The Tenant Fees Act 2019: what it means for landlords

From 1 June 2019 landlords and lettings agents are no longer able to require tenants to pay certain fees in relation to assured shorthold tenancy agreements, students lets or licences to occupy private residential housing.

The Tenant Fees Act 2019 has introduced fundamental changes which ban all payments from a tenant unless they are expressly permitted. The Act applies to all new agreements entered into after 1 June 2019. For agreements entered into before 1 June, landlords will still be able to charge the fees and payments until 31 May 2020 but after that date the ban will apply.

A landlord who fails to get it right now could face a financial penalty of £5,000 and may face criminal prosecution.

Landlords need to take advice on the changes and ensure that tenancy agreements are compliant with the new Act.

What payments are allowed under the Act?

Permitted Payments: only certain payments are allowed under the Act; these include rent; refundable tenancy deposits up to a cap of no more than five weeks’ rent (where total annual rent is less than £50,000); refundable holding deposits capped at one week’s rent; charges on assignment or variation of the tenancy (capped at £50 or ‘reasonable’ costs incurred if higher); early termination costs and payments in respect of utilities, TV licence, council tax and communication services.

Rent: under the Act rent payments cannot be ‘front loaded’. It is possible to ask a tenant to pay more than one rent instalment at the start of the tenancy, for example the first two months, provided that the monthly rent payments are split equally across the tenancy

Default fees: The Act also restricts the amount that a tenant can be charged in the following situations:

• If a tenant is more than 14 days late in paying rent, interest may be charged but the interest rate must not exceed 3% above the base rate of the Bank of England.

• If a tenant has lost a key or security device giving access to the property and requires a replacement; the fee cannot exceed the reasonable cost of replacing the key and the landlord or agent must provide evidence to show that the costs have been incurred.

What happens if the Act is breached?

A tenant is entitled to reimbursement of any prohibited payment with interest and landlords will be unable to serve a S21 notice until they have repaid any prohibited payment to the tenant.

Trading Standards will enforce any breach of the Act; a breach will be a civil offence with a penalty of £5,000. If there are further breaches within 5 years of a previous offence, a landlord may be fined up to £30,000 and may face criminal prosecution or be subject to a banning order preventing them from letting property.

Act now!

Landlords and letting agents should review their tenancy agreements now and ensure that all new tenancies granted are compliant. They should also ensure that they keep good records of payments made by tenants so that they can justify any charges made and defend any claims that prohibited payments have been made.

To understand how the Tenant Fees Act 2019 applies to your property rental portfolio, please contact us today.