What Fees Can a Tenant Expect to Pay?Written By PropertyLoop April 07, 2021
Of course for many getting that first step onto the property ladder is just simply inaccessible, especially during a time when the financial security of so many is in jeopardy. However, although generation rent is still hailing it as the modern, viable alternative, beginning a tenancy can still leave some with a quickly thinning wallet. Whilst new government legislation has brought about considerable change in what a landlord can charge a tenant before they move into a property, tenants still have to navigate deposits, advanced rent and other financial expectations.
The Tenant Fees Act 2019
Applying to all tenancy agreements signed on or after the 1st June 2019, regardless of if they are new or renewed, the Tenant Fees Act brings with it decisive action from the government intended to safeguard tenants from paying exorbitant fees during the letting process. The Tenant fees Act 2019 prevents landlords and letting agents from charging tenants excessive amounts throughout the tenancy, allowing tenants “to see at a glance what a given property will cost them in the advertised rent with no hidden costs”, encouraging and upholding a more transparent rental landscape.
Whilst arguments have been raised claiming that landlords could simply realign their revenue by charging a higher rent over the course of the tenancy, potentially costing tenants over £100 extra in rent each year; the government intervention hopes to ensure that any costs incurred by the new occupants of a rental property “reflect the real economic value of the services provided”. This reduced cost barrier could be the incentive for those who have been waiting to enter the rental sector, offsetting any monetary losses by the landlord with a more secure, richer pool of potential renters.
Historically tenants have faced ludicrous administration fees of up to £350 for being provided with a copy of the tenancy agreement, alongside reference and credit checks of up to £100 per tenant, causing occupants to be significantly out of pocket before their foot is through the door.
With the introduction of the act landlords are unable to take a tenancy deposit from the tenant that exceeds the value of five weeks rent; however, if the total amount of rent the tenant pays each year for the property is more than £50,000 then the limit place on the refundable tenancy deposit is increased to the equivalent of six weeks rent. Additionally, the amount an aspiring tenant is required to give a landlord to reserve the rental property, what is commonly referred to as the refundable holding deposit, can no longer be placed at higher than the value of one week’s rent .Furthermore, If a tenant also requests that specific details in the original tenancy agreement are adjusted, then this naturally will result in the landlord incurring costs to ensure the change is binding and legally sound. These charges can be passed onto the tenant, however if the landlords intends to charge the occupants over £50 they will have to demonstrate that they paid over this amount also.
However, the act does not exclusively nullify charges intended to be made by the landlord or lettings agency. Rental property owners are still permitted to impose fees on the tenant that relate to any requests made by the occupants to terminate a tenancy period early , payments in respect to household bills or charges to replace keys or security measures around the property. If the tenant falls behind in their rental payments and accumulates more than two weeks of rental arrears the landlord is able to collect a default fee, however this is cannot be more than 3% over the Bank of England’s base rate.
If a landlord is found to be in violation of the act then the tenants would be entitled to be repaid any amounts taken unlawfully, with the local authority enforcing the act also being permitted to award interest to be paid to the occupants by the rental property owner. Additionally, if the landlord is found to be in breach of the act and is faced with two or more fines within a year then they may be added to a database of rouge landlords and could face a banning order at the discretion of the local authority.
It is also worth noting that if your landlord disregards the regulations implemented by the Tenant Fees Act, they will be unable to serve a section 21 notice of eviction until any wrongfully taken money has been returned.
What Is a Holding Deposit?
A holding deposit is the amount a landlord will request from a potential tenant to “reserve”, meaning the rental is no longer being advertised and both parties have 15 days in which to reach an agreement with the tenancy. If the tenants pass the referencing process and are happy with the stipulations of the tenancy agreement then the amount is “returned”, although this is usually deducted from the initial rental payment for simplicity. In the instance that a landlord decides that they would not like to proceed with the tenancy then the full holding deposit must be returned; however, if the tenant decides to cancel proceedings then the landlord is entitled to claim the amount as compensation for their administrative work.
What Is a Tenancy Deposit?
Despite being taken at a similar time in the tenant’s rental experience and being seemingly similar, there can be some confusion surrounding the distinctions between holding and tenancy deposits; however it’s crucial to understand these differences to ensure the full amount given to the landlord is returned. The tenancy deposit, occasionally referred to as a security deposit, is largely praised by landlords as an incentive for tenants to keep the rental property in a better state, as if they discover any damage that goes beyond “fair wear and tear” the associated repair costs, or in some cases rental arrears, will be deducted from the tenancy deposit.
