Tenant Fees Act (2019): What you should Know

Developer

25 Oct, 2019 — 3 mins read

The Tenant Fees Act came into force on 1st June 2019. The basic premise of the new law is there is a default ban on ALL tenant fees (including admin and agency fees) unless the act specifically permits them. 

The permitted list does not include fees such as admin and agency fees, referencing, inventories, credit checks, cleaning, gardening or requirements for Insurance

Here’s everything a landlord needs to know about the Tenant Fees Act (2019).

Summary of Tenant Fee Ban

Limit tenancy deposits to five weeks’ rent

Limit holding deposits to one week’s rent

Ban any other payments (except contractual default penalties)

Fines of £5,000 for first offence (civil)

Fines of £30,000 for second offence (criminal)


What’s in the Act?

Here are the key new rules contained in the Act.

1. All Payments Prohibited Except Rent, Deposits and Three Exceptions

Landlords or their agents will no longer be allowed to charge tenants for anything except: the rent, the tenancy deposit and a holding deposit (more on these below).

This means you will no longer be allowed to ask tenants to cover the cost of their own referencing. You also won’t be able to charge check-in, inventory or admin fees.

2. Three Fees Are Exempt

The only three exceptions are for contract amendments and two kinds of ‘default’ fees. These are fees you can charge when the tenant breaks the tenancy agreement. You will have to write these clauses into your contract to be able to charge tenants these fees while the tenancy is in progress.

(a) Late Rent Fees

You will be able to charge fees for rent payments that are over 2 weeks late. The fees can be up to 3% plus the Bank of England base interest rate. Because this is an annual interest rate, you will have to calculate the amount of pro rata interest accrued on the outstanding rent.

 (b) Lost Keys

You will also still be able to charge tenants for losing their keys (or other security device if your property is high-tech). But you will only be able to charge a reasonable amount for which you can provide evidence of the cost to you.

 (c) Changes to Tenancy

Landlords can charge up to £50 for making changes to the terms of the tenancy. For example, adding a new tenant to the tenancy or allowing a pet.

Landlord can charge more than £50 if they are able to demonstrate their costs exceeded £50, but it is expected that this will not happen often.

Crucially, this exception does not apply to renewals or changes to the length of the tenancy

3. Cap on Tenancy Deposits 

Tenancy deposits, also called security deposits, are to be limited to five weeks’ rent for annuals rents under £50,000. For properties whose annual rent is £50,000 or more, tenancy deposits will be capped at six weeks’ rent. 

4. Cap on Holding Deposits

Holding deposits will be limited to one week’s rent.

5. New Rules on Holding Deposits

The Act includes new rules about how holding deposits must be treated.

The holding deposit must be returned to the tenant: either in payment back to the tenant, or being put towards the first rental payment, or the security deposit.

There are some exceptions. In these cases the landlord can keep the holding deposits:

The tenant withdraws

The tenant doesn’t take all reasonable steps to enter the tenancy

The tenant fails a right to rent check

The tenant provides misleading information which materially affects their suitability to rent the property

6. Repayment of Holding Deposits

Landlords will only be able to hold the holding deposit for 15 days unless another ‘deadline’ date is agree in writing. After the deadline, the holding deposit must be repaid within 7 days according to the above rules (see 5). The holding deposit can be repaid to the tenant, or it can be put towards the rent or tenancy deposit.

What Are the Penalties to Landlords Who Charge Tenant Fees?

Landlord (or agents) who charge illegal fees will face paying huge fines.

The first offence would be a civil offence, with a fine of £5,000.

If the offence is repeated within five years, there would be either a criminal offence or a fine of £30,000.

There are also plans to help tenants recoup any illegal fees they paid from the landlord (or agent).

Can I Still Charge Bills as Part of the Rent?

Yes. You can still include bills in the rent for the following utilities and services:

Council tax

Utilities, e.g. gas, water, electricity

Television license

Communication services (e.g. broadband)

https://www.gov.uk/government/publications/tenant-fees-act-2019-guidance