New tenant fees law could cost landlords up to £83m

The new Tenant Fees Act, which bans excessive fees and caps the deposit tenants can be charged, could cost landlords up to £83m a year and lettings agencies £157m, says the government.


The new tenant fees law could cost letting agents up to £157m in its first year
(Image credit: 2019 Getty Images)

TheTenant Fees Act, a ban on letting fees and excess tenancy charges in England which has been looming over landlords for a few years now, finally came into force on Saturday. And the government estimates that in its first year it could cost landlords up to £83m and letting agents £157m.

The new law abolishes most fees associated with letting a property in the private rented sector in England. It includes fees for viewings, credit checks, references and the drawing up of a tenancy agreement, which have previously added as much as £800 to the upfront cost of renting a property, notes Miles Brignall in the Guardian. The Act also caps the amount landlords can ask for as a deposit.

Other than rent, the only fees that landlords or letting agents can now charge to tenants are a refundable security deposit, capped at no more than five weeks' rent (where the total annual rent is less than £50,000, or six weeks' rent if over this); a refundable holding deposit (to reserve the property) of no more than one week's rent; payment for early termination of the tenancy where requested by the tenant; payment for bills such as utilities and council tax; and a default fee for late payment of rent or replacement of a lost key.

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Landlords who break the rules face fines of up to £5,000 for a first offence, or an unlimited fine if they break the rules again with a five-year period. Many landlords worry that they will be forced to put up the rent on their properties to cover these costs, which will hurt tenants in the long run.

The new rules apply to new or renewed tenancy agreements that were signed on or after 1 June 2019. If a tenancy was entered into before 1 June, any renewal fees agreed at the time will still be due, but only until 31 May 2020. The aim of the bill is to reduce the costs that renters face at the outset and throughout a tenancy, as well as to give them a better idea of the total cost of renting a property.

Similar fees are already effectively banned in Scotland, and are set to be axed in Wales from September. A ban cannot be passed in Northern Ireland until there is a sitting assembly to do so.

The law also comes in the wake of various other government measures in recent years, including a scaling back of mortgage interest-rate relief, which have made buy-to-let a far less profitable investment than it once was.

Sarah is MoneyWeek's investment editor. She graduated from the University of Southampton with a BA in English and History, before going on to complete a graduate diploma in law at the College of Law in Guildford. She joined MoneyWeek in 2014 and writes on funds, personal finance, pensions and property.