The new Tenants fees act 2019 and deposit reduction.

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  • The new Tenants fees act 2019 and deposit reduction.

    im looking for some guidance regarding the new government legislation 'the tenant fees act 2019' I believe it's called specifically with regard to the capping of the deposit to the equivalent of 5 weeks rent ( down from the 'usual' 6 weeks).

    My letting agent has just advised me that agents had 2 options under the new act with regard to what to do with the deposit held at the DPS to keep them and their landlords compliant with the new act - either return part of the deposit, to bring the amount held down to 5 weeks, as and when a tenant renews their lease, or to return some of the deposit to all their clients tenants immediately. They have decided to take the latter option and are charging £75 plus vat per property to each landlord to do this!
    i have said I don't want them to do this and to only do it when necessary as tenants renew ( and I also think £75 is a bit steep!). They have argued it has to be done now if the renewal is due prior to 2020. I know the part of the act banning fees being charged to tenants comes into force 1st June 2019 but can see nowhere that it says agents must return the deposit immediately. I'm assuming it's a way for the agent to generate some income from landlords before the agents income drops after 2019. Can anyone throw any light on this please - is the agent correct, misinformed or simply trying it on?

    Thank you.

    Raymondus

  • DPT57
    replied
    DPS are not even experts in tenancy deposit legislation so I would be wary of relying on their advice if I were you.

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  • Raymondus
    replied
    Well, It seems it's a can of worms, but I am glad I asked the question and I appreciate everyone's input. It certainly seems that opinion and interpretation of parts of the new act is divided.

    I will speak to the DPS tomorrow to see if they can give any guidance and I will also be seeing my agent to discuss what part of the act specifically makes him think he should be giving back all of his clients tenants part of their deposits prior to June 2019 ( not even 2020) and also to ask him how he can justify £75 plus vat to do something that he may ( or may not) be required by law to do. I wouldn't actually mind even paying a small fee if it turns out he has to return part of the deposit, but seeing as he would be doing something he has to do for both of us to be compliant £75 seems a bit steep.

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  • MdeB
    replied
    Originally posted by cymro123 View Post
    MdeB I have just done a word search of the Act for the word "lawfully" and there are no matches so I am not sure exactly where your quoted text comes from sorry.
    It is not a quote; it is my summary of S30. "lawfully" means "in accordance with law (Acts, regulations, common law, judgements)".
    see #19 for detail that leads to this summary.

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  • cymro123
    replied
    MdeB I have just done a word search of the Act for the word "lawfully" and there are no matches so I am not sure exactly where your quoted text comes from sorry.

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  • MdeB
    replied
    Originally posted by cymro123 View Post
    * Looking at Schedule 1 Section 2 (3) it is clear only the excess deposit is a prohibited payment not the whole deposit.
    But that is ignoring the provisions of S30, which say "payments already lawfully demanded are not affected by this act".

    I would suggest that you get back to your trainers about this (and the legal complications it might introduce as suggested by jpkeates #24)

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  • jpkeates
    replied
    I would be careful about how you do that and how you document it.
    The deposit protection legislation doesn't cater for returning part of a deposit mid-tenancy.

    Because the regulations refer to "a deposit" throughout (until the parts about a court compelling its return), splitting it or defining some kind of new deposit may be an issue.
    Your tenant will have a signed document with the original deposit amount and bank records and PI* showing you received and protected it.

    Most deposit schemes require that the deposit be returned in some controlled process, mediated by the deposit protection organisation.
    How you can follow the process with a part deposit looks really complex or impossible, but if you don't follow them you're not complying with the protection regulations.
    (And remember that most deposits that are 6-weeks rent are really a month and a half, and five weeks is (12 lots of rent/52)*5)

    If you give the tenant the returned portion, send them a cheque or transfer the funds into a bank account, you can show that you've returned the concerning portion of the deposit.
    If you simply make it available to them to collect at a deposit protection company, you probably haven't actually returned it until they collect it.

    I don't know how many tenants of yours get in touch at the end of the tenancy to find out how they get their money back because they've forgotten where it is (about half in my case).

    As it stands, by June 1st all of my tenants will be on SPTs, and any new agreements required for a new tenant will have a five-week deposit.
    So I'm doing nothing.

    *The PI will also then be wrong, which may mean it has to be re-issued.

