What you need to know about the Tenant Fees Act 2019 – are you ready for the change?
As I am sure many of you are aware, the ‘Tenant Fees Act 2019’ becomes law on 1st June after it gained Royal Assent in February of this year. This change in legislation will affect all residential tenancy agreements signed on or after 1st June 2019- including those secured through the income streams of online property portals such as Rightmove and Zoopla.
Initially, the change in legislation will not affect existing tenancy agreements, then after 1 year, any clauses in the tenancy agreement that allows fees to be charged for terminating or renewing the tenancy agreement will become invalid.
What can estate agents charge tenants for?
From the 1st June, landlords and letting agents can only legally charge tenants for;
- An amendment or early termination of the tenancy agreement if requested by the tenant
- Utilities, council tax and communication services such as telephony and internet access
- Costs incurred due to a tenant default- this could include lost keys or late payment of rent for example- however, late payment of rent can only be charged at 3% above the Bank of England interest rate and no charge can be made for sending reminder letters.
- For properties with annual rental of less than £50k, security deposits are to be capped at 5 weeks’ rent
- 1 week rent equivalent for holding deposits- the tenant has 15 days to enter into the tenancy and these funds must be returned in full within 1 week of holding deadline, the landlord backing out, or the deposit can be converted to part of the security deposit if authorised by the tenant. The full amount of the holding deposit does not need to be returned if the tenant backs out, doesn’t supply requested information within the 15-day holding period, or the tenant is discovered to have provided false or misleading details.
What can estate agents no longer charge tenants for?
The changes to current legislation go further to prohibit charging tenants to cover the cost for the following items;
- Credit checks
- Guarantor form costs
- Administration charges
- Gardening services
- The use a specific insurance provider
- De-flea treatments as a condition of keeping pets
We fully recognise that for many of our Hunters franchise owners, residential property lettings provide a steady additional income stream. so, where will these costs be recouped from?
Some Agents may think there is a simple way around this ‘no fees income stream’ loss- perhaps agents can simply increase rents? Increasing property rents will, for an introductory period, be subject to a ban in order to deter agents and landlords from using this strategy to camouflage passing on the costs of administration incurred engaging tenants in new, or extended, agreements. One further risk in the market is that higher rents will probably encourage consumers to shop around and maybe be forced to compromise the quality of their accommodation by using unscrupulous agents that manage sub-standard property portfolios.
At Hunters, we feel that the best strategy is combining our complete end to end lettings solution along with Hunters additional income streams, whilst maintaining our integrity with the high standard of properties we incorporate into our branch portfolios, continuing our healthy relationships with tenants and property owners, and utilise this legislation to help us grow our rental portfolios to increase market confidence as the ‘go to’ agents for reputable rental properties- after all, that’s what makes us the nation’s favourite estate agent.
Interested to find out how we can help you survive this major change to our industry and what makes our complete end to end lettings solution market leading? Then get in touch and lets talk about how a Hunters franchise can change your fortunes.