Tenant fees ban interpretations and exceptions

by Readers Question

12:00 PM, 31st May 2019
About 6 months ago

Tenant fees ban interpretations and exceptions

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Tenant fees ban interpretations and exceptions

I have been wondering about the tenant fee ban and how it may affect situations that are not addressed. My starting point is as an agent we have never issued a non-student tenancy solely for a fixed term unless we were asked to, or to fill a specific void. More than 95% of our non-student tenancy agreements are for six months, but with a term allowing them to automatically continue on a contractual periodic basis unless either side gives notice.

Our charges to tenants were simply £100 per single tenancy, plus a further £30 for each additional adult. These charges covered the whole process. I believe the practice of charging further fees for six monthly renewals was wholly unnecessary and could not be justified. To a certain extent I think the industry is reaping what it has sown.

Had I been designing the new law I would made it obligatory to include a contractual periodic term in each tenancy and introduced a cap on tenant fees. Perhaps my fees are a little low, but I am sure many agents would like to bill this going forward.

Moving on:

1) Often with student lets we are asked to find a replacement tenant. This involves adverts, answering enquiries, viewings, a new tenancy agreement and guarantee, altering the deposit protection and probably a few other steps I have missed out. Now if anyone thinks I am going to do that for £50 then they can think again. But does the legislation say that? Maybe not. You cannot argue that this process is a mere amendment or alteration. A tenant is asking to be allowed out of their contractual obligations and cannot expect this to be free of charge. So I would argue that in this case the tenant should expect to pay a fair rate for the work.
Even if you do say this is an amendment or alteration to the original agreement, an interpretation I struggle with, the law says you can charge more if your costs are higher. Now I would say three viewings at £20 each and £50 for all the paperwork, a total of £110 is more than fair.

2) The above point raises an interesting point about “cost”. If we are charging for an alteration to a tenancy is the new law saying that we can no longer make a living and the cost of a viewing is merely the four mile return trip at 50p a mile giving £2? This seems to be implied by the charges you are permitted to make for attending a lockout.

3) Then I wonder if there is a difference when acting on a tenant find basis instead of a full management arrangement. Assume a tenant changes their name and asks for the contract to be amended. If we charge a tenant find landlord £50 for the new agreement and guarantee and then he pays £20 to change his deposit protection he has total costs of £70. If we are managing that tenancy are the costs £70 if that is what we charge the landlord or just to cost of changing the deposit protection, with all other costs being negligible? I do wonder why in future we would allow a change of tenants with the doubt about what we can charge and the risk of challenge over “costs”.

4) We receive many request for references which in the past we have answered free of charge. However, it occurs to me that in future I can charge for these. Admittedly, this is not a permitted charge. However, the request has nothing to do with the tenancy we are managing, it relates to a new tenancy with another agent or landlord we have no connection with. Is there any reason we cannot charge for providing references?

5) Finally, if you are VAT registered are you allowed a limit of £50 plus VAT, ie £60 or are you expected to do the work for even less at £41.67?

As an aside, we currently attend lockouts from lost keys 24 hours a day for £20 out of office hours. I would defy anyone to argue that is an unreasonable charge. From the end of May it will be illegal for us to charge this. I am not providing this service for nothing and the solution is quite simple. From 1 June tenants will have to use a 24 hour emergency locksmith.

I do question the thought processes of those who draft and pass our laws.

Many Thanks

Robert



Comments

Robert Mellors

14:07 PM, 31st May 2019
About 6 months ago

It seems to me that most of the charges you have mentioned are indeed fair and reasonable, but this is irrelevant under the new legislation as the examples you give are "standard" charges to cover the cost, not actually the true cost. I believe that all such "standard" charges are unlawful, as from 1st June, so you can no longer charge these to the tenant.

This does not of course stop you from charging the standard fees to the landlord, IF your agency contract allows for this. The landlord can then mitigate these new costs by increasing the rent, subject to following the correct procedures for doing this.

Ian Narbeth

14:17 PM, 31st May 2019
About 6 months ago

Hi Robert
The Act is not well-thought out. You can charge "reasonable" costs but paragraph 6 of Schedule 1 says:
6(2) But if the amount of the payment exceeds the greater of—
(a) £50, or
(b) the reasonable costs of the person to whom the payment is to be made in respect of the variation, assignment or novation of the tenancy, the amount of the excess is a prohibited payment.
Get your figure wrong and you are in breach and liable for a fine. If a tenant quibbles over any fee over £50 and/or demands that it be repaid what are you to do? Fight and win and you will spend a lot of time defending yourself. Fight and lose and you are in the merde.
It will be safest to say to a tenant who wants to leave: "If you come to me with a new prospective tenant with an up to date credit check and a good reference from a landlord, I will consider them and if satisfactory, may allow them to become a substitute tenant. However, the law does not allow me to recover my costs for finding a replacement and may in some circumstances criminalise me if I try to recover those costs. Therefore, the default position until YOU find a replacement is that you remain liable until the end of the tenancy." When the tenant expresses surprise at this I suggest you direct them to Shelter or the CAB to explain how wonderful the Tenant Fees Act is.
You will not be able to charge the tenants for providing a reference. You could charge the new landlord or his agents. That may be what Parliament expected. This is likely to lead to higher rents.

Jim S

12:00 PM, 1st June 2019
About 6 months ago

Hello Robert,
I personally think that the fee you have suggested as being fair ie £20 for a viewing and £50 for a sign up is ridiculously cheap, the £20 for a viewing is not horrible although to fully cover costs I think this should be £30
but if you can sign up a group of 7 students and pay the deposit insurance fee and cover your costs for £50 well you need to teach me how!! I think £250 is fair for a sign up. What would a Solicitor charge for doing the sign up for us and are we any less entitled to the same rate?
I have written to the RLA/NLA and asked then to establish a national landlord labor rate pounds per hour. Obviously they never replied because they never do reply to my suggestions but is this now the time to decide a national landlord labor rate? The so called "reasonable costs" that we are allowed to charge is no good and as an industry we should now have REALISTIC approved costings that we can all work to. The Manchester City Council HMO inspection officers charge out at a labor rate of £40 and they are relatively unskilled people so we should be entitled to charge out at higher than that.


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