04 Sep the tenant fees act 2019 rent deposits
In the second part of our Tenant Fees Act 2019 series, Samuel Okoronkwo Jr. explains the impact of the Tenant Fees Act on the levels of rent and the extent of deposits chargeable. You can find Part 1, An Overview of the Tenant Fees Act here and Part 3, The Tenant Fees Act and Tenancy Changes and Breaches here.
Once the Tenant Fees Act 2019 comes into force, there will be a ban on setting rent at a higher level for an initial term of the tenancy and then dropping it down thereafter. The idea is to prevent landlords or agents trying to offset the ban on fees by artificially increasing the rent for the initial period to make up the costs. However, it is permissible for a landlord or agent to charge a higher rent than they would normally charge for the property, as long as it is charged consistently throughout the tenancy.
A holding deposit is a payment taken by the landlord or agent from the tenant before a tenant agrees a tenancy with the landlord, in order to ‘hold’ the property while checks are undertaken. Holding deposits will be limited to a maximum of one week’s rent and subject to statutory legislation on the repayment of this should the tenancy not go ahead.
HOLDING DEPOSITS AND THE TENANT FEES ACT 2019
Once the holding deposit is taken, the landlord has 15 days to make a decision once a holding deposit is taken, unless otherwise agreed in writing. The unlawful retaining of a holding deposit is civil offence resulting in a penalty of up to £5,000.
Landlords or agents can only accept one holding deposit for one property at any one time and should stop advertising a property once it has been taken. If the tenancy goes ahead, the holding deposit must be returned within seven days of agreement, unless it is converted into part payment of the actual deposit or used towards the initial rent payment.
If the tenancy does not go ahead due to no fault of the tenant, then the money must be repaid in full within seven days of the deadline being reached or the landlord backing out. The landlord also has to refund the deposit if they impose a requirement which breaches the Tenant Fees Act 2019 or behaves in a way that would make it unreasonable to expect the tenant to enter into a tenancy with the landlord.
However, repayment does not need to be in full if the tenant backs out of the tenancy agreement themselves, fails right to rent checks, has provided false or misleading information, or where the landlord tries their best to get the information needed but the tenant fails to provide it within the 15 days. An explanation for retaining the holding deposit must be provided in writing within seven days of the decision to not let the property being made if this is before the 15-day deadline or within seven days after this deadline passes. Otherwise, landlords or agents forfeit the right to retain the holding deposit and it must be returned. The explanation should be coupled with the evidence of the costs incurred in order to demonstrate that they are reasonable
Deposits will be limited to five weeks rent as a maximum amount for tenancies where the annual rent is below £50,000. Deposits for tenancies where the annual rent is £50,000 or more are limited to the equivalent of six weeks rent. However, if a tenant paid a deposit before 1 June 2019 which exceeds the aforementioned caps, there will be no need to refund part of the deposit that is above the cap unless the tenancy is renewed with a new fixed term after the 1 June 2019.
A tenancy that states a deposit can be taken or the tenant may pay a fee to use a zero deposit scheme would be a permitted payment under the Tenant Fees Act. Any deposit taken for an assured short hold tenancy needs to be protected within 30 days in one of the three Government backed tenancy deposit schemes. The tenant must also be provided with the prescribed information relating to their deposit. Failure to protect the deposit can result in the tenant being able to claim up to three times their initial deposit by going through the courts.
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 Rents and Deposits, please get in touch by booking a consultation with a barrister; inquire via our website or by email email@example.com; or telephone us on 020 3034 0077.