On 1 June 2019 the Tenant Fees Act comes into effect in England. It’s important that Landlords know how the new rules will affect them.
The new act means that the number of chargeable items, for which letting agents can charge tenants, is significantly restricted. These include;
- Refundable tenancy deposit (capped at no more than five weeks rent or six weeks if annual rent exceeds £50,000)
- Refundable holding deposit (maximum one week’s rent)
- Amendments to the tenancy agreement, if requested by the tenant, capped at £50 unless agent can justify further expense
- Payment concerning ending of the tenancy when the stated end date of an agreement has not been reached if requested by the tenant
- Payment inclusive of council tax, TV licence, communication services and utilities
- Default fees for late payment of rent and replacement of keys and/or security devices, where required in the tenancy agreement
These changes restrict the monetary value that can be charged for certain items, meaning that letting agents could find it difficult to replace that income.
However, there is a risk that some agents may instead increase management costs to landlords to recover the potential financial losses associated with the rule changes.
This, in turn, could result in rent increasing and the tenant facing higher costs despite the intention of the act being to reduce additional costs for tenants.
Landlords are being advised to plan in advance by contacting their letting agency and ensure they are aware of any potential costs and services, and understand if anything is going to happen.
Knowing how the Tenant Fees Act will affect you as a landlord early enables you to put the appropriate strategies in place to deal with it.
If rent is to increase, a minimum of one month’s notice must be given to the tenant (6 month’s notice on yearly tenancies), and the tenant must agree.
However, HMRC states that letting agents and management fees are tax deductible, meaning landlords can reclaim tax on the additional costs.