The Tenant Fees Act - A Piccolo Perspective
This latest gem of legislation which comes into effect on the 1st June 2019, makes it illegal for landlords or letting agents to charge any fees to tenants. The legislation is complex and the Government has produced a guidance booklet for landlords and agents which runs to 59 pages! The knock-on effect is that letting agents are having to spend hours and hours, getting to grips with the new rules, re-writing tenancy agreements and holding deposit agreements and explaining to landlords why their charges are going up.
The intention of the legislation was to put an end to the “rip-off fees” charged by some letting agents, but rather than cap these at a reasonable level, the Government saw fit to ban them all together. In my opinion, the Act is completely one-sided; it will encourage tenants to submit multiple applications for rental properties and will allow unscrupulous tenants who are in serious breach of their tenancies to blackmail landlords. There are no penalties for tenants who abuse the process or give false or misleading information and no mitigation for landlords for minor “offences”. Yet the penalties for breaches by a landlord or letting agent are incredible; £5000 for a one-off offence and a fine of up to £30,000 or prosecution and criminal record for a second offence.
The legislation highlights the huge imbalance between Landlord and Tenant rights, and sounds the death knell for many private landlords who will simply sell their properties. In a nutshell, the only permitted payments that can be charged by a Landlord under the new legislation are as follows:
- Payment of rent under the tenancy
- Council tax, utilities, TV licence and telecom services
- A deposit (capped at 5 weeks rent)
- A holding deposit (capped at 1 week’s rent i.e. average in the South West £196.00)
- Default fee (where the tenant defaults on rent payments or to replace the actual cost of lost keys)
- Variation or assignment (limited to £50 where the tenant e.g. requests a change to the rent payment date)
- Early termination (where the tenant wants to surrender the tenancy early)
Local enforcement authorities have primary responsibility for enforcing this legislation and in addition to this, the Tenant Fees Act creates an independent lead enforcement authority to oversee the operation of letting agency legislation. Local authorities will have the right to keep the money from fines for certain purposes and are therefore likely to be ‘proactive and enthusiastic’ in enforcement!
It comes as no surprise that in addition to criminal sanctions and fines, the ability to serve a Section 21 Notice is also closely linked to the new rules. The Act imposes further restrictions on a Landlord’s ability to serve a Section 21 Notice if these rules have been breached. My personal opinion is that this will all backfire.
- Legislation that was intended to make renting more affordable for tenants will have the opposite effect as Landlords increase rents to mitigate their increased costs.
- Tenants who have pets will no longer be able to offer a pet deposit and so their only option will be to offer higher rent.
- The big corporate letting agents are being forced to seek other means to replace their lost fee income and so we will see a huge growth in agents up-selling and/or cutting corners.
- The rising costs of using a letting agent will lead many landlords to choose to self-manage instead of paying agent’s fees. Sadly few Landlords are fully up to speed with all the legislation and we will see a growth in non-compliance and a drop in standards across the private rented sector.
- The increased ‘hassle’ and the never-ending barrage of rules and tax implications may be the final straw for may private landlords who will simply decide to sell their rental properties. At a time when there is a significant shortage in property for rent, this could be just one of many un-intended consequences of this latest piece of legislation.