Are you Ready for the Tenant Fees Act 2019?
Published on February 23, 2019 by Paul Cassar
The Tenant Fees Act 2019 comes into force on 1 June 2019. Its aim is to limit the fees charged to tenants by landlords and agents, and it will introduce a range of penalties for those who do not comply.
The Tenant Fees Act will apply to assured shorthold tenancies, student tenancies and licensed lets, but will not affect social housing, company lets or other types of long term leases.
The Act will introduce a range of ‘permitted payments’ that can be charged to tenants or prospective tenants. All fees outside of the permitted payments will be banned.
What are permitted payments under the Tenant Fees Act?
The following will be classed as permitted payments under the Tenant Fees Act 2019:
Rent – the rent charged for the first period should not exceed the rent charged for any subsequent rental period. The aim here is to prevent over-inflated early rental payments that would hide a banned fee.
Tenancy deposit – the amount of the deposit must be limited to five weeks’ rent, where the yearly rent falls below £50,000. For yearly rent over £50,000, the deposit can only be the equivalent of six weeks’ rent.
Holding deposit – fees charged to tenants to hold or secure a property until a tenancy agreement is granted must not exceed the equivalent of a week’s rent. The holding deposit may form part of the first month’s rent, or the tenancy deposit, providing the tenant consents to it.
Event of default – there are limited events of default for which fees may be charged. These are loss of a key or security device required to access the property, and failure to pay rent in full within 14 days of the day it is due. If the tenancy agreement does not specifically state that the landlord may make these charges, then they are not allowed.
Variation, assignment or novation – a fee may be charged to a tenant for providing consent to the variation, assignment or novation of the tenancy agreement on the consent of the tenant. This fee must not exceed £50 or the reasonable costs incurred by the landlord or managing agent in considering or arranging the transaction.
Termination of tenancy – if the tenant elects to end the tenancy prior to the end of the contractual term, then the landlord will be allowed to charge them an amount equivalent to the loss suffered as a result of the early termination, or the reasonable costs incurred by a managing agent in arranging it.
Utilities, television licence and communication services – it is allowable to charge tenants for utilities, TV licence fees and communication services, as long as the tenancy agreement sets out as such. Utilities under the Act means electricity, gas or other fuel as well as water and sewerage. Communication services means telephone, internet and satellite or cable TV.
What are the penalties for breaching the Tenant Fees Act 2019?
If a landlord or managing agent breaches the Tenant Fees Act 2019 then they will face various financial and legal penalties, including:
- A first breach of the Act by a landlord or agent may incur a financial penalty of up to £5,000.
- If the landlord or agent has been fined under a first breach and then goes on to make the same breach within five years then this will be deemed a criminal offence. Such an offence may be subject to a financial penalty of £30,000, or the landlord or agent may be liable on summary conviction to a fine.
- The tenant will not be bound by any term of the tenancy agreement that involves a prohibited payment. The rest of the agreement will however remain enforceable.
- Landlords are prevented from serving notice to terminate a tenancy under Section 21 of the Housing Act 1988 until any banned payments have been returned to the tenant.
As with all regulations surround residential lettings, the local authority will be responsible for enforcing the rules under the Tenant Fees Act 2019.
In light of the introduction of the Act, landlords and agents will need to review their tenancy agreements and holding deposit forms to ensure compliance.