As previously mentioned the landlord is unable to charge the tenant more than the equivalent of five weeks rent, where the annual rental fee falls below £50,000, and the equivalent cost of six weeks rent if the annual sum exceeds this amount.
Once the requested amount has been given to the landlord it must be entered into an authorised deposit protection scheme within 14 days of its receipt. The landlord must also provide the tenant with comprehensive details of their tenancy within 28 days of the deposit being paid; stipulating the full address of the rental property, the landlord’s and protected schemes name and contact details, alongside reasons why the full amount may not be returned to the tenant and the end of the rental period.
Deposit Protection Schemes
Tenancy deposit protections schemes are either what is referred to as “custodial” or “insurance based”. The significant distinction between the two types of protection is the party that is physically safeguarding the tenant’s deposit. If the rental property owner decides to enter the deposit into an insurance based scheme, then they will bear the sole responsibility of protecting the deposit over the duration of the tenancy. However, the landlord is still prevented from using the deposit to fund any remedial work on the property or expenses they may otherwise incur. With this being said, if at the end of the tenancy period a dispute arises regarding the amount that should be returned to the tenant, the landlord is required to pass on the full deposit to the protection scheme until a resolution has been reached.
If, however, the landlord chooses to protect the tenancy deposit in a custodial scheme, the provider will hold onto the full amount until the tenancy period expires. Once the rental agreement has ended the scheme will distribute the appropriate amounts between the two parties, with any deductions being paid to the landlord, or full amount returned to the tenant. It is important to note that these deposit schemes act impartially and if an agreement cannot be reached regarding the amount that should be refunded by the landlord, the scheme’s resolution service will reach a decision.
Do You Always Pay Rent in Advance?
It is not uncommon for a landlord to request that a tenant pays for at least one month’s rent in advance before moving into the rental property. It is important to note that this is not a deposit and will therefore not be returned to the tenant, instead this is intended to secure the property for the tenant and provide a smooth transition into the tenancy period. For tenants moving into their first rental property, it is good practice to have the landlord detail what each of the payments you are making is for, and if you are making any rental payments before moving into the property, have them explain how long it will be until the next payment is expected. Whilst there is technically no legal threshold on the amount a landlord is able to request a tenant pays in rent before moving into the property, taking an increased amount and simply including this under the advanced rent umbrella is strictly prohibited. Landlords will typically only request that a tenant pays more than a couple of months’ rent upfront if they have any blemishes on their credit history, or have some reed flags come up during their affordability checks during the tenant referencing process.
Should a Tenant Pay For Repairs?
It goes without saying that once a tenant has signed a tenancy agreement with a landlord they are entering into a legally binding agreement and accept the responsibility to return the rental property to the landlord at the end of the rental period in a similar state under which it was initially rented. However, this doesn’t mean that the occupants of the property are expected to wield power tools like an expert craftsman, rather that they will report any necessary repair work to the landlord and providing them and other access to the property in order to conduct the appropriate remedial work.
During a tenancy a tenant could be expected to make a number of minor repairs themselves, alongside maintaining the property by ensuring other tenants and guests don’t cause avoidable damage to the property, and don’t neglect or misuse any furnishings or appliances provided by the landlord. Whilst this would be more accurately detailed in the individual tenancy agreement, if the damage to the property was caused accidentally or otherwise by the tenant or guests in the property, the responsibility could fall on them to cover the associated costs of rectifying the situation, even if this would traditionally be covered by the landlord.
Of course, a landlord cannot be held accountable for conducting repairs that they were not aware needing doing. With this in mind, reporting nay repairs to your landlord is essential and is often an obligation of the properties occupants, outlined in the tenancy agreement.
Whilst ample notice must be provided by the landlord before intending to enter the rental property, usually 24 hours, a tenant is still obliged to provide reasonable access to the property for repair work to be conducted. A tenant is able to refuse a landlord entry to the rental property; however the landlord may pursue action through the courts to gain entry into the rental. If the damage to the rental is widespread and deemed an emergency then the landlord is able to gain access to the rental without any notice being given to the tenants.
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