The Tenant Fees Act 2019 (“the Act”), is a new piece of legislation banning certain types of fees in relation to the private rental sector, and came into force from 1st June 2019.
This is part of a series of reforms to increase transparency within the private rental sector for residential tenants.
We explain below who the ban applies to and which fees are banned.
WHO THE BAN APPLIES TO?
Currently the ban will only affect landlords, agents and tenants in England, in relation to the following types of tenancies:
- Assured shorthold tenancies;
- Licences to Occupy in the private rented sector; and
- Student accommodation lettings (provided by a specified educational institution)
WHICH FEES ARE BANNED?
Under the Act all other fees, apart from those listed below, are prohibited and are considered illegal to charge. Schedule 1 of the Act expressly permits the following fees:
- Tenancy deposits;
- Holding deposits;
- Payments in the event of a default;
- Payments of Damages for Breach of an Agreement;
- Payments on variation, assignment or novation of a tenancy;
- Payments on termination of a tenancy;
- Payments in respect of council tax;
- Payments in respect of utilities etc;
- Payments in respect of a television licence; and
- Payments in respect of communication services.
Set-up fees, credit-check fees and fixed penalty charges for late payment of rent are examples of what are now, illegal charges.
The Act rules out the opportunity for landlords to charge a higher than normal rent during the earlier rental period and a reduced rent for the remainder of the term. This is because the difference is considered to be a prohibited payment unless the difference comes from an upwards/downwards rent review provision or has been agreed between the tenant and landlord. An exception to this rule is are annual rent increases under assured shorthold tenancies, provided notice has been given by the landlord in accordance with of section 13 of the Housing Act 1988.
Any landlord or agent in breach of the Act will now face a fine of £5,000. This figure may increase to £30,000 for a repeated breach or potentially result in a criminal offence.
WHEN DOES THE BAN START?
The ban applies:
- From 1 June 2019 – to any Relevant Tenancy that was/is granted or renewed on or after 01 June 2019;
- From 1 June 2019 – holding deposit paid from this date;
- From 1 June 2020 – to all other Relevant Tenancies, insofar any provisions contained in an agreement requiring a Prohibited Payment will become unenforceable
There is a transition period for the renegotiation of (pre-1 June 2019) agreements that runs from 1 June 2019 to 31 May 2020.
WHY HAS THE GOVERNMENT DECIDED TO INTRODUCE THE BAN?
The Government estimates that £240 million pounds will be saved by renters under the new legislation.
The Act aims to prevent residential tenants from being “stung by unreasonable costs” from landlords, such as property viewing, inventory check and check-out charges. .
The aim is to develop a fairer, affordable and attractive housing sector- particularly for lower income individuals, deterred by the market’s murkiness due to an inability to swallow unexpected charges.
The Act also seeks to create equilibrium between residential tenants and landlords. Landowners retain the power to charge fees duly owed, whilst tenants obtain the capacity to refuse to pay unjust fees.
This marks the beginning of a changing landscape in the housing market in England.
Rest assured there is more to come.
Website content note: This is not legal advice; it is intended to provide information of legal interest about current legal issues.