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Welsh ban on fees – 10 top tips for letting agents

Wednesday 01 April 2020

As part of ARLA Propertymark’s Tenant Fees Toolkit Wales, we’ve put together 10 of our top tips for letting agents ahead of the Renting Homes (Fees etc.) (Wales) Act coming into force on 1 September 2019.

1. Every fee is illegal unless it is expressly stated as a Permitted Payment

Under the ban, Permitted Payments are: Rent; a Security Deposit; a capped refundable Holding Deposit; payments in default; payments in respect of Council Tax; payments for utilities (electricity, gas or other fuel, water or sewerage – including cesspits); payments for a television licence; communication services (telephone other than a mobile telephone; the internet; cable television, satellite television); and the Green Deal charge. If it isn’t in this list, it can’t be charged.

2. No cap on Security Deposits

The Security Deposit is not capped in the legislation. This means in certain circumstances a higher amount of deposit can be taken. For example, should a tenant have pets a higher deposit can be taken to cover any potential damage that might be caused. However, agents must be aware that a power is contained within the Act for the Welsh Government to set a limit, if it wishes, in the future.

3. Specific information for Holding Deposits

The Welsh Government has now passed regulations that specify the information that must be provided to prospective tenants, in writing, before taking a holding deposit. This came into force on 28 February 2020.

4. Failing referencing isn’t enough to withhold a potential tenant’s Holding Deposit

If a tenant provides completely factually and accurate information but still fails referencing, agents will have to still return the Holding Deposit. To withhold the Holding Deposit for a tenant providing false or misleading information, the agent must be able to prove that the tenant provided factually inaccurate information rather than the tenant made a mistake. For example, a potential tenant stating that their salary was higher than it actually is would be providing false or misleading information.

5. It is OK to take rent in advance or the Security Deposit before a tenancy is signed

Where a tenant is not physically available to sign an agreement before the term of the tenancy begins, landlords and agents can require rent in advance, or the Security Deposit. This cannot be classed as an excess Holding Deposit providing the tenant is made aware in writing that any such payment was an advance payment of rent or the Security Deposit.  

6. No transitional period for tenancy agreements

The ban on fees only applies to tenancy agreements signed on or after 1 September 2019. For tenancies signed before 1 September 2019, the Act will apply when the term of that tenancy agreement has finished, and a new tenancy agreement is signed.

The Welsh Government have not provided guidance defining a new tenancy. In the absence of guidance from the Welsh Government, as set out by the UK Government in guidance for letting agents in England, where Fixed-Term tenancies which started prior to the ban coming into force become periodic tenancies after the ban comes into force, this will be classed as a continuation of the existing tenancy. Consequently, fees can be charged until a new Fixed Term agreement is signed.

7. You cannot charge to amend a tenancy agreement

The Welsh Government have clarified that should either the landlord or tenant wish to change a tenancy agreement, a fee cannot be charged for the amendment. 

8. Prescribed limits for Default Fees

A payment in default is a payment required by the landlord or agent as a result of the negative actions of the tenant. It is either the late payment of rent by its due date, or a breach of terms of the contract. Examples include: Missed appointments; avoidable or purposeful damage to property; replacement keys; or emergency/out of hours call-out fees. A payment in default can only ever be charged to a tenant if it was agreed to in the tenancy agreement when signed, otherwise it is regarded as a prohibited payment.

The Welsh Government have specified events where there are prescribed limits to default payments that can be charged. From 28 April 2020 prescribed limits apply where the tenant has failed to make a payment by the due date to the landlord (such as rent), or where a landlord is required to add, remove or replace locks, keys and other security devices.

Where there are no prescribed limits agents should charge the actual costs for doing the work and a reasonable administration charge. These charges must be set out clearly in the tenancy agreement and fees schedule agreed.

This does not affect a landlord’s ability to reclaim actual losses incurred during a tenancy as a result of the actions of a tenant, from the tenant’s security deposit or via a court case for breach of contract.

9. Changes to other transparency rules

Under the Renting Homes (Fees etc.) (Wales) Act, agents are still required to display their fees schedule, Client Money Protection and redress scheme membership in their office and on their website. This requirement has been extended to advertisements on online advertisers.

This includes the portals (Rightmove, Zoopla, OnTheMarket) as well as other websites such as local newspaper sites, local property portals and social media (e.g. Facebook, LinkedIn, Twitter). It may not be possible on a social media website to fully advertise all these details. In this instance, a link may be provided to the agent’s website which provides all the information.

10. Don’t underestimate the severity of charging a Prohibited Payment

Any person guilty of an offence under the Renting Homes (Fees etc.) (Wales) Act is liable to a fine of £1,000. Local authorities are required to notify Rent Smart Wales when they become aware of a person who has been convicted of an offence under the Act relating to a property in their area. Rent Smart Wales will then consider whether a convicted person is fit and proper to be granted or retain a licence to carry out lettings or property management activities.  

toolkit

TENANT FEES TOOLKIT WALES

The Renting Homes (Fees etc.) (Wales) Act comes into force on 1 September 2019. To help our members prepare we've put together a host of new resources to help you understand the legislation and to help your business to comply. These resources include template legal documents, a case study from Scotland, bite-size videos and events.

Find out more