments that are two weeks or more overdue. These fees can be up to 3% of the rental amount, plus the Bank of England base interest rate, charged on a pro-rata basis. This brings tenancy agreements into line with other contracts, such as invoices for goods, where the ability to charge interest on overdue payments has been a long-established legal right.

Landlords do not have the right to charge for letters or phone calls involved in chasing or collecting outstanding rent and, because the amounts are relatively small, they probably won’t act as any kind of a deterrent or incentive to a tenant that is already in arrears.

This new legislation has little impact on tenants who default on their rent and, in that situation, the landlord has the standard Section 8 notice to fall back on.

What is a Section 8?

There are two different types of eviction notice, a Section 21 and a Section 8. The notice is a standardised document that can be downloaded from www.gov.uk. It’s absolutely vital that the law is precisely followed when evicting tenants, otherwise they may have a case to challenge the eviction on a technicality and you could end up with a situation where a tenant remains in a property for months, without paying any rent, whilst the eviction notice goes back and forth in the courts. This also starts to pile on the legal fees, making the whole process y costly.

A Section 21 can only be served if the tenant has had all the legally required documentation, including EPCs and gas safety certificates. If you serve a Section 21 shortly after a tenant has put in a request for repairs to be carried out, then it could be regarded as a ‘retaliatory’ eviction and easily challenged by the tenant in court. You cannot serve a Section 21 within the first four months of a tenancy, and you must give your tenant two months’ notice to quit the property.

A Section 8 eviction notice, also requiring a certain notice period, has a wide range of grounds that can justify its use, including rent arrears. If a tenant is up to two months in arrears, then a Section 8 notice can be served. It’s also possible to serve a Section 8 notice if a tenant is consistently late or in arrears, even if the rent has been paid up to date at the point of the notice being served.

If you are a landlord or managing agent and have any questions, please contact us on 01733 888888.