- Which tenancies are affected?
This Act applies to the following tenancies in England:
- Assured shorthold tenancies;
- Licence to occupy (excluding licence to occupy social housing); and
- Student lettings.
Any new or renewed tenancies and licences granted on or after 01 June 2019 will be affected. If you granted a tenancy or licence before the 01 June 2019, you will be able to charge fees which may be prohibited under the Act until 31 May 2020, after which all tenancies and licences (listed above) will be caught by the Act.
For the avoidance of doubt, contractual tenancies and company lets are not caught by the Act.
The Renting Homes (Fees etc.) (Wales) Bill, has passed through the Welsh Assembly and is awaiting Royal Assent. Similar provisions to the Tenant Fees Act 2019 are proposed under this Bill. We will produce further guidance and updated documents once this Bill has been made into law.
- What payments are permitted under the Act?
A tenant can be charged:
- A refundable tenancy deposit (capped at five weeks’ rent if the yearly rent is less than £50,000 or capped at six weeks’ rent if the yearly rent is £50,000 or more);
- A refundable holding deposit (capped at no more than one week’s rent);
- The following ‘default’ fees, which must be written into the tenancy agreement:
- Payments in the event of default for a lost key or security device only if such payments are reasonable and a landlord or letting agent on their behalf must be able to produce written evidence of the reasonable and properly incurred costs; and
- Interest for late payment of rent (if the rent is unpaid for more than 14 days). The rate of interest must not exceed the rate of 3% above the Bank of England base rate.
Letting agents must publicise these default fees on their website and in their offices.
- Utilities/Communication services/TV Licence/Council Tax (landlords or letting agents on their behalf must only charge the billed amount);
- £50 fee for the landlord’s consent for a variation, assignment or novation of a tenancy agreement which is requested by the tenant (excluding renewals or varying the term of the tenancy). A landlord may be able to charge more if such costs are reasonable and have been properly incurred and written evidence (invoice or receipt) is produced to the tenant; and
- An early termination fee (in the event the tenant wishes to terminate early but not where the tenant is exercising a break clause). The termination fee must reflect the actual loss suffered by the landlord (for example, loss of rent the landlord would have received) or as a letting agent (referencing and marketing costs).
- What payments are prohibited?
Landlords or letting agents on their behalf are prohibited from charging tenants any fees which are not permitted payments (described above).
- Letting fees cannot be passed on to a tenant and must be fronted entirely by the landlord. Letting fees include:
- Viewing fees;
- Preparation of contracts;
- Credit checks; and
- Key collection
- Landlords cannot charge a tenant for gardening or professional cleaning services (unless this is included in the rent);
- Landlords cannot charge a higher deposit for pets (unless the total security deposit does not exceed the relevant cap);
- The amount of a security and/or holding deposit which exceeds the caps referred to above will be a prohibited payment;
- Renewal fees for a renewal of the tenancy agreement;
- Payments in the event of default (unless they are permitted payments), for example a fixed penalty charge for a missed appointment with a contractor; and
- Landlords or letting agents on their behalf are prohibited from charging increased rents for an initial period to offset the payments which are prohibited under the Act.
For the avoidance of doubt, the Act does not affect any entitlement to recover damages for breach of contract, either by way of a deduction from the tenancy deposit or court action.
- Security Deposits
Tenancy deposits to secure the tenant’s obligations under a tenancy must be capped at five weeks’ rent if the yearly rent is less than £50,000 or capped at six weeks’ rent if the yearly rent is £50,000 or more.
Security deposits for tenancies entered into before the 01 June 2019 will not be affected.
- Holding Deposits
A holding deposit is usually charged to a tenant to secure a property prior to signing the tenancy agreement. You can still charge a holding deposit, but you must not charge more than one week’s rent and you must not charge more than one holding deposit for one property at any one time.
There are strict time frames for repayment of the holding deposit. Under the Act, the holding deposit must be refunded within 7 calendar days of the tenancy being entered into (although there is provision for the holding deposit to be applied to the first instalment of rent or towards any permitted security deposit subject to the consent of the tenant).
If the landlord and tenant fail to enter into a tenancy agreement within 15 days unless of receipt of the holding deposit paid by the tenant (‘the Deadline for Agreement’) (unless otherwise agreed), the landlord must repay the holding deposit to the tenant within 7 days of the Deadline for Agreement.
A holding deposit can be retained but only in limited circumstances, for example, where a prospective tenant provides misleading or false information.
Neither a landlord or a letting agent can require a tenant to make a prohibited payment to a third party or enter into a contract with a third party (other than for the supply of utilities) or require a tenant to make a loan in connection with the tenancy. For example, you cannot require a tenant to pay a third party that provides a service such as reference checks or credit checks.
- Amendments to the Consumer Rights Act 2015
The Act amends the Consumer Rights Act 2015 requiring letting agents who advertise on third party sites (such as Zoopla or Rightmove) to either publicise their fees on these sites or ensure there is a link on these sites to the agent’s website where the fee list is published.
- What are the penalties and consequences for non-compliance?
A term in a tenancy agreement which is caught by the Act and which seeks to impose a prohibited payment on the tenant will be void and the tenant will not be required to pay this sum under the agreement.
If a landlord or letting agent asks for a prohibited payment in error, the payment must be fully refunded to the tenant within 28 days.
I hope you have found this useful and ensured that you have made the relevant changes ready for the 1st June 2019. If we can be of assistance, feel free to give us a call on 0115 8240235.
Kind Regards Angela Barbaro-Robins