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The Tenant Fees Act 2019 – Changes to the Tenancy

 

In the third and final part of our Tenant Fees Act 2019 series, Samuel Okoronkwo Jr. explains the impact of the Tenant Fees Act and when the tenant breaches the tenancy or either the landlord or tenant want to change the tenancy. You can find Part 1, An Overview of the Tenant Fees Act here and Part 2, The Tenant Fees Act – Rent and Deposits here.

Changes to the Tenancy

As a general rule, charging for the surrender of a tenancy is prohibited. However, landlords and agents are still allowed to charge certain small sums to tenants if the tenant requests a change in tenant or an early surrender.Where the tenant has requested a change in the tenancy (e.g. swapping tenants), the landlord may charge a fee of £50 for the change or the actual costs incurred if above this threshold if evidenced in writing.

Where the tenants have requested early surrender of the tenancy, the landlord or agent may charge fees equivalent to the loss incurred. As charges such as referencing, tenancy drafting, etc are now prohibited, landlords will not be able to show a loss has been incurred for the provision of these services. Instead, landlords and agents will be able to charge the equivalent of the rent lost due to the unforeseen void period.

Landlords must be careful not to double charge for rent in that if a replacement tenant is found, the landlord cannot continue to charge the existing tenant once the new tenant has moved in. It is also important to note that the remaining rent must be taken as agreed pursuant to the tenancy e.g. monthly. The aim of the Tenant Fees Act 2019 is to prevents landlords and agents benefiting financially from a tenant leaving early. So, any payments which exceed the loss incurred will be classified as a banned fee.

Breach of the Tenancy

Where the tenant has breached the tenancy and has caused damage, landlords may be entitled to seek compensation via deductions from the deposit or court action [Hyperlink to commercial litigation services page]. Clauses should be drafted in the tenancy to this extent should landlords wish to do so. When drafting clauses in the tenancy, landlords and agents will be in breach of the Act if they put clauses in the tenancy agreement that require payment as a penalty if the tenant fails to meet an obligation, because this will be considered a Default Payment, which is itself a banned fee.

However, landlords are allowed to charge for two types of default payments. For the loss of keys, landlords are allowed to charge the reasonable cost that they can evidence in writing. Anything landlords cannot evidence in writing with receipts will likely be considered a banned fee. For late payment of rent, landlords and agents may only charge interests if rent is more than 14 days late. They may charge three per cent above the Bank of England base rate in interest on the late payment of rent from the date the payment is missed. At the time of writing this would be 3.75 per cent interest. They may not charge for sending reminder letters.

The Tenant Fees Act and Section 21 Notices

Landlords will be restricted from serving a Section 21 notice if they charge and receive banned fees. Landlords and agents can either refund the prohibited payment or, with the permission of the tenant, use that money as payment towards rent or the deposit.

So, if you are a landlord, tenant or agent and require specific advice from our barristers on the Tenant Fees Act 2019 and its relationship with Tenancy Changes and Breaches, please get in touch by booking a consultation with a barrister; email us at clerks@mercantilebarristers.com; or telephone us on 0203 034 0077.