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August 13

by Millie Wickens
Letting fees to be banned in Wales from September – are you ready?

Are you a landlord or letting agent who rents out or manages properties in Wales? Landlords and agents in Wales will be banned from charging certain fees from September, as a result of a new law passed by the Welsh Assembly earlier this year. Tenant fees are already banned in Scotland and have been banned in England since the 1 June 2019, but are still permitted in Northern Ireland. 

From 1 September the tenant fee ban will apply to all new ‘standard occupation contracts’ in Wales. You can find out more details on the Renting Homes (Fees etc.) (Wales) Act 2019 here.  Or in Welsh on the National Assembly for Wales website:  Deddf Rhentu Cartrefi (Ffioedd etc.) (Cymru) 2019.

The tenant fee ban will also extend the Consumer Rights Act 2015 for publishing fees to online advertisements, including sites such as Rightmove and Zoopla, with the ability to prosecute an agent for multiple breaches. It is the duty of the agent to be transparent and open when publicising fees. Agents are obligated to make sure that relevant fees are visible on their own website, and if using a third party website ensure that they include a link to a page on their own website that outlines the fees thoroughly, or publish this information directly onto the third-party website being used.

In a recent case, ARLA Propertymark challenged a website over using agent listings without permission, and more importantly, without displaying tenant fees, potentially exposing agents to a significant fine as a result of breaching not only the Consumer Rights Act 2015 but also the Tenant Fees Act 2019. While the Tenant Fees Act 2019 only applies in England the same rule will apply under the new Welsh legislation. It is therefore important for agents to be aware of their legal obligations and keep up to date with changing legislation in order to remain compliant. Failure to do so could result in a significant penalty fine.

It is important to note that if you are also involved with rental properties in England, the new Welsh rules differ, in part, from those already in place across the border.

What does the tenant fee ban mean?

Primarily it means that, in Wales from 1 September 2019, you will not be able to charge tenants any fee that relates to the granting, continuation or renewal of a contract or addition of a fee provision into the contract, unless it is a ‘permitted’ fee. Further information will be published after 1 September on the definitions of ‘default fees’ that will be permitted in contracts.

If you charge a prohibited fee, it will need to be refunded in the required time or it will be an offence and penalties will apply.

What fees are ‘permitted’?

The following costs are all allowed, with some conditions that can be found in Schedule 1 of the Act:

Rent which must be on a regular monthly basis over the contract period unless the landlord AND tenant agree to a ‘permitted variation’.

Holding deposit rules are now clarified in Schedule 2 of the Act but in summary will be limited to one weeks’ rent, which can be used towards the first months’ rent if the tenancy goes ahead. However, it must be repaid, in full, within seven days of the contract being agreed, OR within 15 days if no agreement is in place. The only reasons for withholding the holding deposit is if the prospective tenant:

  • provides false or misleading information
  • decides not to enter into a contract without good reason
  • fails to take reasonable steps to enter into a contract such as failing to provide the documents required

Security deposit rules are unchanged and there is no cap on how much you can take, although the Act allows the capacity to do so in future. If you also handle deposits for properties in England you will have to treat these differently to those in Wales.

Utilities (including Green Deal) such as council tax, television licence and communication services provided these are written into the contract.

Default payments, (yet to be defined) but will include a breach of contract.

For added clarification you should note that any fee in a contract which is not listed as a ‘permitted’ fee will be unenforceable and the tenant will not have to pay it.

How about enforcement and penalties?

Responsibility rests with local authorities and Rent Smart Wales. The former can share information with other local authorities and will have a duty to share information with Rent Smart Wales about convictions or fixed penalty notices.

Tenants can apply to the County Court for a refund of a prohibited payment, except where a landlord or agent is involved in related criminal proceedings, where the judge can rule on the refund.

Interestingly, enforcement will be a housing function and not the role of Trading Standards as it is in England. This will mean it will be enforcement officers from the 22 individual Welsh local authorities’ housing teams, or the licencing authority Rent Smart Wales, that will be responsible for policing the ban.

The fixed penalty notice for taking a prohibited fee and failing to refund it will be £1,000, which will need to be paid to avoid prosecution. The enforcement authority also has the discretion to proceed directly to court where the judge can award a fine up to level 4 on the standard scale; currently this is a maximum of £2,500.

Where a prohibited payment or holding deposit has not been repaid, you will be restricted when it comes to gaining possession of the property.

Further guidance for landlords and agents is set to be published by the Welsh Government shortly. Landlords and agents should make sure that they keep up to date with the latest information on the government website and comply when the law comes into force on 1 September.

Further changes to the private rented sector in Wales

In addition, further change looks to be on the horizon for the private rented sector in Wales. A further consultation was announced in July 2019 which includes, amongst other things, looking at extending a landlords’ minimum notice to end a periodic tenancy; the landlords’ powers to end a fixed term contract and proposals for longer tenancies. The consultation ends on 5 September 2019.

Find out more information on current consultations from the Welsh Government.