In recent years the lettings industry has had numerous changes imposed on it by the government such as tax relief on mortgages being decreased (and removed completely by 2020), an increase in stamp duty for a person buying a second home and numerous legislative changes that can be very easy to overlook if you are not regularly reading the industry press. The latest change to the lettings industry which is due to become law on 1st June 2019 is in the form of a cap on the amount a landlord or letting agent can take as a deposit and a near blanket ban on fees charged to a tenant.
Firstly the deposit cap, this is to be set at no more than 5 weeks rent for all tenancies with an annual rent under £50,000 (or £4,166/month) which covers the vast majority of homes across the country and all but a very few in the OX5 area. If you are reading this and you are one of the very few with a rental income of more than £50,000/year, then the deposit cap is set to be no more than six weeks rent. It will soon be an offence to charge a higher deposit than the figures above regardless of the reasoning. For example currently it is fairly common place for a landlord to request a higher deposit if a tenant has a pet living at the property, under the new laws this will no longer be permitted. The good news is that come the 1st June we do not need to suddenly return the excess deposit amount that is being held if a tenancy is within the fixed term. Only at the renewal stage will the excess deposit over the five weeks have to be sent back to the tenant.
Moving on to the tenant fees bill this is to be a near total ban on all fees charged to a tenant. Generally in the industry it is expected that a tenant would pay a fee to cover all referencing and possibly the check-in or check-out among other costs. All of these are due to become non-permitted charges moving forward. We will still be able to take a property reservation fee which is good news for landlords as it will help prevent tenants applying to rent multiple properties and then withdrawing their application before the tenancy starts. There will be a couple of permitted charges that the government has said landlords and letting agents can still levy although these will be very minimal. An example of a permitted fee is for loss of keys or a charge for late rent although this is to be capped at an interest rate of just 3% above the bank of England base rent (0.75% at time of writing).
The government has aimed to make the deposit cap and tenant fee bill very clear and will be imposing a fine of up to £5,000 per offence to landlords and letting agents. The message from this is ‘do not look for loop holes’ it would seem. If you would like to discuss this in any more detail then please do not hesitate to make contact and I would be more than happy to share with you any additional details that I can on the subject.