Tenant Fees in Wales

The ban on tenant fees in Wales will come into effect on 1 September 2019.

The commencement order and transitional regulations were recently published and they confirm that The Renting Homes (Fees etc.) (Wales) Act 2019 will apply to assured shorthold tenancies (“ASTs”) entered into after 1 September.

Scope of the Ban

The scope of the ban is one of several small ways in which the Welsh tenant fee ban differs from the equivalent law in England, the Tenant Fees Act 2019.

The Welsh fee ban does not apply to licences, but instead covers only to assured shorthold tenancies. While the English legislation specifies that certain types of AST are not covered by ban (such as those granted by social landlords) the Welsh ban will include these tenancies. However, a tenancy granted by an educational institution which is not an AST can be caught by the English fee ban, whereas in Wales no non-Housing Act tenancy is included.

One likely reason for these differences is that the new fee ban is being introduced against the backdrop of comprehensive reforms to Welsh residential tenancy law. In Wales ASTs (and several other fundamental building blocks of residential tenancy law) will be replaced in when the Renting Homes (Wales) Act 2016 is brought into force. This is expected to be before May 2021.

Tenancies which become periodic

In England, the Tenant Fees Act 2019 specifically addresses the question of periodic tenancies – a periodic tenancy arising automatically at the end of fixed term does not come within scope of the ban in England until the ‘transitional period’ ends on 1 June 2020.

By contrast the Welsh legislation has no ‘transitional period’ and does not make any express allowance for periodic tenancies. The effect of this is real uncertainty about whether the ban applies to periodic tenancy which arises at the end of a fixed term after 1 September.

A statutory periodic tenancy is a new tenancy and it is deemed to have been granted immediately before the preceding fixed term tenancy came to an end. This means that a statutory periodic tenancy would be caught by the Welsh fee ban if is arises after 1 September 2019. However, contractual periodic tenancies will need to be analysed differently and usually are likely to be seen as a continuation of the preceding tenancy, meaning that the fee ban will not apply in Wales to such tenancies.

Banned Fees

The Welsh legislation is similar to the Tenant Fees Act 2019, but with minor differences. For example:

• There is a power to set a maximum deposit, but it has not yet been used.
• A landlord or agent may demand ‘default fees’. These will be subject to a prescribed limit, if regulations are made. There is a consultation in respect of these fees and how they should be dealt with which has recently closed.
• There is no express provision allowing for fees for variation, assignment, novation or early termination of the tenancy. However, these appear to not be banned at all, since the Welsh legislation does not attempt to ban all payments made in connection to a tenancy in the same way that the English ban does. For the same reasons, a Welsh agent appears to be able to charge for a reference.
• The Welsh government has a power to prescribe information which agents will have to give to tenants when they take a holding deposit. The above-mentioned consultation considered what this will be.
• There is also a power for the Welsh government to issue guidance which local authorities will be obliged to take heed of. It is very likely that such guidance will be issued.

This small but significant differences are likely to cause headaches for larger landlords and agents who operate across both England and Wales.