The Tenant Fees Act 2019 comes into force this week
28 May, 2019
The Tenant Fees Act 2019 comes into force this week ( 1st June) and will have far reaching effects for landlords and letting agents. It applies to all ASTs, licences and student lettings in England but not to company lets or assured tenancies.
There are two key parts to the Tenant Fees Act 2019 which every landlord and agent must be aware of. The first relates to tenancy deposits and the second to fees charged to tenants or prospective tenants.
Tenancy deposits on tenancies with a yearly rent of less than £50,000 are to be limited to five weeks rent. A landlord may only take a deposit of six weeks rent if the rent is above £50,000 per annum. Tenants cannot be required to pay additional deposit sums for keeping a pet. If a landlord takes more than the permitted sum it will be a prohibited payment and must be repaid to the tenant. Notice seeking possession of the property pursuant to Section 21 of the Housing Act 1988 cannot be served until that is done.
There are limits on fees tenants can be asked to pay at the start of or during a tenancy. Any payments not permitted by the Act are prohibited.
Holding deposits are to be limited to a sum equal to one weeks rent and there are strict rules on when and how these deposits must be repaid. Landlords and agents may only take one holding deposit at a time for each property. Tenants cannot be charged for the cost of compiling an inventory, check in or check out fees or for the cost of referencing. Tenants cannot be charged for the costs of renewing a tenancy. The landlord must pick up all of those costs.
Tenants will still be responsible for any costs incurred as a result of early termination of a tenancy or changes to the agreement at their request, the latter to be capped at £50 or reasonable costs if higher.
If a tenant gets into difficulty with their rental payments then a landlord can charge interest on the sums outstanding fourteen days after they become due but the interest is to be limited to 3% above the Bank of England base rate. Then can be no late payment of rent fee or charges for letters sent by agents or solicitors.
For those tenancies already in existence and where the agreement allows charges to be made then those charges can continue to be made until 31st May 2020. After that time they will not be legally binding so landlords should beware if they have long term tenants on a periodic tenancy. They won’t have to return deposit sums over and above the cap but cannot charge any other fees even if the agreement provides for them.
For landlords or agents thinking they might get around this ban and simply add the fees they would have charged on to the rent then the watchword is caution. You cannot front load the fees onto the first months rent and then charge unequal sums during the term for example £800 in month one and then £500 thereafter. The £300 uplift for fees would be a prohibited payment.
Landlords or agents are required to repay any prohibited payments to tenants and cannot serve Section 21 notices until that has been done. The Act will be enforced by Trading Standards and initial penalties can be up to £5000 with other financial penalties for repeat offenders and the possibility of being added to the database of rogue landlords and agents.
If you need any advice in relation to this, please do not hesitate to contact our Residential Property expert, Jane Canham at Jane.Canham@storrarcowdry.co.uk.