Effects of the Tenant Fees Act 2019 from the 1st June 2020 on all residential tenancies
The Tenant Fees Act 2019 (‘the Act’) came into force on 1 June 2019 and imposed limitations on the fees that Landlords and Agents could charge Tenants under Assured Shorthold Tenancies granted by private landlords, tenancies of student accommodation and most licences to occupy housing in the private rental sector in England. It meant that any fees charged outside of the Act were not permitted and consequently banned.
The Act has the effect of reducing the costs incurred by the Tenant throughout the Tenancy so as to make the private rental sector more affordable.
Permitted charges
The payments permitted under the Act include the following:
- The rent
- A refundable tenancy deposit – capped at no more than 5 weeks’ rent where the 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 – capped at no more than one weeks’ rent
- Payments to change the tenancy upon the tenant’s request – capped at £50 or reasonable costs incurred if higher
- Payments associated with early termination – when requested by the tenant
- Payments in regards to utilities, TV licences and Council Tax
- Default fee for late payment of rent and replacement of a lost key, where required.
Any fee not noted in the above list would be regarded as a prohibited payment under the Act meaning a Landlord or Agent cannot charge it.
However, any fees that have been charged to a tenant outside of the above list before the 1 June 2019 did not have to be repaid.
Changes from 1 June 2020
The Act applied only to new tenancies and letting agency agreements granted on or after 1 June 2019.
There was a one year transitional period for existing tenancies which has now come to an end, meaning the legislation now applies to all relevant and existing tenancies and licences to occupy housing in the rental sector in England, whether granted before, on, or after the 1 June 2019.
In practice, this essentially means Landlords and Letting Agents cannot request additional fees for such things as cleaning, references, inventories and admin.
Any term in an agreement requiring a Tenant to make a prohibited payment will not be deemed binding on the Tenant from the 1 June 2020. Accordingly, if a Landlord or Letting Agent receives a payment outside of the permitted list above, whether intentionally or by mistake, they will have 28 days to return it to the Tenant in order to avoid breaching the Act and incurring a penalty for non-compliance.
Penalties for non-compliance
There are substantial penalties for a breach.
Landlords who do not comply with this Act could face financial civil penalties issued by local authorities of up to £5000 for each breach of the Act, with larger financial penalties potentially reaching up to £30,000 being issued for repeated offences. Other penalties for non-compliance include banning orders and an entry of the Rogue Landlord Database.
Moreover, a Landlord’s ability to successfully serve a S.21 Notice for possession may be detrimentally diminished where a prohibited fee has been charged until the payment is reimbursed to the Tenant in full.
To avoid any potential breaches of the Act, ideally, Landlords and Tenants should agree to vary and update all pre-existing agreements in order to bring them in line with the new legislation.
