Do you have a vacant property? Are you considering renting it? If so, property renting can be a good source of passive investment.
When you’re renting out a property though, what are the tenant fees that need to be paid? And which fees can’t you charge your tenants? It’s likely you’ll have hundreds of questions if you’re looking to rent out a property for the first time.
As a property owner, you are responsible for property upkeep and levying the right rent. So, in this article, we’ll be discussing all the property-related fees that you can legally ask your tenant to pay.
Whether you are a first-time landlord or have a large property portfolio, keeping up with the latest regulations and laws regarding property rent can become challenging. If you’re feeling stuck, Habitare is a trusted block property management company and we can guide you through the ins and outs of property management.
An Overview of the Tenant Fee Act 2019
When considering what tenant fees you can charge, you need to be aware of the stipulations of the Tenant Fee Act 2019 to avoid falling on the wrong side of the law.
The Tenancy Fee Ban 2019 came into effect on 1st June 2019 after rent prices in London continued to skyrocket. To eradicate this issue, the Mayor, Shelter, and Citizens Advice have formulated this legislation to prevent renters from paying unreasonable letting fees and rental deposits.
The Act came into effect to reduce the charges that landlords can impose, not just at the outset of the rental agreement/renewal, but also throughout the tenancy tenure.
Whether you’re a letting agent, landlord, or property manager, it’s imperative that you clearly discuss and outline all the related house rent agreement charges to your tenant.
The Tenancy Fees Ban 2019 covers the following letting arrangements:
- Lodgers/tenants living with private property owners
- Student lettings
- People who have a room in a shared accommodation
- Assured shorthold tenancy
- Property guardians
Tenancy Fees That Are Banned
As a property owner or manager, you must be aware of banned fees, because, if you charge them it could result in legal repercussions.
Here’s a list of property-related fees you’re not allowed to charge:
Administrative Fees:
Before the introduction of the new ban, as a property owner, you could impose fees related to administrative tasks such as issuing contracts, amounting to anywhere between £300 and £350. You can no longer charge this fee.
Reference Checks:
Before the Tenancy Fee Ban 2019 came into effect, property owners and managers could charge anywhere between £75 and £100 for conducting background checks to deduce whether or not an applicant was a viable tenant. This also included fees to conduct financial checks to understand the solvency of the potential tenant and whether they are capable of paying the rent.
With the introduction of the tenancy fee ban, property owners can no longer levy any charges for conducting background checks.
Moving Out Inspections:
Some landlords used to charge a fee when an old tenant moved out, covering the cost of checking if the house was left undamaged and in the same condition as when the tenant moved in. Before the ban, a fee of £100-£300 could be charged, but this is no longer allowed.
Tenancy Renewal:
Tenants no longer have to pay a tenancy renewal fee if the property owner and tenant mutually decide to extend the tenancy. Previously, landlords could ask anywhere between £150-£180 for renewing the tenancy.
Professional Cleaning Services:
Prior to the Tenant Fee Act 2019, landlords could levy a charge for professionally cleaning the property once the tenancy tenure was over. This is no longer an option, although it’s still expected that the renter will hand over the property in top condition.
Deposits
As a landlord, you can’t levy holding deposits for reserving a property amounting to more than a week’s worth of rent. Taking a deposit worth more than five week’s rent isn’t allowed either. There’s one exception: for luxury rental properties that cost more than half a million pounds a year, a six-week deposit is allowed.
Property owners or managers who are found guilty of imposing banned fees can be fined up to £5,000 for their first offence. Repeat offenders may need to pay anywhere up to £30,000.
What Fees Do Tenants Have to Pay
Now we’ve covered those that you can’t charge, let’s explore the fees that you can legally charge your renter.
Rent
This is the monthly or weekly amount that you can levy for allowing the tenant to reside in your property. As a general rule of thumb, you should charge rent that amounts to 1% of your property’s value. For example, if you purchase a property for £100,000, the rent should be approximately £1,000 per month. Other factors that can influence the rental amount are the property condition, whether or not furniture and amenities are included, location, and local market rate.
Refundable Holding and Tenancy Deposit
You can also charge holding fees and a tenancy deposit, both of which are refundable. The holding deposit is usually capped at a week’s rent for reserving the property and must be returned within 14 days before you sign the tenancy agreement.
A tenancy deposit can be imposed on renters, but, as mentioned earlier, you can’t levy more than five weeks’ worth of rent.
If your property is damaged, you can hold back the tenancy deposit or deduct the amount required to repair the damage. However, you need to be able to prove that the repair cost is legitimate, with bills to back your claim.
Utility Bills
As a landlord, you can charge your tenants fees associated with managing and maintaining your property. This includes energy, gas and water bills, broadband, TV licence, and council tax.
Late Fees
As a landlord, you can levy late payment if the rent is more than 14 days overdue. After this tenure, you can legally charge interest on every day the rent isn’t paid. The interest is usually curbed at 3% above the Bank of England’s base rate.
Change in Tenancy Agreement
House rent agreement charges that can be imposed include any change in tenancy terms, whether for terminating a lease before it’s due or making any changes such as allowing a pet inside the house. Usually, this is capped at £50.
You can only charge more if you have a written receipt as justification for the higher fee.
Loss of Key
If your tenant loses their key, then you can charge them for replacing the lock. Again, you need to be able to prove the fee with a receipt from the locksmith before you can charge the amount from your tenant or deduct it from their security deposit.
Contact Habitare for Complete Property Maintenance and Tenant Communication
Ensuring your tenants are paying all relevant fees on time is just one of the many tasks to keep up with as a property owner. Hopefully, this guide has helped you to understand the answer to the question: “What are tenant fees you can and can’t charge based on the Tenancy Fee Ban 2019?”.
Instead of dealing with these tasks alone though, you may decide that you prefer to outsource the task to a reliable management company, like Habitare. We offer a variety of comprehensive solutions relating to block property management, from property maintenance to repair, tenant communications, and financial record keeping.
Get in touch with us today to understand how we can help you with property management and related tenancy fees.