From 1 June 2019 Landlords and Agents will not be able to charge tenants for creating a tenancy, renewal of a tenancy, or for checking out. There are also new restrictions on the level of deposit that a Landlord can request at the beginning of the tenancy. This article will give you a whistle stop tour of what you need to know:
Lets start with the fee update. The changes that came into force on 1st June will mean that Landlords and Agents cannot charge tenants fees to set up a new tenancy which previously covered expenses such as referencing, credit and immigration checks, drafting a tenancy agreements and administration charges. There are limited “Permitted Payments” that can still be charged which cover the below:
- REFUNDABLE HOLDING DEPOSIT – This is capped at one weeks rent. This ensures that the landlord or letting agent holds the property for you until you sign the contract. A holding deposit should be returned when you sign the contract but it can also be used as payment towards rent in advance or your tenancy deposit. Holding deposits do not have to be protected in a government-backed scheme.
- LATE RENTAL PAYMENT – If rent is overdue by 14 days the Landlord/Agent has the ability to charge 3% over the Bank of England base rate
- LOST KEYS/FOBS – Reasonable replacement costs can be charged
- EARLY TERMINATION OF TENANCY – Landlords and Agents can charge “reasonable” costs if a tenancy is terminated before the end of the fixed term to cover any losses
- CHANGING/ASSIGNING A TENANCY – Landlords/Agents can charge £50 to cover administration of changing the terms of a tenancy agreement
This has impacted on a Landlords running costs significantly and as a consequence appears to be driving rental prices up which we are sure will be closely monitored over the coming months.
The second key change is to the amount of deposit that can be held in relation to an Assured Shorthold Tenancy. Previously there were no caps on the deposit amount that a landlord could hold but typically this was around six weeks. The new levels are outlined below:
- LESS THAN £50K PA – Capped at five weeks rent if your annual rent is less than £50,000. PA This still requires lodgement in either a custodial or insured deposit scheme.
- OVER £50K PA – Capped at six weeks if your annual rent is above £50,000 PA. As above this requires lodgement in either a custodial or insured deposit scheme
A breach of the legislation will usually carry a civil offence and a fine of up to £5,000 but where an offence has occurred a local authority can impose a fine of up to £30,000. However, if the tenancy was entered into before 1 June 2019 and it was agreed in that contract to pay certain renewal fees, then a Landlord or agent can charge these fees for a renewed fixed-term agreement or statutory periodic agreement up until 31 May 2020. For tenancies entered into before 1 June 2019, the Landlord/agent can also charge for checking out, up until 31 May 2020.
Now is the time to really consider what these changes are likely to cost you, if you are managing your own properties and require some support to ensure that you are compliant with the ever changing property market legislation please get in touch to discuss. We can offer Full Property Management solutions where we manage your property compliance on your behalf to take the hassle out of property investing