How will the Tenant Fees Bill impact on Section 21 notices?
Andrew Turner, chief executive at specialist buy to let broker Commercial Trust Limited, takes a look at some of the implications.
From 1 June 2019, the Tenant Fees Bill becomes law and a wide range of issues that landlords and letting agents currently charge for, will become unlawful. Landlords and letting agents can get ahead by ensuring that any new tenancy agreements reflect the new rules when it comes to charges.
Many landlords will want to know the impact of the Tenant Fees Bill on Section 21 notices. There are potential implications.
With the exception of exempted fees, from June 1st landlords and letting agents will not be permitted to charge tenants fees.
Among the fees that will be banned are:
Charges for a guarantor form
For domestic cleaning
For taking up references
Having the property de-flead as a condition of allowing pets in the property
Requirements to have specific insurance providers
There are a few charges which will be exempt from the ban, namely: holding deposits, rent, deposits and charges related to contractual defaults.
So, moving forwards, it would make sense for landlords or letting agents to ensure that future tenancy agreements do not mention any of the above banned charges.
Of course there may be potential issues for tenancy agreements already in effect, which may include clauses allowing some of the above events to be chargeable.
The new rules will initially apply only to renewals of tenancies and new tenancies and will exclude statutory and contractual periodic tenancies that arise after 1 June 2019.
However, landlords and letting agents should be aware that the fees ban will be applicable to pre-existing tenancies from June 2020.
From that date, any clauses in the agreement that permitted subsequently outlawed charges, will become ineffective.
In the context of Section 21, this is essential information.
After that date, if a landlord or agent makes a charge that relates to a banned fee, they must return this within 28 days, or it will be considered unlawful and will render a Section 21 ineffective.
It should also be noted that the new rules only apply to assured shorthold tenancies, student accommodation and licenses.
It is important for landlords and letting agents to fully understand the implications of the Tenant Fees Bill in the context of affected tenancy agreements and Section 21.
It is worth spending some time to review existing tenancy agreements and templates to ensure that these will remain fit for purpose after 1 June 2019.