Future proofing your lettings business – tenant fee ban (HF Academy)

The Tenant Fees Act is set to change the way that many agents and landlords do business.

Hamilton Fraser’s latest workshop on this issue was a sell-out. ‘Future Proofing Your Lettings Business and How to Deal with The Tenant Fee Ban’ was aimed at preparing business owners for the transition and providing agents with strategies to help navigate this change.

From 1 June 2019, landlords and agents are prohibited from charging any fees to tenants, other than those ‘permitted’ by the Act. Any tenancy that is signed on or after 1 June must adhere to these new regulations.

With the tenant fee ban finally here, we explore the frequently asked questions from the event to help ensure that you are on the right track and also remain legally compliant.

Rent payments

Question 1: ‘As an agent can I charge a balloon payment on every rent taken from 1 June and then have some of the additional funds taken out in replacement of a traditional ‘fee’.

Answer 1: You cannot take additional payment from tenants and use this as a replacement for a traditional fee. All costs must be upfront and cannot be hidden from tenants.

 

Question 2: ‘Can a tenant pay extra on top of their rent in a month if they wish to do so?’

Answer 2: Tenants can choose to pay extra on top of their usual rent each month. However, you must be able to demonstrate the reason for doing this and rent must be as advertised. Any agents or landlords found to be flouting the regulations set out by the Tenant Fees Act will face enforcement from Trading Standards and severe penalties for non-compliance.

 

Question 3: ‘As an agent am I still able to charge rent inclusive of utilities after 1 June 2019?’

Answer 3: You are still permitted to charge rent ‘inclusive’ of utilities providing that this is clear to tenants at the start of the tenancy.

Read more about ‘permitted’ payments at GOV.UK.

 

Question 4: ‘Can a tenant voluntarily pay a fee?’

Answer 4: No, even if the tenant has ‘agreed’ to voluntarily pay a fee this may still be considered a prohibited fee. However, if a tenant opts to employ the services of a third party, for example by purchasing their own reference check or inventory service then this cost would be the tenant’s responsibility.

Holding deposits

Question 5: ‘How much can I take for a holding deposit if a tenant is interested in renting the property?’

Answer 5:  You can take up to one week’s rent as a holding deposit to reserve ‘the property’ for a tenant who wishes to commit to renting a particular property. In addition, you can only take one holding deposit for one property at a time.

 

Question 6: ‘The tenant is now living in the property for which I took a holding deposit, what do I do?’

Answer 6: You must refund the holding deposit to the tenant, in full, within seven days of the tenant entering into a tenancy agreement unless it has been agreed to use the holding deposit as part of the first months’ rent.

Pets in the property

Landlords permitting pets in the property and the question of the damage they can cause was another area of confusion for agents.

 

Question 7: ‘Can I take a higher amount of tenancy deposit if a tenant has a pet?’

Answer 7: No. A landlord or agent can only take a tenancy deposit up to a maximum of five weeks’ rent (where the total annual rent is less than £50,000) or six weeks’ rent (where the total annual rent is over £50,000), even if there is a pet in the property. If you currently only take four weeks’ rent as a deposit, then you would be able to increase it, up to the five week cap.

 

Question 8: ‘Are we able to insist that a tenant has pet insurance when renting one of our properties?’

Answer 8: No. This would be a condition of the granting of a tenancy and this is a prohibited fee.

 

Question 9: ‘Can we take out pet insurance, make the tenant aware that this policy has been taken out and is part of the tenancy and then charge them for this?’

Answer 9: No. You could purchase the pet insurance but you cannot insist that the tenant pays for it. This would constitute a ‘fee’ which is prohibited under ‘the Act’. Should the tenant choose to purchase the insurance, without it being a condition of the tenancy, then the tenant is responsible for the cost.

Enforcement of the Tenant Fees Act

Question 10: Who will enforce the Tenant Fees Act?

Answer 10: According to government guidance, “Trading Standards authorities have a duty to enforce the ban but district councils that are not Trading Standards authorities will also have power to enforce if they choose to do so.” Read more about your local trading standards authority.

Tenants have the option of recovering prohibited fees through the First Tier Tribunal.

 

Question 11: “What is classed as a breach of the Tenant Fees Act?”

Answer 11: Any request made for a fee that is not a ‘permitted payment’ will be a ‘prohibited payment’ and be classed as a breach under the Tenant Fees Act. Each request that is made is treated as a separate breach and so you may be liable for multiple breaches. For example, if you charge different tenants under different tenancy agreements these will be treated as individual prohibited payments.

 

Read more information on what is considered to be a breach in the government guidance on the topic.

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In addition, interesting points of note raised during the workshop included:

  • All of your paperwork, electronic documentation included, must also reflect the tenant fee ban
  • There is a transition period for existing tenancies from 1 June 2019 – 31 May 2020
  • The process must be followed correctly, there is no room for manoeuvre when it comes to the Act and agents and will be held accountable for a breach
  • All fees must be displayed online and in the agency, and be clear and transparent
  • The tenant fee ban doesn’t apply to company or holiday lets

 

Find out more information on the tenant fee ban and read our latest guidance. You can also read more about upcoming Hamilton Fraser Academy events and sign up to secure your place here.

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