Beware: Tenant Fees ban may impact Section 21 notices

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A warning has been issued to lettings agents to review tenancy agreements to see if they are fit for purpose when the fees ban takes effect in June – and in particular to minimise any impact on Section 21 notices.

The call comes from Andrew Turner, chief executive at specialist buy to let broker Commercial Trust Limited, who says that while the ban will initially apply only to renewals of tenancies and new tenancies and will exclude statutory and contractual periodic tenancies that arise after June 1 it appears the fee 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” says Turner.

“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” he cautions.

“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’s worth spending some time to review existing tenancy agreements and templates to ensure that these will remain fit for purpose after June 1 this year.”

From June 1 2019 a wide range of issues that landlords and letting agents currently charge for, will become unlawful.

Among the fees that will be banned are:

– Charges for a guarantor form;

– Credit checking;

– Inventory checks;

– For domestic cleaning;

– For taking up references;

– Professional cleaning;

– Having the property de-flead as a condition of allowing pets in the property;

– Administration costs;

– Requirements to have specific insurance providers;

– Gardening provisions.

There are a few charges which will be exempt from the ban, namely holding deposits, rent, deposits and charges related to contractual defaults.

Turner says: “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.”