Ban on Hidden Tenants Fees
29-05-2019
Coming into force on 1 June 2019, the Tenants Fees Act 2019 (the Act), is the Government’s line of attack in banning letting fees and capping deposits in England. Its aim is to reduce the costs tenants have to pay at the commencement and during the lifetime of a tenancy. It allows a tenant to understand the costs of renting a particular property upfront.
The Act applies to all assured shorthold tenancies, tenancies of student accommodation and licences to occupy housing in the private rented sector in England.
The Act will prevent landlords passing on payments such as, but not limited to, inventory fees, service fees, credit checks, fees for professional cleaning and fees for missed contractor appointments.
Permitted Payments
The Act sets out seven permitted payments:-
- Rent
- Refundable tenancy deposit capped at no more than five weeks’ rent where annual rent is less than £50,000; or six weeks’ rent where annual rent is above £50,000
- Refundable holding deposit to reserve a property – capped at no more than one week’s rent
- Payments to change a term of the tenancy at tenant’s request – capped at £50
- Payments associated with early termination when requested by the tenant
- Payments for utilities, communication services, television licence and council tax
- A default fee for late payment of rent/replacement keys or other security device, which has been set out in the tenancy agreement
Any payment which is not covered by the Act as above is prohibited. In addition, landlords are prevented from including a term in tenancy agreements that require payment of fees intended to act as a penalty.
However, the Act does not prevent landlords recovering damages for breach of the tenancy, nor does it prevent a landlord from recovering associated legal costs or from making deductions from a secured deposit following a breach, or for damage beyond reasonable wear and tear.
The Tenants Fees introduction in two stages
The Act will be introduced as follows:-
- From 01.06.2019 the Act will apply to all new tenancies and landlords will be prohibited from charging fees not contained in the Act. Landlords will be responsible for associated costs of setting up, renewing and ending a tenancy. Any fees already charged before 01.06.2019 do not have to be refunded. Where a tenancy agreement was entered into before 01.06.2019, landlords can still charge fees up to 31.05.2020 but only where fees are required under an existing tenancy agreement.
- From 01.06.2020 there will be a ban on fees to all tenancies. Any fees requested in error and paid, will have to be refunded within 28 days.
Enforcement of the Tenants Fees Act
The Act will be enforced by local authorities and, where applicable, Trading Standards.
Landlords who have charged any prohibited payments will be prevented from recovering possession through section 21 of the Housing Act 1988, known as ‘no fault evictions’, until payment has been refunded.
Tenants can recover unlawfully charged fees through the court.
A breach of the Act will be a civil offence and comes with a fine of up to £30,000.00. A subsequent breach within five years will be a criminal offence, the penalty of which is a banning order offence under the Housing and Planning Act 2016, and includes an unlimited fine.
Conclusion
Naturally, some landlords will be concerned that certain charges cannot be offset, however, the introduction of the Act is part of the Government’s overhaul of the private rented sector.
Landlords should double-check tenancy agreements and work with their letting agents to understand what permitted payments can be charged. This is to avoid the risk of being fined or banned from renting property in the future.
If a landlord, or tenant, is unsure of its obligations, it should seek independent legal advice.
