Journal

Tenant Fees Act 2019: Goodbye to unfair letting charges?

By on
49

Agents have been allowed to charge exorbitant, arbitrary fees for too long, says future trainee solicitor Fraser Collingham

Ever been screwed over by a landlord or letting agents? Maybe not if you’re a lawyer or law student. But if you are part of ‘Generation Rent’, you will probably have had to shell out on letting agency fees at some point.

Tenancy fees

In Lambeth, London, where a lot of my friends live, the average fee paid by two tenants at the start of a tenancy is £409, and fees can range from £150 to a crippling £660. These are justified by being for reference checks and administration costs. Some letting agents also charge ‘checkout fees’ when you leave, and charge for refresher reference checks when you are renewing a tenancy. Add a deposit to that, a chunk of which might be deducted for the property not being clean enough when you leave, and you basically need a small fortune. If you add a deposit and the first month of rent, the costs are exorbitant for a student.

Even if you are being paid a maintenance grant from a law firm, this will be seriously watered down from the outset by these initial costs. If you are not lucky enough to rely on the Bank of Mum and Dad, you will be forced to work at least one job alongside your studies, incur serious debt, or be barred from the profession altogether.

A key problem is that the fees are wildly inconsistent across letting agents, and often grossly inflated and arbitrary. They often do not reflect the work actually done, argues Polly Neate, chief executive of homelessness charity Shelter. Vague descriptions such as ‘admin’ are not transparent — in reality this could just be printing paper and sending an email. However, we can now say goodbye to these charges.

Fees prohibited

The Tenant Fees Act 2019 will take effect in law on 1 June 2019. Letting Fees will be banned in England. All payments ‘in connection with the tenancy of housing in England’ are prohibited unless they are one of the prescribed ‘permitted payments’. These permitted payments include: rent, the deposit, a holding deposit, default payments, fees for changes to the tenancy agreement, fees for ending the tenancy, payments for utilities and communication services.

Fees for reference checks and administration fees will be prohibited under this law. Payments to third parties for cleaning fees will not be allowed. But, paying for a new key after you lose yours will be chargeable.

Want to write for the Legal Cheek Journal?

Find out more

The Act applies to assured shorthold tenancies, licences and student lettings. It will apply to all new tenancies signed on or after 1 June 2019 and renewals granted from that date onwards too. After one year it will apply to pre-existing tenancies and clauses charging fees in them will be unenforceable.

Cap on deposits

The Act also introduces a cap for tenancy deposits (schedule 1). If annual rent is less than £50,000, the maximum you have to pay is five weeks’ rent. If the annual rent is £50,000 or more, up to six weeks’ rent can be required. Any excess at all would be a prohibited payment under section 3.

It never fails to amaze me how many people are ignorant of the current rules on deposits. If you rent on an assured shorthold tenancy starting after 6 April 2007 in England and Wales, your landlord MUST protect your deposit using a government-backed tenancy deposit scheme. This makes it easier to challenge deductions at the end of the tenancy and get your money back.

Penalties

If the landlord or letting agent does not comply with the new Act once, they will commit a civil offence and be fined up to £5,000 (section 8). If they do so again, they will commit a criminal offence and be fined up to £30,000 (section 12). It remains to be seen how rigorous or effective enforcement will be.

Can landlords get around the rules?

The new law won’t cover everything — letting agents will no doubt continue to try to impose costs on renters.

What if the landlord charges £1,500 in month one of the tenancy, £2,000 in month two, and then £1,500 in month three? This would be a way of recouping £500 in rent which would actually just be used to cover the banned fees. The legislators have thankfully foreseen this. The £500 would be prohibited under schedule 1 of the Act.

Effect on the market

This law will cause letting agents to lose a significant proportion of their profits. To cover this, they may decide to charge landlords more. This would be on top of the increase in stamp duty and reduction in mortgage interest tax relief that landlords have had to contend with.

But can letting agents actually pass on the costs? It is a very competitive market. There are over 1,000 letting agencies in London alone. Landlords, unlike tenants, are free to shop around for the cheapest agents.

The main worry is that landlords will raise rents. As with many laws, we can look to Scotland, which banned fees in 2012. Victoria Spratt, a journalist who campaigned for the new Act, points to Scotland and says the ban in 2012 resulted in only a marginal rent increase (£) in line with other urban areas in the UK. It has been argued that the market merely adapted, and in the long term, a better relationship between landlord and tenant was created.

