The Tenant Fees Act 2019 – An Overview

The Tenant Fees Act 2019 – An Overview

In the first part of our Tenant Fees Act 2019 series, Samuel Okoronkwo Jr. gives an introduction to the Tenant Fees Act and an overview on what it covers. You can find Part 2, The Tenant Fees Act – Rent and Deposits here and Part 3, The Tenant Fees Act and Tenancy Changes and Breaches here.

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From the 1st of June 2019, landlords and agents are no longer permitted to charge a number of fees in England for new tenancies signed on or after that date. This is a wide ranging tenant fees ban with landlords and agents only able to charge for fees provided for in the Tenant Fees Act 2019.

 

Application of the ban

 

Only Assured Short hold Tenancies (“AST’s”), student tenancies, and licences to occupy (e.g. lodgers) are caught by the Tenant Fees Act 2019. Commercial lets and non-assured tenancies are exempt. Also, the Tenant Fees Act applies only to landlords, tenants and agents in England. Wales has recently passed the Renting Homes (Wales) (Fees etc.) Bill which is expected to come into force on 1 September 2019. Letting fees have been banned in Scotland since 2012.

 

The scope of the ban

 

Not only does the Tenant Fees Act apply to new tenancies signed after 1 June 2019, it also applies to the renewal of old tenancies after the Tenant Fees Act comes into force. So, if a tenancy was signed before 1 June 2019, tenants will still be required to pay fees written into their agreement until 31 May 2020 when the 12-month transition period ends. This includes fixed terms which become statutory or contractual periodic tenancies during this time.

However, from 1 June 2020, the ban will attach to pre-existing tenancies and clauses that charge fees in them will become ineffective. If a landlord or agent takes a prohibited payment after that date, they will have 28 days to return it or be considered in breach of this legislation.

 

What is banned?

 

Any fee that the tenant (or someone acting on their behalf) is required to pay as a condition of the “grant, continuance, assignment, termination or renewal” of an AST or licence agreement is considered a banned fee. This includes payments to third parties, either for services throughout the tenancy or for specific performance of a job; and loans from third parties. So, any fee that is in the tenancy agreement will be void unless it is exempt.

Examples of banned fees include:

  • Admin charges
  • Charging for a guarantor form
  • Cleaning services
  • Credit checks
  • Gardening services
  • Inventories
  • Professional cleaning
  • Referencing
  • Requirements to have specific insurance providers

 

What isn’t banned?

 

Landlords and/or tenants will be able to charge for the following:

  • Rent
  • Holding deposits (capped at one week’s rent and subject to a number of provisions) 
  • Security deposits (limited to five weeks’ rent where the annual rent is less than £50,000, or six weeks’ rent otherwise)
  • Payments to change the tenancy, where requested by the tenant (usually capped at £50, or reasonable costs incurred if higher)
  • Payments for early termination of the tenancy, where requested by the tenant 
  • Payments for utilities, broadband, TV, phone and council tax. Landlords and agents may specifically charge for television licence and council tax if explicitly referred to in the contract. However, only landlords are permitted to charge for the costs they incur for specific utilities such as telephone, broadband and television services, again if explicitly referred to in the contract.
  • Default fees for replacement of a lost key or security device, and a charge when rent payments are at least 14 days late.

 

The landlord pays the bills and reclaims the payments from the tenant, the landlord must not overcharge the tenant beyond the actual cost of the services. Tenants are entitled to request and receive a breakdown of the costs paid by the landlord and can take a landlord to court to recover any additional charges.

 

Enforcing the Tenant Fees Act 2019

 

Where a breach has occurred and a banned fee or payment is taken, tenants will be able to make a claim in the county court or First-tier Tribunal [Hyperlink to commercial litigation services page]. The landlord or agent may be charged interest on this from the day that the prohibited payment was taken.

 

Further, local trading standards will be required to enforce this legislation and district councils which are not trading standards authorities will also have the power to enforce. Fines of up to £5,000 for a first offence can be issued by enforcement authorities. Subsequent breaches within five years are criminal offences, with an unlimited fine on conviction and the possibility of a banning order. Alternatively, the landlord can be fined up to £30,000 by the local authority as a civil penalty. Note also that if a landlord is being fined for multiple breaches at once, but has not previously been served with the financial penalty, the penalty is limited to up to £5,000 for each breach.

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