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  • KTC
    replied
    Originally posted by cymro123 View Post
    However I understand this takes more than zero time to do and everyone's time is worth something and this is something that has been mandated by law so I can understand why an agent may want to make a small reasonable charge for this extra work - nothing is free (apart from the best things in life!)
    Let's go with the argument that it is mandated by law. That legal requirement applies to both the landlord and the agent explicitly and seperately. The agent would not be doing something because the landlord is required to and thus the landlord is instructing the agent to do it on the landlord's behalf. The agent has no legal basis to demand a fee from the landlord for the agent fulfilling their own legal obligations. There almost certainly can be no contractual obligation for the landlord to pay. I see no basis for any fee, even if it's required which I don't agree with.

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  • cymro123
    replied
    Here are some extracts from my legal training notes...

    'This is straightforward when it comes to requiring a tenant to pay a checkout Fee after the transition period because the whole requirement ceases to be binding.'

    'This become more challenging in relation to a six week deposit in a pre-ban tenancy. Is the whole deposit not binding or just the excess?'*

    * Looking at Schedule 1 Section 2 (3) it is clear only the excess deposit is a prohibited payment not the whole deposit.

    Pending any goverment guidance to the contrary I will be returning any deposit amount over 5 weeks (prohibited) before 31st May 2020 but whether/how I vary the agreement or not I have yet to decide and await further guidance. The extra work of doing this I will absorb and will not be charging my clients for doing this. However I understand this takes more than zero time to do and everyone's time is worth something and this is something that has been mandated by law so I can understand why an agent may want to make a small reasonable charge for this extra work - nothing is free (apart from the best things in life!)

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  • KTC
    replied
    Yes, so for example, if there were a clause that requires a tenant to pay for a professional clean at the end of the tenancy (as opposed to them simply being required to return the property in the same condition less wear and tear), then that would be a prohibited payment and the clause will no longer be binding.

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  • cymro123
    replied
    Not sure I fully understand it but thank you for trying to explain. Combining 30 (3) and (5) it reads ... After 31st May 2020 the provision of a tenancy agreement entered into before 1st June 2019 ceases to be binding on the tenant if that same provision would have been a prohibited payment had the same tenancy agreement been entered into after 1st June 2019.


    I think what it is saying is as a transitional arrangement any prohibited payments defined in the TA continue to be binding for the first year (that is the (1) part) then are no longer binding after that transitional period.

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  • MdeB
    replied
    Originally posted by cymro123 View Post
    The legal experts I know are divided on whether the extra deposit should be repaid on June 1st 2020 and until we have some case law we may not know for sure but who wants to be the test case.
    As KTC says #17, S30 (un)clearly says
    • "any payment received before 1 June 2020 for a tenancy agreement before 1 June 2019 (and any spt arising from such a tenancy) is unaffected by the Act, AND
    • no payment that is prohibited by the Act may be claimed by LL/agent after 1 June 2020 regardless of what the tenancy agreement says".
    S30 says, for agreement entered into before 1 June 2019:
    • (1)(a) payments received before S1 comes into force are not affected.
    • (5) any provision in an agreement that requires a prohibited payment ceases to be binding on the tenant after 1 June 2020.
    • (6) if a prohibited payment is taken after 1 June 2020 and is not returned within 28 days, then the tenant has been required to make a prohibited payment.
    so I do not see why a legal expert should think extra deposit should be repaid.

    DPS are probably looking at a facility for returning part of the deposit to cater for replacement tenancies.

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  • cymro123
    replied
    Subsection (5): 'apply in relation to a provision of a tenancy agreement entered into before the coming into force of section 1'?

    The legal experts I know are divided on whether the extra deposit should be repaid on June 1st 2020 and until we have some case law we may not know for sure but who wants to be the test case. This may explain why the DPS is consulting with the government and hastily making changes to allow part refunds.

    Leave a comment:


  • KTC
    replied
    cymro123,

    That's not what subsection (5) and (6) says. It basically says that any provision that requires what is a prohibited payment going forward cease to be binding, and that if the landlord or LA accepts such a payment from June 2020, then it has to be re-paid etc. It says nothing about payment required or accepted before that date.

    Leave a comment:


  • cymro123
    replied
    My interpretation is that by virtue of 30 (3) the prohibitions defined in section 1 apply to any pre June 1st 2019 provision and if that provision required a payment prohibited in post June 1st 2019 tenancies that provision is no longer binding on June 1st 2020. A pre June 1st 2019 provision to pay more than 5 weeks security deposit for a tenancy would not longer be binding for that tenancy so on June 1st 2020 any extra deposit is a prohibited payment and must be re-paid (at that time)?

    Leave a comment:

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