According to a report compiled by Shelter, 59% of letting agency managers said the ban in Scotland had no impact on their business.

Letting agencies will have to adapt. They may have to promote longer tenancies to avoid renewal costs or move to unfurnished properties to avoid inventory checks. Service standards could drop.

Letting agents have been allowed to charge exorbitant, arbitrary fees for too long. I hope that the market will adapt and tenants will not have to bear these unfair costs again.

Considering that up to a third of millennials will probably never own their own home in their lifetime, this law is one I welcome.

Fraser Collingham is a University of Nottingham law graduate. He is currently studying the LPC at The University of Law and is due to commence a training contract at an international law firm later this year.

Want to write for the Legal Cheek Journal?

Find out more

Please bear in mind that the authors of many Legal Cheek Journal pieces are at the beginning of their career. We'd be grateful if you could keep your comments constructive.

49 Comments

Anonymous

Finally.

Anonymous

The agents will push the charges on to landlords, the landlords will raise the rent to pay for them.

Most of these charges are as a result of the state meddling in the sector anyway. EVERY TIME the state meddles, tenants pay more. The state can’t control prices, it just ends in misery every time it has ever been tried.

Andon

Hmm. Not sure about that. According to the FT, similar reforms in Scotland had minimal effect on the letting market.

What this might mean is that the agents who are not successful enough to be able to make ends meet without charging tenants go out of business. That will mean fewer, larger firms who can apply economies of scale, which should result in lower fees to landlords and thus lower rents to tenants.

That argument is a simplistic one (but no less simplistic than yours) but just demonstrates that there can be more than one possible outcome.

Anonymous

So concentrating the market into fewer big business practically leads to price fixing for fees.

Anonymous

Interesting and BLOODY GREAT NEWS

Anonymous

Interesting.

Anonymous

I signed for my tenancy three months’ ago in preparation for my LPC and the estate agent used this upcoming legislation to convince us into signing for a long tenancy (of two years) due to the fact that it would “no longer be profitable to rent for one year”. Eventually managed to negotiate to 18 months but was not ideal being a large house which I have no need for beyond graduation.

Whilst the fees charged to us for referencing, “admin”, and check-in were extortionate, If this becomes the norm it would be very hard for students where they have no need for such a long tenancy and are left with signing over their rooms to others, with parents left on the contract as guarantors to the entire tenancy – even after they’ve left the house.

Anonymous

damn you got bullied like that? might wanna rethink a career in law

Anonymous

I understand that if you wrre sharing with others yoy may have felt like you didn’t want to let them down by declining the demands of the agency. But two years when you’re only staying a year is too long! It would have been better to rent a one bedroom flat at less cost, and if they try and pull that trick of “oh yoy need to sign a two year contract” tell them there are many other competitive priced similar properties on the market with ONE year contracts and take your businesses elsewhere! Dont ever be pressured into anything, especially where money is involved. In a way it can perhaps be easier to lay down the line because you don’t know them and they dont know you and theres no real connection to maintain beyond business.

Anonymous

Cucked. How could you be so stupid? They literally told you the law was changing. Jesus. Off to the high street for you.

Anonymous

Due to the nature of my practice a fair amount of my work involves letting agents and I can confirm that the majority of them are scum. Stupid too, so I imagine there will be even more work for me as these halfwits unsuccessfully try to find ways around the legislation in order to keep filling their pockets.

James

Classy with a hint of inadequacy. There are good and bad in all industries but its a shame you fell so bitter. Why? Perhaps it because you see letting agents owners earning more then a partner in a solicitor practice? That the value of their practices is of a 4x magnatude of solicitors firm?

Having been a solicitor and partner in a law firm and having run my letting agency for 20 odd years well I can confirm it’s a better life owning your own good letting agents. Due to retire in 2 years with a business valued close to 1.1mil. Keep being bitter. Keep underestimating those you despise for your own personal inadequcies.

Anonymous

Business valued at 1.1 million? Aren’t you a little cutey pie.

Not sure anyone in the city will be taking your comparison even remotely seriously when judging whether or not they should be jealous of you.

Best of luck with your retirement and your “valuation”.

Anonymous

Learn to spell.

Anonymous

James. I’m not bitter at all. And certainly not envious of a failed solicitor, now successful letting agent.

