Tenant Fee ban in Wales comes into force

The tenant fees ban in Wales came into force on 1 September 2019 and applies to new assured shorthold tenancies in Wales.

Guidance

The Welsh Government published guidance for landlords and agents earlier this month. While important and authoritative, this guidance is not definitive and further it describes itself as ‘non-statutory’. The effect of this distinction is not entirely clear. Local authorities in Wales are required by section 15 of the Renting Homes (Fees etc.) (Wales) Act 2019 to “have regard to any guidance issued by the Welsh Ministers”. “Any guidance” is a wide category which would include non-statutory guidance. However, nothing prevents Welsh local authorities from departing from the Welsh Government’s interpretation of the legislation, provided that they have considered the relevant guidance.

This is important because, as detailed below, this guidance contains serious errors.

What tenancies does the Welsh ban apply to?

In Wales the fee ban will apply to new assured shorthold tenancies only. The new rules will apply to tenancies granted from 1 September 2019 and to holding deposits taken from that date.

I noted in an earlier blog post that there was some uncertainty about whether statutory periodic tenancies arising at the end of a fixed term after August 2019 would come within the scope of the Welsh fee ban. The prohibitions in the Renting Homes (Fees etc.) (Wales) Act 2019 do not apply to a requirement imposed before the coming into the force of the ban or to a requirement forming part of a ‘standard occupation contract’ entered into before 1 September; this would on the face of it suggest that the fee ban should not apply to a statutory periodic tenancy arising after from a pre-September 2019 tenancy agreement. However, a statutory periodic tenancy arising at the end of fixed term is not merely a continuation of an existing tenancy – it is a new tenancy which imposes new contractual requirements on the parties. It is at least arguable that a statutory periodic tenancy would come within scope of the Welsh fee ban at that stage.

The Welsh Government guidance does not confront this issue head on, merely noting that fees under existing assured shorthold tenancy agreements may be charged, and that “the Act will apply when the term of that tenancy agreement has finished, and a new tenancy agreement is entered into.” This evades the difficult questions surrounding statutory periodic tenancies – where the original term has expired but no new fixed term has been entered into.

Regulations

The Welsh legislation allowed regulations to be made to:

• set a maximum deposit;
• make a prescribed limit for ‘default fees’; and
• issue prescribe information which agents would have to give to tenants when they take a holding deposit.

None of these powers have been used. This came as something of a surprise since there was a consultation on the use of these powers and the Welsh Government expressed a clear intention to make such regulations.

The decision not to make regulations at this stage means that there will be an extended transitional phase. When these regulations are eventually made landlords, tenant and agents will need to learn a new set of rules.

Which fees can be charged in Wales?

When the fee ban applies, a tenant may only be charged ‘permitted payments’. Permitted payments are listed in Schedule 1 of the Act and are:

1. Rent;
2. Security deposit;
3. Holding deposit;
4. Payments in default;
5. Payments in respect of council tax;
6. Payments in respect of utilities;
7. Payments in respect of a television licence;
8. Payments in respect of communication services.

Can landlords and agents charge for amendments to a tenancy agreement and changes of sharer?

The guidance states that fees cannot be charges for arranging a change of sharer or for arranging amendments to tenancy agreements.

”Payments for change of sharer

Landlords or agents are unable to charge tenants to change a joint tenancy agreement to reflect a change of sharer, should one tenant leave and be replaced by another.”

”Payments for amendment to a tenancy agreement

Should either party wish to amend a tenancy agreement, a fee cannot be charged for the amendment.

An example of this may be an agreement to pay an increased tenancy deposit (to be protected as required), and to include more conditions in the tenancy agreement, should a tenant wish to keep a pet.”

This is incorrect as these fees are permissible in Wales.

The English legislation contains specific ‘permitted payments’ relating to variations of the tenancy agreement at the tenant’s request and to the assignment or novation of tenancy agreements: landlords and agents may charge limited fees in those circumstances in England.

There are no such ‘permitted payments’ in the Welsh legislation, but that does not mean that these fees are banned. There is no need for a ‘permitted payment’ to be listed because these fees are never prima facie banned in the first place in Wales. Sections 2 and 3 of the Renting Homes (Fees etc.) (Wales) Act 2019 prohibit payments to landlords of agents in consideration of the grant, renewal or continuance of a standard occupation contract”. That list does not include variation, assignment, novation or termination or tenancies.

In England the ban is wider and prevents any payment being demanded “in connection with a tenancy of housing in England”. At sections 1(5) and 2(5) of the Tenant Fees Act 2019 a broad definition of “in connection with a tenancy of housing in England” is given and this includes: “in consideration of arranging the grant, renewal, continuance, variation, assignment, novation or termination of such a tenancy”. That wider application creates the need for more permitted payments under the English legislation.

The Welsh Government guidance misstates the law by claiming that fees for varying a tenancy agreement or arranging a change of sharer are unlawful.

This confusion is only going to result in difficulty for landlords, tenants and agents to keep track of their legal rights and obligations during what is already a time of significant legal upheaval for the Welsh private rented sector.