What is the ‘Tenant Fees Act 2019’?

Landlords and Tenants – Everything you need to know about the ‘Tenant Fees Act 2019′

On 1st June 2019, the Tenant Fees Act came into force. The Act controls what payments a landlord or letting agent are allowed to request from tenants. It also restricts what third-party charges a tenant or guarantor may be billed for which you will find listed below. The new regulations apply to any tenancy agreement signed on or after 1st June 2019. If a tenancy agreement began before 1 June 2019, the original fees agreed on can in theory, still be charged until 31 May 2020 but only where required under an existing tenancy agreement. An example might be fees to renew a fixed-term agreement where such payment had already been agreed.

For the purpose of the act, it is a good idea to presume that all payments are prohibited unless expressly “permitted” by the Act. It is also wise to remember that many of the permitted payments have restrictions that can be found in more depth on the Government guidelines linked.

Who does the ‘Tenant Fees Act 2019’ apply to?

The Act applies to:

  • assured shorthold tenancies (The majority of tenancies in the private rented sector)
  • licences to occupy housing in the private rented sector in England (lodger lettings for example)
  • student lettings (provided by a specified educational institution)
  • A ‘Relevant person’ – anyone acting on behalf of a tenant or licensee or a guarantor.

Local housing authorities, the Greater London Authority or a person or organisation acting on their behalf are excluded from the definition of relevant person under the Act and can continue to make payments in connection with a tenancy when acting on behalf of a tenant or guaranteeing their rent.

What fees can be charged under the Tenant Fees Act 2019?

Fees that are ‘permitted’ by the act are as follows:
Rent:

  • The amount charged should be equally split across the first year of the tenancy.
  • After the tenancy has begun, the amount of rent payable may change without breaching the Tenant Fees Act, only if agreed with the tenant or under a rent review clause in the tenancy agreement.
  • If the tenant has no suitable guarantor or referee they may be asked to pay their rent in a lump sum but landlords should consider if this is necessary and affordable for the tenant.

Tenancy deposit: These are refundable at the end of tenancy and provide landlords with security against damage to their property, the non-payment of rent and breaks in the terms of a tenancy agreement.

  • Where the annual rent is less than £50,000 per annum, the maximum tenancy deposit allowed is five weeks.
  • Where the annual rent is equal to or greater than £50,000, up to six weeks deposit is allowed.

Holding Deposit to reserve a property whilst reference checks and the preparation of tenancy agreements are undertaken. See section below for further information.

  • The maximum holding deposit allowed is up to one week’s rent (annual rent divided by 52).
  • Only one holding deposit can be held at any one time for a single unit.
  • Tenants must be given clear information about why a holding deposit is required and also given a copy of the tenancy agreement.
  • Landlords will usually have 14 days to enter into a tenancy agreement after taking a holding deposit.

Payment in the event of a default. This should be written into the tenancy agreement and can cover:

  • the loss of a key to, or other security device giving access to, the housing to which the tenancy relates, or
  • a failure to make a payment of rent in full before the end of the period of 14 days beginning with the date (“the due date”) on which the payment is required to be made in accordance with the tenancy agreement.

Payment on variation, assignment or novation of a tenancy: any reasonable request to alter a tenancy agreement as requested by the tenant:

  • This is capped at £50, or reasonable costs incurred if higher.

Payment on termination of a tenancy –

  • Landlords must be able to prove that reasonable loss was suffered, for example as a result of referencing, re-advertising and can charge rent until the next tenant moves in.
  • The costs charged for early termination must not exceed the loss incurred by the landlord.
  • Rent can be required by the landlord until a suitable replacement tenant is found.
  • A tenant should not sub-let unless their tenancy agreement allows this,

Payment in respect of utilities eg: electric, gas, water,sewerage.
Payment in respect of council tax, TV licence, communication services (e.g. telephone, broadband etc.)

What fees are prohibited under the Tenant Fees Act 2019?

Any fees that are not listed on the government’s ‘permitted fees’ list above are prohibited. Therefore, landlords and agents are NOT permitted to charge fees for items such as:

  • Tenancy set up/check out/renewal fees
  • Third party fees (unless requested by the tenant)
  • Property viewing
  • Referencing
  • Credit checks
  • Gardening fees
  • Third party insurance fees.
  • Administration charges
  • Rent Guarantor fees (a guarantor might be a condition of the tenancy fees cannot be charged fees for meeting this condition)
  • Right to Rent checks (the landlord or agent are liable for this cost, unless the tenant fails the check)
  • Pet fees/deposits
  • Interest on permitted payments
  • Professional end of tenancy cleaning (as a special clause – breach of contract ONLY)
  • Loans – It is prohibited under the Act for a landlord or letting agent to require a relevant person to make a loan in connection with a tenancy.

What are the rules on holding deposits?

Schedule 2 of the Act outlines the treatment of holding deposits. A few of the requirements are as follows:

  • the holding deposit must be refunded to the tenant within seven days of the parties entering into a tenancy agreement (although the holding deposit can be applied, should the tenant wish, to the first instalment of rent or security deposit).
  • The circumstances in which a holding deposit can be retained by a landlord are restricted. A landlord might be able to keep the holding deposit if:
    • The tenant can not rent the property due to the Immigration Act 2014 where the landlord / letting agent was unaware, and could not reasonably have been expected to know, prior to accepting the deposit,
    • The tenant provides false or misleading information. Here, the landlord is reasonably entitled to use their discretion when deciding whether or not to allow a tenancy,
    • The tenant chooses not to enter into a tenancy agreement or fails to take all reasonable steps to enter into a tenancy agreement.

Where a landlord or letting agent seeks to retain a holding deposit a notice must be served on whoever paid the deposit, outlining the grounds.

What are the penalties for breaking the ban?

The penalty for a first offence is up to £5,000. If a person commits a second offence within 5 years, a further penalty of up to £30,000 may be charged. Also, it should be noted that a second offence is a criminal offence and a banning order offence.

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