I have no idea whether you are correct about the relative earnings of a partner in a solicitor’s firm because I’m a barrister and that’s not my realm. However, I suspect that’ your claim is meaningless because the earnings of a partner in an MC firm and the earnings of the partner in a struggling high st legal aid firm are poles apart. However, the fact that you reduce things to money and base your value judgments on the bottom line says a great deal.

As a lord justice once said “I’d rather be a barrister on miner’s* money than a miner on barrister’s money” (barrister’s money in my being decent six figures, so another reason not to be bitter)

*Equally if not more true of letting agents, mutatis mutandis

Lucy Gordon

Wondering if anyone can help me…… I paid the fees in may for a tenancy that doesn’t start (and hasn’t been signed) until 5th June. Does this mean I should get my fees back as technically its only for tenancies signed or or after 1st June? Thanks

James

The article is nieve and unfortunately show from the little realife experiences of a trainee. Having been an articled clerk a long time ago you look at things in black and white. Life is not. Rents will increase for tenants and cost more to them. Shelter have not helped tenants and crow like they have done a great deed. Shame they don’t spend a donated penny on actual housing and when invited to act as a guarantor to help the downdrodden tenant they did not want to take on this risk.
Sounds

Andon

Lucy – have you read the legislation? It is usually a good start

kate

I am in the same position paid in May, signed on 1st June. Andon, I have read the legislation and cannot find a definitive answer to put to the letting agent as he has already fobbed me off when I raised this point with him. Your advice would be appreciated as I am £440 out of pocket at the moment.

Anonymous

I would be happy to advise you. Although, that advice would be subject to you passing compliance checks, signing up to the Firm’s engagement terms, and agreeing to be charged £500+ an hour plus VAT.

I look forward to hearing from you on whether you wish to go ahead.

OB

You are all that is wrong in the world…
‘passing compliance checks’
GET OUT

Kate

Lucy did you get an answer; I am in the same position paid in May, signed on 1st June. Andon, I have read the legislation and cannot find a definitive answer to put to the letting agent as he has already fobbed me off when I raised this point with him. Your advice would be appreciated as I am £440 out of pocket at the moment.

James

The article is nieve and unfortunately show from the little realife experiences of a trainee. Having been an articled clerk a long time ago you look at things in black and white. Life is not. Rents will increase for tenants and cost more to them. Shelter have not helped tenants and crow like they have done a great deed. Shame they don’t spend a donated penny on actual housing and when invited to act as a guarantor to help the downdrodden tenant they did not want to take on this risk.
Sounds

Andon

James – just out of interest, what particular insight does being an articled clerk at some point in the dim and distant past give you on the workings and economics of the lettings market? It certainly hasn’t done much for your grammar.

Setting out some of your reasoning rather than just stating your conclusions might assist.

Shelter are a lobbying and advice charity and not a house builder, a landlord or insurance company, so that perhaps goes some way towards explaining why they haven’t built or bought any housing and why they don’t act as a guarantor for tenants (have you any idea how much it would cost to underwrite that risk?)

Steve

Great news when I moved into my flat I had to pay an extra £100 for any damage caused and £50 for each pet I had plus credit checks etc,lots of money to find on a tight budget.

Anonymous

Well rent somewhere cheaper if basic charges we are issue. Self-pitying snowflake tosh.

Anonymous

Yeah.

It’s astonishing how some people seem to think there is a “right” to have a roof over your head in this country.

Fun fact: there isn’t!

Anonymous

Fees are patently a racket and should have been got rid of a long time ago.

As far as I know it remains unlawful for recruitment agents to charge job hunters. Nobody suggests the market has collapsed or been distorted by that. This is just the rented sector equivalent.

The amount of work required to insert a name into a standard contract is close to nil. There is no argument for ‘admin’ fees, and any appreciable work that needs to be done for other reasons is covered by the contract and charges between agent and landlord.

I don’t believe for a moment that rents will go up.

Letting agents = horrible little chiselers.

Anonymous

This statute is a heavy-handed disgrace and unnecessarily interferes with the market. Hammering deposits but there is no change to the pathetic laws that make it too hard to kick a bad tenant out. Fees were a good way of weeding out the ne’er-do-wells who really could not afford to rent the property.

