Banned tenant fees and penalties for landlords

Banned tenant fees have occurred as a result of recent tenant law reforms. They have had a significant impact on the rental market by getting rid of many of the costs that tenants were previously made to pay. 

The law reforms were introduced in an attempt to create a fairer rental market and protect tenants from receiving excessive and often unexpected costs. As a result, many of these fees that were once common practice are now illegal, and strict penalties are in place for landlords who fail to comply.

As a landlord, it is important to understand your responsibilities and stay informed about these new regulations. We’ll break down the banned tenant fees. We’ll explain what landlords can no longer charge for, and offer practical advice on how to navigate these changes.

Understanding the New Law

The implementation of banned tenant fees and the recent changes to rental laws represent a huge shift in how the rental market works. This legislation came into effect on June 1, 2019, under the Tenant Fees Act in England. Similar regulations have also been introduced across other parts of the UK to protect tenants from facing unfair charges.

The ban only applies to charges incurred on or after June 1, 2020. Landlords are not required to refund fees that were collected before this date.

The main goal of these banned tenant fees was to reduce the financial burden on tenants. And make the costs associated with renting more transparent and simple. Having this transparency not only protects tenants from hidden costs, but it also significantly improves the landlord-tenant relationship, which has had a positive impact on tenant retention.

What are the banned tenant fees?

It is important to understand what fees have been banned to avoid facing any penalties or fines. Here is a list of some of the specific fees that are now prohibited:

• Admin Fees: Landlords cannot charge for administrative tasks, including contract renewals, reference checking, and other related activities.
• Inventory Fees: As a landlord, you can no longer charge tenants for performing an inventory check.
• Credit Check Fees: Fees cannot be charged for credit and immigration checks, as it is the responsibility of the landlord to ensure the tenant is legally allowed to rent the property.

These banned tenant fees have an impact on every stage of the tenancy process, from before, during, and after. The bans have helped to streamline the rental process. As well as protect tenants from excessive and hidden fees at any stage of their tenancy.

What fees can landlords charge?

Despite the range of banned tenant fees we have discussed, there are specific charges that landlords are still permitted to impose under the new regulations.

Holding deposits 

Landlords can charge a holding deposit to reserve the property while referencing and checks are completed. This deposit is capped at one week’s rent. Plus, it must be returned if the tenancy does not proceed, subject to certain conditions.

Security deposits

Landlords can collect a security deposit to cover potential damage or unpaid rent. The deposit is typically capped at five weeks’ rent for properties with an annual rent of less than £50,000. Or six weeks’ rent for properties with an annual rent of £50,000 or more.

Late rent payment

A default fee can be charged for late payment of rent. But only where the rent payment has been outstanding for 14 days or more (from the date set out in your tenancy agreement).  

Any fee charged by a landlord or agent cannot be more than 3% above the Bank of England’s base rate for each day that the payment has been outstanding. A fee that exceeds this amount is unlawful. 

Early termination fees

If a tenant wishes to end the tenancy early and this is agreed upon, landlords can charge a fee. Provided it is outlined in the tenancy agreement and is a genuine pre-estimate of the loss incurred.

Replacement of lost keys

Charges for replacing lost keys or changing locks can be imposed if explicitly stated in the tenancy agreement. As long as they are reasonable and reflect the actual cost incurred.

These fees must be clearly outlined in the tenancy agreement. Landlords must adhere to strict guidelines to ensure they are fair and transparent.

Changing your tenancy

Payments can be no more than £50 for the variation, assignment, or novation of a tenancy.

Utility payments

Tenants still have to make payments in respect of utilities, communication services, TV licence and council tax.

Consequences for non-compliance with the banned tenant fees

If a landlord violates the banned tenant fees, there are numerous penalties they could face. Charging unlawful fees will be a breach of legislation, and the landlord will face a financial penalty of up to £5,000. 

However, if the landlord breaches the legislation again within five years of the imposition of a financial penalty or conviction for a previous breach, this will be a criminal offence. This may impose a financial penalty of up to £30,000 as an alternative to prosecution.

Landlords who receive multiple fines for multiple breaches at once and have no prior financial penalty record will face a maximum fine of £5,000 per breach.

Landlords need to understand and adhere to these changes to avoid penalties and maintain positive relationships with tenants.

Staying informed about banned tenant fees and ensuring compliance with the law will help foster trust and avoid legal complications. Staying updated on these regulations and seeking professional advice when needed will contribute to a smoother rental experience for both parties.

We at CIA Landlords are here to give you the best advice when it comes to renting out your property. For peace of mind, we offer comprehensive landlord insurance tailored to your needs. To find out more, call us on 01788 818670 or get a quote today.