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23rd May 2019

Landlords beware – are you prepared for the Tenant Fees Act 2019?

In February 2019 Mira Arezina wrote an article discussing the Tenant Fees Act 2019 (“the Act”) which comes into effect on 1 June 2019.

The Act prohibits the landlord and or an agent from demanding certain fees from a tenant, referred to as “Prohibited Payments”.  The Act applies to all assured shorthold tenancies, student lets and licences to occupy houses, in the private rented sector, which are entered into as from 1 June 2019.  In relation to a tenancy which was entered into before 1 June 2019, a Prohibited Payment may be demanded but is subject to the tenancy agreement providing for it and cannot be requested after 31 May 2020.  Social housing providers are excluded.

Where a sum demanded from a tenant is a “Prohibited Payment” under the Act, this could result in the landlord not being able to recover the property via s.21 of the Housing Act 1988, and enforcement action may be taken which would include financial penalties and it could be a criminal offence.

What is a Prohibited Payment?

The Government has now issued its guidance relating to Prohibited Payments under the Act and provides, amongst other items:

  • A fee may be charged where the tenant has requested an early termination of the tenancy, but this must not exceed the financial loss suffered by the landlord and other reasonable costs, such as marketing.
  • Where the tenant has requested a change to the tenancy agreement a fee may be charged limited to £50 or “reasonable costs” if higher.
  • Subject to there being provision within the tenancy agreement, a fee for late payment of rent (where the rent is more than 14 days overdue) may be charged but is limited to no more than 3% above the Bank of England’s annual percentage rate.
  • A holding deposit can be held for no longer than 15 days or such other time as agreed in writing (“the Deadline”) and must be refunded save for certain limited circumstances. Where the deposit is retained, the reasons for doing so must be given in writing within 7 days of deciding not to enter into the agreement or the Deadline.

Any other fees demanded from the tenant, such as:

  • fees for obtaining references;
  • inventory check in and check out reports; and
  • renewal of a tenancy agreement (except where the tenancy agreement was entered into prior to 1 June 2019 and the agreement allows for these fees)

will be a Prohibited Payment and must be returned within 28 days failing which the landlord will be in breach of the Act.

Tips for Landlords

As failure to comply with the Act could have dire consequences for the landlord, it is important to ensure that any requests for fees do not fall foul of the Act.  It is important, therefore, that where fees have been demanded which:

  • are in excess of the limits provided by the guidance e.g. change to the tenancy agreement; or
  • have to be reasonable

invoices/evidence in relation to the costs and losses incurred are retained in case the landlord is required to show that these have been incurred/are reasonable.

Landlords beware – are you prepared for the Tenant Fees Act 2019?

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