The Tenant Fees Act 2019 may be welcome news for tenants but not such good news for landlords. The new rules, which came into force on 1 June 2019, are aimed at ending unfair and disproportionate administrative fees that were being charged to tenants by some landlords.
In this article, we explain the limits to which landlords may now charge fees to their tenants and what this means in practice. The rules apply only to most assured shorthold tenancies, licences and student lettings.
Essentially, all payments are now banned except those allowed by the 2019 Act. For new tenancies, landlords and letting agents can no longer charge for any activity (unless specifically permitted) or time spent in setting up a new tenancy. For example, they must not charge for references or credit checks, guarantor fees or other administrative costs; nor can they charge for inventory costs, check-out costs or cleaning services at the end of the tenancy.
The only fees and costs a landlord or letting agent is allowed to charge a tenant under the 2019 Act are ‘permitted payments’. This means that when a tenancy begins, when it ends and during the tenancy, the landlords may only charge tenants the following permitted payments:
- rent for the first (and any further initial) rental periods of no more than the rent charged for any subsequent rental period;
- a tenancy deposit of up to five weeks’ worth of rent where the annual rent under the tenancy is less than £50,000 or six weeks’ worth if more than £50,000;
- a holding deposit can be charged to secure the property before a tenancy agreement is granted, up to a maximum of one week’s worth of rent;
- a fee where the tenant has lost the key, zapper or other security device, but this must not exceed the actual cost and the landlord must provide written evidence of this to the tenant;
- interest on overdue rent, not exceeding three per cent above the Bank of England base rate;
- a fee on a change or early termination of a tenancy by the tenant (up to a maximum fee of £50 or what is reasonable in the circumstances) and an amount equivalent to any loss suffered by the landlord as a result;
- the costs in relation to outstanding utilities, communication services and council tax; and
- reasonable payments resulting from a tenant’s default in paying rent in full within fourteen days of the due date. However, a fee may only be charged if the tenancy agreement expressly allows it in these circumstances.
No other payments are allowed. Furthermore, lettings fees must not be ‘disguised’, so landlords or agents must not attempt to disguise a prohibited payment as (or as part of) a ‘permitted payment’. For example, they must not exaggerate a ‘permitted’ fee in an attempt to recoup their costs for credit checks, references, etc. As a landlord, you may well be caught out if you attempt to do this!
Are there penalties if landlords wrongly impose a charge?
The 2019 Act was introduced to protect tenants and is being enforced by local authority trading standards departments. If a landlord fails to comply with the new rules, they risk a £5,000 fine for a first offence and up to a maximum of £30,000 for subsequent offences.
Also, if a tenant has made a payment to the landlord on request at the end of the tenancy and that payment is not ‘permitted’, the landlord will not be allowed to validly serving notice on the tenant under section 21 of the Housing Act 1988 to terminate the tenancy – unless and until it has refunded the payment. So if you are a tenant and have made such a prohibited payment without knowing your rights at the time, you can consider how to recover your money from the landlord.
What you should do
Landlords should take specialist advice on the new rules so that they understand what they are now permitted to charge a tenant. They and their agents should particularly reconsider their procedures around taking tenancy deposits, etc and how they pass other charges and costs to their tenants to avoid falling foul of the rules.
They should also consider reviewing how new tenancy agreements with incoming tenants should be drafted so that the fees and charges at the start of the tenancy comply with the new rules.
If you are a tenant and you have received a bill from your landlord at the end of your tenancy, consider checking it with specialist solicitors before making any payment. You will not want to risk paying out more than you are legally required to.
For further information, please contact the commercial property team on 01732 770660 or email [email protected]. Warners Solicitors has offices in Tonbridge and Sevenoaks, Kent.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.