The Tenant Fees Act 2019 (the Act) recently came in to force. The Act sets out what payments a landlord or letting agent may require from a tenant. It also puts in place limitations on what third-party contracts a tenant or guarantor may be required to enter.
The Act currently only applies to the following new residential tenancies in England granted on or after 1 June 2019:
- Assured Shorthold Tenancies (ASTs), other than social housing tenancies or a lease of over 21 years;
- Student lettings; and
- Licences to occupy housing – for example a lodger or House in Multiple Occupation (excluding holiday lets, social housing and live in carers where a charity/ community interest company has given advice to either the licensor or carer).
The Act states that all payments by tenants or guarantors of the above tenancies are now “prohibited payments” unless they are listed as a “permitted payment”. Permitted payments are:
- A tenancy deposit (capped at 5 weeks rent if the annual rent is less than £50,000 or 6 weeks rent if the annual rent is £50,000 or more);
- A holding deposit (capped at 1 weeks’ rent);
- Payments on certain default events (loss of key/ security access device, failure to pay rent or a breach of the tenancy);
- A fee for the variation, assignment or novation of the AST (capped at £50 or reasonable costs);
- Payment on early termination of the tenancy (but such payment cannot exceed the loss suffered by the landlord);
- Utilities and Council Tax;
- TV licence; and
- Payments for telecommunications – phone line, internet, cable/ satellite TV.
Examples of payments that are now prohibited:
- Set up fees;
- Viewing fees;
- Credit-check fees;
- Inventory check fees;
- Check out fees; and
- Fees for professional cleaning services.
Terms in tenancies which require the payment of a prohibited payment are not binding on the tenant, the tenant’s guarantor or anyone acting on behalf of the tenant. All other provisions of the tenancy continue to have effect.
The Act also contains detailed obligations relating to holding deposits. The person who received the holding deposit must repay this to the tenant in the following circumstances:
- the landlord and tenant enter into a tenancy agreement. The deposit must be repaid within 7 days of the date of the tenancy;
- the landlord decides not to enter into the tenancy. The deposit must be repaid within 7 days of the landlord’s decision; or
- the landlord and tenant fail to enter into a tenancy agreement before the deadline for agreement (which is 15 days from receipt of the deposit or such other date agreed in writing between the parties). The deposit must be repaid within 7 days of the deadline for agreement.
The deposit need not be repaid in the following circumstances:
- where it is used towards payment of rent or a tenancy deposit with the consent of the payee;
- the prospective tenant is disqualified as a result of their immigration status and the landlord/ letting agent did not, and could not reasonably have been expected to know, the disqualification applied before accepting the deposit;
- where the tenant provides false or misleading information to the landlord or letting agent and the landlord is reasonably entitled to take this information into account;
- the tenant decides not to enter into the tenancy before the deadline for agreement and neither the landlord or letting agent have breached their obligations under the Act nor behaved in a manner that would make it unreasonable to expect the tenant to enter into a tenancy agreement with the landlord; or
- where the landlord takes all reasonable steps to enter the tenancy agreement by the deadline for agreement but the tenant fails to do so and neither the landlord or letting agent have breached their obligations under the Act nor behaved in a manner that would make it unreasonable to expect the tenant to enter into a tenancy agreement with the landlord.
Holding deposits paid before 1 June 2019 are outside of The Act.
If a landlord or letting agent requires a tenant to make a prohibited payment or breaches the requirements relating to holding deposits, an enforcement authority can impose a fine of up to £5,000. If the same landlord or letting agent is found to have breached the Act again within a 5 year period, a fine of up to £30,000 can be imposed. Alternatively, the landlord or letting agent could be prosecuted for a criminal offence in which case there is the possibility of an unlimited fine and a banning order prohibiting the landlord or letting agent from renting out residential properties, engaging in letting agency work and managing residential properties. A tenant can also apply for the return of a prohibited payment.
From 1 June 2020, the prohibitions will apply to all tenancies listed above entered into before 1 June 2019 and any provision in such an agreement is not binding. The tenancy will continue to have effect, as far as is practicable, in all other respects. A landlord or letting agent who accepts a payment and does not return it within 28 days (even without a request for the return) will be treated as having required the tenant or guarantor to make the prohibited payment and the penalties above will apply.
Landlords should review any existing agreements which will continue to have effect after 1 June 2020 for any prohibited payments and consider whether these need to be returned.