How will the tenant fee ban affect landlords?

Concerned landlordLetting fees, or tenant fees, are fees charged by letting agents to cover basic administration, references and credit checks. They may also include fees charged to any changes to the contract (like changing tenants during the contractual term) and contract renewal. They are paid by tenants and can run up to hundreds of pounds.

Now the government plans to ban letting fees across England and punish those who disobey the law. It is said that this new law will save tenants around £240 million a year and make the market fairer. This ban applies to assured shorthold tenancies and licenses to occupy in the private rented sector in England.

At Romain Coleman, our team of landlord solicitors are here to help with any legal landlord concerns. In this post, we aim to explain this piece of legislation and its impact.

What’s changed?

The new bill proposes to ban all letting fees, with the only fees that are legally applicable to the tenant now being the security deposit, holding deposit and default charges. It’s also forbidden to increase the initial price of the rent and then lower it to circumvent these changes. Deposits are capped at six week’s rent for security and one week’s rent for holding. Though these laws are not retrospective, they apply to all landlords, including those with only one or two properties. This bill is still in parliament as of September, so these are still subject to change.

What happens if they are not complied with?

The new laws are the responsibility of the Trading Standards, who must also make provision for tenants to be able to recover unlawfully charged fees via the First-tier Tribunal. A first offence will incur a fine of up to £5,000, with repeat incidents in the following five years treated as criminal offences. Fines can be as large as £30,000 as an alternative to prosecution.

What will this impact look like?

Though nothing is guaranteed, there is a predecessor to this. A similar law was introduced in Scotland in 2012, with more or less identical aims. As agents were set to lose income from tenant fees, they looked to recover it by increasing the fees charged to landlords. In many instances, the landlords have had to absorb the hit. While it is easy to argue that the landlords can increase the rent to offset the higher charges levied by the letting agents, in reality many landlords don’t because they need to remain competitive.

We can help

At Romain Coleman we represent landlords only and our team of expert landlord solicitors are here to help you with any legal concerns. Call us now on 0208 520 4555 for legal guidance tailored for landlords.

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