New restrictions on tenants fees

New restrictions on tenants fees

This article was published on: 1st June 2019

Tenant Fees Act 2019

This has recently been passed. But what does it mean for letting agents and landlords? As this is new law and there are no test cases yet, this is intended to be a general guide only. If you have any specific queries, please get in touch.

When does it come into effect?

1 June 2019.

What tenancies does it apply to?

It will apply to all assured shorthold tenancies (i.e. most short-term residential tenancies) in England, as well as licences and student lettings.

What can you charge tenants?

You can only charge tenants for:

  • Rent (provided the rent remains at the same level throughout the term).
  • A tenancy deposit, up to a maximum of 5 weeks’ rent if the rent is less than £50k per year, or up to 6 weeks if the rent is more than 60k per year.
  • A holding deposit to reserve a property, up to a maximum of 1 weeks’ rent.
  • The cost of a replacement key or other security device.
  • Interest on arrears up to 3% above Bank of England Base rate.
  • A fee of up to £50 if a tenant requests the variation, assignment or novation of their tenancy (n.b. more is allowed if you can show that costs were reasonably incurred – so, perhaps, getting solicitors to draft the documents).
  • A payment in consideration of terminating the tenancy early, limited to the loss suffered by the landlord as a result of the early termination.
  • Payments in respect of council tax, utilities, TV licence, land line, internet, cable and satellite TV

These are all known as ‘permitted payments’

What can’t you charge tenants?

Basically, everything else – so no start-of-tenancy admin fees, no cleaning fees, and no inventory fees. These types of payments are known as ‘prohibited payments’. Any additional rent payable at the start of the tenancy (perhaps to make up for the limits on deposits) will also be a prohibited payment.

What happens if you charge a prohibited payment?

If a prohibited payment is charged, you cannot serve a section 21 notice until it has been repaid.

Local authorities can fine the agent and/or the landlord up to £30,000 for breaches. Directors of landlord and agency companies will also personally liable for any breaches. The local authority can also order refund of any prohibited payments, with interest.

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