The Tenant Fees Act 2019 came into force on 1 June 2019 and applies to all relevant tenancies from 1 June 2020. The Act prohibits landlords (and managing agents) from charging fees (prohibited payments) to tenants and if landlords do not comply, they may face difficulties recovering possession from tenants and/or face a fine.
What types of tenancies does the Act apply to?
The Act applies to assured shorthold tenancies, a licence to occupy and tenancies of student accommodation.
From 1 June 2020 the Act applies to all relevant tenancies (even those entered into before 1 June 2019, which it initially covered when first introduced last year).
What are prohibited payments?
In summary, landlords cannot recover the following from tenants:
- Viewing fees
- Tenancy set up fees
- Tenancy check-out fees (including requiring the tenant to pay for a cleaning service)
- Third party fees (such as a third party reference check fees, inventory fees).
What types of payments can a landlord charge?
In summary, landlords are permitted to charge their tenants the following fees:
- A tenancy deposit (up to a maximum of five weeks’ rent, or six weeks’ rent if the annual rent is £50,000 or more)
- A holding deposit to reserve a property (up to a maximum of one week’s rent)
- A payment to change the terms of the tenancy (for example, permission to sub-let) generally up to £50
- A payment on early termination of the tenancy
- Payment of utilities, broadband, TV, phone and council tax (provided tenants are not overcharged)
- A default fee for late payment of rent or where a tenant has lost their keys
- Damages where a tenant has breached the terms of the tenancy.
What happens if a relevant tenancy expressly permits a prohibited payment?
If a relevant tenancy contains a provision permitting a landlord to recover a prohibited payment, that provision no longer has any effect.
If a tenant does make a prohibited payment, for whatever reason, the landlord should return it within 28 days.
What are the consequences for breaching the Act?
Trading standards officers, local councils and tenants can enforce the Act.
A breach of the Act will tend to be considered a civil breach, with landlords facing a fine of up to £5,000 per breach (if being fined for multiple breaches at once). If landlords commit a further breach within five years, this will be a criminal offence, and landlords could face an unlimited fine. Where an offence is committed, local authorities may impose a fine of up to £30,000 as an alternative to prosecution.
A tenant is also entitled to be refunded the prohibited payment, together with an interest (if awarded).
Can accepting a prohibited payment restrict a landlord’s ability to recover possession?
Yes. A landlord is prevented from serving a section 21 notice if they are in breach of the Act.
If a landlord wants to serve a section 21 notice, the prohibited payment must be returned to the tenant before the section 21 notice is served.
- Landlords should review all relevant tenancy agreements to ensure that no prohibited payments have been demanded or accepted;
- If a relevant tenancy does contain a prohibited payment, it would be sensible for landlords to make a note that this provision is unenforceable (and potentially even cross it out), to limit the risk that a prohibited payment is accidentally demanded and accepted.
- If a prohibited payment has been accepted, this should be returned immediately.