Tenant Fees Act 2019 – all you need to know and a guide to prepare for the incoming Act

Author:  Sarita Magar, Trainee Solicitor at RHJ Devonshire Solicitors

The Tenant Fees Act 2019 (‘the ACT’) comes into effect from 01 June 2019 in England.

 

What is the Act?

The Act has been introduced primarily for the benefit of tenants in the private sector. The Act comes into force on 01 June 2019. Its purpose is to make residential lettings in the private sector fairer, affordable, and transparent for tenants.

The Act places a ban on tenant fees and limits the amount of deposit that landlords and letting agents can seek from the tenants. The Act also controls what payments landlords and letting agents may charge tenants in setting up or renewing a tenancy. For instance, security deposits to be paid to the landlords or letting agents are capped at no more than 5 weeks if the annual rent is less than £50,000.00. If the annual rent is more than £50,000.00, the security deposits are capped at six weeks’ rent. Further, holding deposits must not exceed more than 1 weeks’ rent.

What are the permitted payments?

Schedule 1 of the Act contains the permitted payments that landlords or letting agents are allowed to receive, and these are:

  • Rent
  • Tenancy deposit
  • Holding deposit
  • Two types of payments in the event of a default i.e. interest on late rent and costs in replacing any lost keys which must be evidenced in writing.
  • Payment on changes to the tenancy purported by the tenant i.e. variation, assignment, novation or termination of a tenancy. A limited fee of £50.00 can be charged unless it can be evidenced in writing that increased costs was reasonably incurred.
  • Bill payments in respect of council tax/ utilities/ television licence/ communication services.

From 01 June 2019, it will therefore be illegal for landlords or letting agents to charge tenants for any costs incurred that is not stated above i.e. referencing, inventories and any ‘admin’ fees.

Which tenancy type does the Act apply to?

The Act applies to following tenancies:

  • Assured short-hold tenancy agreements
  • Student accommodation
  • Licences

Company lets, social housing tenancies, holiday lets, long leases and non-assured tenancies will be exempt.

Will the fees ban apply to existing tenancies?

The Act will apply to fixed term tenancies, including the renewal of such tenancies, but it excludes statutory and contractual periodic tenancies that arise after the Act comes into force on 01 June 2019.

Example: if an existing tenancy agreement ends and is renewed on or after 01 June 2019, the provisions of the Act will be applicable. If the same tenancy agreement is not renewed but continues as a periodic tenancy after 01 June 2019, the Act will not apply.

As from 01 June 2020, the Act will apply to all tenancies. Any clauses in those tenancies that purport to charge fees excluded under the Act will be void. If a landlord or agent takes a prohibited payment after 01 June 2020, they will have 28 days to return it, or will be considered in breach of the Act.

What are the consequences for non-compliance?

Landlords or agents who charge illegal fees will face significant financial penalties. The first offence will be a civil offence, with a fine of up to £5,000.00. If they repeat the offence within a 5 year period, such conduct will amount to a criminal offence subject to a fine of £30,000.00. As with previous residential letting regulations, enforcement of the new rules will be the responsibility of local authority.

Furthermore, in the event of a breach under the Act no valid section 21 notice may be served on a tenant whilst a landlord or agent is holding onto any prohibited payment.

Preparing for the Act

In light of the introduction of the Act, it is vital that the landlords and agents operating in the private rented sector should undertake reviews of their portfolios to check which payments are being charged and will become prohibited under the Act.

The prohibition on fees will impact the private letting industry so it is vital that landlords and their agents are prepared and consider their current business models carefully to plan ahead of 01 June 2019.

If you require any further guidance on this matter or any other landlord and tenant related issues, please contact the Dispute Resolution Team at RHJ Devonshire on 0203 923 0440.

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