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Tenant Fees Act 2019

28/06/2019

The new Tenant Fees Act, which came into effect on 1 June, introduced new legislation that directly impacts the fees that landlords can charge tenants at the start of a tenancy, explains Lodders’ Dispute Resolution solicitor, Lauren Smith.

The Act, introduced to provide more protection for residential tenants in the private rental sector in England, restricts the payments letting agents and landlords can request from tenants of assured shorthold tenancies (ASTs).

New fee restrictions have been put in place to help reduce and standardise the costs faced by tenants, including a cap on the amount that landlords can charge as a deposit and the banning of letting fees altogether.

The Act states that deposits must be capped at five weeks’ rent, if the annual rent amount falls under £50,000 or six weeks’ rent for annual amounts over this. The holding deposit has also been limited to one week’s rent and payments associated with the early termination of a tenancy are restricted to the landlord’s loss or the reasonably incurred costs of the agent.

Banned and permitted payments

Although the new legislation provides a more transparent fee structure for potential tenants, the results are less favourable for landlords and letting agents. The new restrictions mean that there are a number of payments which landlords and agencies can no longer ask of tenants, such as tenancy set-up fees, viewing fees, inventory check fees, and check-out fees.

The only payments which can be requested from tenants are standard; utilities and council tax, a charge for changing or ending the tenancy, or default charges, such as for late rent payment. Any other charges imposed on tenants could result in the landlord facing a fine of up to £5,000 for errors and non-compliance with the new legislation.

As well as ASTs, the Tenant Fees Act is also applicable to student lettings, and licenses to occupy housing, and applies to tenants, as well as the tenant’s guarantor, or a person acting on behalf of a tenant. However, it does not apply to social housing tenancies, or long leases.

Serving notice

Landlords currently have the ability to serve Section 21 notices to bring tenancies to an end. This is generally known as a no fault notice amongst landlords. The new act means landlords cannot evict tenants using a Section 21 notice until they have repaid any unlawfully charged fees, or returned an unlawfully retained holding deposit.

What does this mean for landlords?

New sanctions have been put in place for non-compliance with the guidelines, meaning enforcement authorities will ensure prohibited payments are repaid to the tenant. Breaches of the legislation would generally mean a penalty of up to £5,000, but a further breach within 5 years could impose a penalty of up to £30,000.

Landlords need to be aware of the restrictions imposed by this new act, and the potential consequences of any breaches. The legislation will apply to all new tenancies and renewals granted from 1 June onwards. Although, it is yet to be seen to what level the act will be enforced.

For a full list of banned and permitted payments, click here.

For support and advice on the Tenant Fees Act 2019, please contact Lauren Smith on 01789 206146 or via email.

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Get in touch

For more information, please contact Lauren Smith on 01789 206146 or via email.