Understanding the Tenant Fees Act

Understanding the Tenant Fees Act

This article was published on: 13th May 2020

The Tenant Fees Act (“the Act”) came into force on 1 June 2019 for any new or renewed tenancy agreements signed on or after that date. Its primary purpose was to reduce the initial costs that a tenant faces when in a tenancy, by banning most letting fees and putting a cap on tenancy deposits. The Act only applies to private sector tenants.

From 1 June 2020 the Act will apply retrospectively, in that all tenancy agreements will fall foul of the Act if the landlord or agent:

  • Hold a deposit of more than 5 weeks’ rent on a property with a total annual rent of less than £50,000, or more than 6 weeks’ rent if the total annual rent is over £50,000;
  • Charge renewal or referencing fees;
  • Charge a tenant a “prohibited payment”;
  • Charge the tenant in excess of £50 without reasonable proof of incurred costs for variation, assignment, or novation of a tenancy; or
  • Take a holding deposit of more than one week’s rent.

Any fees that were written into an agreement signed before 1 June 2019 where the tenancy ends after 1 June 2020 will be void. This includes check out fees, cleaning fees, and administration fees. It is also important that any deposits in excess of the permitted amounts are partially refunded to the tenants in order to bring the deposit held to a figure in line with the Act. Similarly, any renewal fees held on account must be refunded if the tenant signs their contract on or after 1 June 2020.

For the avoidance of doubt, the landlord or agent can charge:

  • Rent;
  • A refundable tenancy deposit capped at no more than 5 weeks’ rent where the total annual rent is less than £50,000, or 6 weeks’ rent where the total annual rent is £50,000 or above
  • a refundable holding deposit (to reserve a property) capped at no more than 1 week’s rent;
  • Payments associated with early termination of the tenancy, when requested by the tenant;
  • Payments capped at £50 (or reasonably incurred costs, if higher) for the variation, assignment, or novation of a tenancy;
  • Payments in respect of utilities, communication services, TV licence and Council Tax;
  • A default fee for late payment of rent and replacement of a lost key/security device giving access to the housing, where required under a tenancy agreement.

Breaching the Act is enforced by the local housing authority who have the power to impose financial penalties of up to £5,000 per breach. Successive breaches within 5 years are considered a criminal offence with a potentially unlimited fine being levied. This would also likely result in a Banning Order, which would see the landlord entered into the Database of Rogue Landlords and Letting Agents.

Breaching the Act will also impact the ability to serve a Section 21 notice if the landlord has either failed to repay a holding deposit or has required a tenant to make a prohibited payment and failed to refund this or apply it as rent or part of the deposit.

Most landlords and agents are well on the way to compliance with the Act, having undergone process changes to accommodate the legislation on introduction in 2019. It is very important for any landlords who are not aware of the impact that the Act has on existing tenancies as of 1 June 2020 to familiarise themselves as the risks associated with a breach can be costly.

Author: Philip Copley, Solicitor

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