The Tenant Fees Act 2019

The Tenant Fees Act 2019 has come into force and will apply to new tenancies created on or after the 1 June 2019.

The purpose of the legislation is to offer further protection to tenants in the private rental sector against the charging of unfair fees.

Under this legislation fees can now only be charged for a new tenancy in a limited number of circumstances.

The following fees are permitted:

  • Rent;
  • A refundable tenancy deposit;
  • A refundable holding deposit to reserve a property;
  • Any payments linked to the early termination of a tenancy (this only applies where the early termination is at the request of the tenant);
  • Payment relating to utilities such as TV licence and Council Tax;
  • A form administration fee linked to late payment of rent or replacement of lost keys or any device giving access to a property.

It should be noted that the tenancy deposit is capped at no more than five weeks rent where the total annual rent is under £50,000 or, where total annual rent is £50,000 or above it will be capped at six weeks rent.

The holding deposit to reserve a property is now capped at one weeks’ rent.

Generally speaking, any fees that fall outside those listed above will be deemed to be prohibited payments and are illegal.

 

What tenancies will be affected?

The legislation refers to a tenancy as being an assured shorthold tenancy, student lettings or a licence to occupy the house.

The legislation will apply to landlords, tenants and any lettings agents and therefore any lettings agents must be careful not to request a prohibited payment from a tenant.

Failure to comply with the legislation may result in the imposition of a fine of up to £5,000 to the party that’s breached the legislation by requesting a prohibited payment.

This, however, is just the first penalty that may be imposed. If a landlord or letting agent is found to be a serial requester of prohibited payments they may face criminal penalties under the Housing and Planning Act 2016, such as a banning order.

There are no caps to the penalties that may be imposed under this Act.

It would be at the discretion of any local authority and, if they do not choose to prosecute the offending party the local authority can impose a fine of a maximum of £30,000.

Importantly, this legislation also allows for the piercing of the corporate veil in that the officers of an offending company can also be made personally liable for the offence.

This legislation may produce a rather alien set of circumstances particularly to letting agents who have in the past used fees such as those now prohibited as an income stream.

The legislation envisages that there’ll be a transition period in relation to the banning of these fees, and this transition period will last until 31 May 2020. During this time, landlords and letting agents are expected to review their terms and conditions and any agreements they may have in place.

 

Commentary

This legislation follows a raft of measures that have been brought in to offer additional protection to tenants in the private rental sector.

This sector has in recent years been the focus of much negative publicity and for many this Act will be a welcome addition to the measures already in place. It is not clear how this Act will affect letting agents in particular who have traditionally used now prohibited payments as an income stream and there is always a risk that agents will seek to recoup their losses in other ways such as increased management fees to the landlord. It is yet to be seen if any increases in management fees will be passed on to the tenants in the form of higher rents but no doubt time will tell.

 

 

Liz Rowen

With over 10 years specialist property management litigation experience, Liz has accrued a wealth of knowledge and experience in all things property management.

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