The Tenant Fees Act 2019 came into force on 1 June 2019. It will apply to all new tenancies (defined below) from 1 June 2019 onwards, as well as tenancies which are renewed after that date. It does not apply to tenancies granted before 1 June 2019 which automatically convert to statutory periodic after that date. It also does not apply to Assured Tenancies.
Tenancies that are likely to be affected include:
- Assured shorthold tenancies
- Licences (lodger lettings, for example)
- Student lettings (provided by a specified educational institution)
What Are the Practical Implications?
As most tenancies in the private rented sector are Assured Shorthold Tenancies granted for a fixed term of 6 months, the effect of the Act is unlikely to be seen until after 1 December 2019. However, landlords and agents need to make sure they are complying with its requirements now to avoid problems further down the line.
One of the main intentions of the Act is to remove “administration fees” such as application fees, reference fees, guarantor fees, check in/out fees, deposit processing and pet ownership fees, which were commonly being charged by agents. According to the Association of Residential Letting Agents (ARLA, March 2019), fees charged to tenants represented 20% of the revenue of letting agents.
What Will It Mean For Fees?
The key thing to be aware of is that all fees are essentially prohibited, unless they fall within specific exceptions as set out in the Act. Landlords and agents should note that:
- Security deposits are capped at no more than five weeks’ rent
- Holding deposits are capped at no more than one week’s rent
- Fees that can be charged to tenants are capped at £50 unless the landlord demonstrates that greater costs were incurred
- An agent / landlord can face a financial penalty with a fine of up to £5,000 for an initial breach
- It is a criminal offence where a person has been fined or convicted of the same offence within the last five years. Financial penalties of up to £30,000 can be issued as an alternative to prosecution in that scenario.
A landlord cannot serve a Section 21 Notice until any unlawfully charged fees have been repaid. It is therefore essential that landlords (and agents) know what they can and cannot charge, in order to avoid their Section 21 Notices being found to be invalid.
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