The Tenant Fees Act 2019
The Tenant Fees Act 2019 (‘the Act’) came into force on 1 June 2019 and applies to three main criteria “in connection with a tenancy of housing in England”.
- Controlling the kind of payments that landlords and letting agents can require
- Restricting certain third party arrangements
- Setting out strict regulations for the treatment of holding deposits
Tenancies to which the Act applies:
The Act applies to tenancies of housing in England. For the purposes of the Act ‘tenancy’ means:
- Assured Shorthold Tenancies (other than social housing and certain long leases)
- Student Lettings (falling within paragraph 8 of Schedule 1 of the Housing Act 1988 )
- Licences to Occupy (excluding holiday lets and licences to occupy social housing)
- Prohibited Payments
The starting point is to understand that all payments are likely to be prohibited unless the payment is expressly permitted under the Act.
The only permitted payments are as follows:
|Permitted Payments||Points to Note|
|Rent||If the amount of rent payable in respect of one period is more than the amount of rent payable in respect of any later period, the additional amount paid is not a permitted payment.
Unfortunately, if you were thinking you could charge a higher than normal rent for one month to recoup your costs, then a reduced rent for the remainder of the term – the legislation already covers this!
|Refundable Tenancy Deposit||A tenancy deposit is a permitted payment, and no changes have been made to the requirements of protecting this. However; the amount of deposit is now subject to the following caps:
• Where the rent is less than £50,000 per annum, the maximum tenancy deposit allowed is five weeks’ rent
• Where the rent is more than £50,000 per annum, the maximum tenancy deposit allowed is six weeks’ rent
Any deposit over this amount would be a prohibited payment.
|Refundable Holding Deposit||There is a stringent procedure to be followed under Schedule 2 in relation to accepting and repayment of a holding deposit – see more below.
The maximum holding deposit allowed is up to one weeks’ rent.
|Default Fees||These are only permitted for loss of a key or failure to pay rent by the end of a period of 14 days beginning on the date which payment is required to be made.
Default fees are subject to caps. For example, the loss of a key fee can be no more than the costs reasonably incurred by the landlord, and the interest on late payment of rent is capped at 3% above the Bank of England Base Rate.
|Payments on Variation, Assignment, Novation or Termination of a Tenancy||Only if the tenant requests to a landlord a variation, assignment, novation or termination of the tenancy, is a payment for performing the request permitted. Generally the amount must not exceed the greater of £50, or the reasonable costs of the landlord.|
|Payments in Respect of Council Tax or Utilities||A payment to a billing authority in respect of council tax is a permitted payment. A payment for the provision of a utility is permitted if the tenancy agreement requires it and ‘utility’ means electricity, gas, water or sewerage.|
- Prohibited Arrangements
The Act prohibits landlords and letting agents from requiring a tenant (or guarantor) to:
- Enter into a contract with a third party in connection with housing in England, if that contract is a contract for a provision of a service, or a contract of insurance. There is an exception in relation to the provision of utilities and communication services to tenants.
- Make a loan in connection with the tenancy.
- Holding Deposits
Schedule 2 of the Act sets out a timetable for dealing with holding deposits and restricts the treatment of holding deposits.
Only one holding deposit may be held at any one time for the same letting unit, so taking multiple holding deposits from multiple prospective tenants is not allowed. However, if a holding deposit has been repaid to a previous tenant, or the landlord is entitled to retain a holding deposit (e.g. due to a tenancy not being granted following misleading information given by the tenant) the landlord or agent can then take a further holding deposit from another prospective tenant.
From the time a holding deposit is received by a landlord or letting agent, there is a deadline for agreement which is 15 days from that date.
The holding deposit must be repaid:
- If the landlord and tenant enter into a tenancy agreement, it must be repaid to the tenant within 7 days from the date of the tenancy agreement.
- If the landlord decides before the deadline for agreement to not to enter into a tenancy agreement, it must be repaid to the tenant within 7 days of the decision.
- If the landlord and tenant fail to enter into a tenancy agreement before the deadline, it must be repaid to the tenant within 7 days from the deadline for agreement date.
Subject to a one year transition, the prohibitions relating to landlords do not apply to a requirement imposed before 1 June 2019 or a requirement imposed by or pursuant to a tenancy agreement entered into before 1 June 2019.
Any term that requires a prohibited payment after 1 June 2020 ceases to be binding and any prohibited payment received must be repaid within 28 days.
Enforcement and Penalties
The new provisions will be enforceable by local weights and measures authorities (i.e. Trading Standards) and district councils that are not local weights and measures authorities.
The penalty for a first offence is up to £5,000. If a person commits a second offence within 5 years, a penalty of up to £30,000 is payable. A second offence is also a criminal offence. All prohibited payments will be required to be repaid on top of the financial penalties. Further details on enforcement and penalties can be found here.