Anonymous

Anyone who lets out a property is exercising a control over a basic need in return for money. They take on serious responsibilities that should prevent them turfing out ‘bad’ tenants on a whim. In fact it should only be possible to evict in extreme cases.

I’d also like to see perpetual tenancies, general rent controls and a right to buy from private landlords.

Private landlords should be regulated as if they are social landlords.

If you want to own multiple properties and charge people for living in them you should accept the risks of tenants you don’t like or who don’t do everything within the terms of the contract.

Suck it up: while they rent your or your client’s property it’s their home, not yours or your client’s. If you don’t want easy money for putting a roof over someone’s head, sell your properties and do something else instead.

Anonymous

What leftist tosh. It is my property and those that chose to contract to pay money to use my property better never forget it.

Anonymous

Tenants already have statutory rights. Your absolutist view of your own freedoms as a property owner is foolish.

Like many others, I just think tenants should have more rights than they have now.

Andon

@Anonymous :Jun 1 2019 2:00pm.

You’re wrong. When you grant a tenancy you alienate your rights for the period of the lease. With an AST it is not ended by a s.8 or s.21 notice and only end by the tenant or by way of a court order. So, after you grant a tenancy and until such time as the tenant leaves or the date set by a possession order passes, the property is not yours.

It is exactly that sort of ignorant attitude and the exploitative and bullying conduct which tend go along with it that ultimately leads to legislation which restricts the rights of landlords and agents.

Andon

*With an AST it is not ended by a s.8 or s.21 notice and can only end by the tenant giving up possession or by way of a court order

(missing words included)

Anonymous

Pathetic socialist tosh.

Andon

Eh? The law was proposed and formulated by the Tories

Anonymous

Doesn’t stop it being socialist tosh. The Tories are pandering to the mediocre moaners in an attempt to gain their votes.

Anonymous

You just wait until they repeal s.21. Then you snivelling little letting agent whiners and the greedy landlords you serve will have something to bleat about. Now THAT will really disrupt the market.

Anonymous

Such proposals are appalling. If someone is in my property and the lease is over or the aren’t paying rent why is a TORY government making it easier for them to squat and defeat my property rights?

Anonymous

Because even the Tories can see that a lack of housing is a risk to prosperity and social order.

Even under non-landlord-and-tenant land law you can’t do what you like with property – planning, environmental obligations, easements and all that. You owe duties to others. Some direct, some indirect.

(Many) private landlords really are the pits. Just fucking sell up if you’re that bothered. A glut of properties for sale will do wonders for a properly balanced market.

Anonymous

What’s wrong with market forces? Stalinist planning that’s what this is.

Anonymous

We’re just going to make them provide references that they pay for and send to us rather than we arrange and get them to pay. Simples.

Soraya Bueno Santos

Hello, i need some urgent help, actually im in a contract done before 1st of june but is about to finish at the end of july. The thing is that i want to renew for 6/12 months more but with another person and the agency is asking me to pay 500 to amend that contract. My question is, can they really do that? Because its suppose that its a new contract, even if its a renew its after 1st of June. Thanks!

Anonymous

Simply ask them the simple question: what statutory provision are they relying on to charge you £500 to make an amendment?

In any event; its the landlord you are contracting with, not the estate agents; contact them directly; explain the situation; cite the extortionate charges, presumably made in bad faith; and come to a separate agreement.

Anonymous

Surely the question is “what statutory provision prevents them charging £500”.

Anonymous

Admittedly I had not bothered to read to the article. You are indeed more astute on this one.

Presumably there will be another extortionate fee to “end” the tenancy, as another permitted payment. All in all, you’ve been royally tea-bagged, Soraya

Fe

Hence why landlords are raising the rent on the tenants. I guess parliament did not cater for the loopholes when enacting such a legislation because now estate agents still have circumvent this by raising the monthly premium on landlords and as a result the landlords are raising the rent on the tenant so back to square one.

I think the most effective thing to do is to put a cap on the rental market in London! It’s ridiculous.

Andris

I am in the same position paid in May, signed on 14st June. I have read the legislation and cannot find a definitive answer to put to the letting agent as he has already fobbed me off when I raised this point with him. Advice would be appreciated as I am £300 out of pocket at the moment.

Ryan

Hi after abit of advise please just moved house and signed rental agreement after 1st of June but I paid refrence fees before 1st of June and I am able to get a refund ? Thanks in advance

Join the conversation

Related Stories