Legal 101

Tenant Fees Act 2019

Amber Akhtar
·
July 24, 2021
Tenant Fees Act 2019

Tenant Fees Act 2019

A Guide for you and your tenants.


Introduction

The law in the Tenant Fees Act has been updated and introduces a ban on prohibited payments, which was released in two stages:


  1. From 1 June 2020

The ban applies to all tenancies, student lets or licences to occupy housing in the private rented sector regardless of the date they were entered into. 


  1. Before 21 June 2019

A landlord or agent was still able to charge fees up until 31 May 2020, but only where required under an existing tenancy agreement. After 1 June 2020 the terms requiring prohibited payments are no longer binding. If you take a payment in error, you should return this payment immediately. If the payment is not returned within 28 days, for the purposes of the Act, you will have taken a prohibited payment that is outlawed under the ban. 

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Enforcement

Any request made for a prohibited payment is considered a breach and the trading standards authority has a duty to enforce the ban, district councils may also enforce the ban if they choose to do so. Please click here to find your local trading standards authority. 


The trading standards can be found in local authorities and their role is to enforce consumer rights. They will be able to determine whether the tenant has been charged a prohibited payment or not and may issue a financial penalty for any breach of the ban. 


If a tenant is charged a fee unlawfully under the Act, they may recover these fees through the First-tier tribunal as a result of this you may not recover possession of the property using the section 21 eviction procedure until the unlawful fees or unlawfully retained holding deposit has been repaid to the tenant. 


To find out more about what payments are permitted please see the guidance detailed below, as summarised using the government guidelines for landlord and tenants in relation to the changes made to tenant fees.


If you need further advice seek guidance from the Citizens Advice or from your local authority.

Permitted Payments


Rent 

  • The amount of rent to be paid should be agreed with the tenant when the tenancy is agreed. The rent must be paid at agreed intervals and the amount payable is usually split equally across the tenancy e.g. a set amount is payable each week, month, quarter or year. 


Refundable Tenancy Deposit

  • A refundable tenancy deposit may be capped at no more than five weeks’ rent where the total annual rent is less than £50,000 or six weeks’ rent where the total annual rent is £50,000 or above.
  • A tenant may be asked to pay a tenancy deposit as security for the performance of their obligations under the tenancy agreement, or the discharge of liability arising under or in connection with the tenancy agreement. You are not legally required to take a deposit but in any case, you must not ask for a deposit which is more than five weeks’ rent where the annual rent is less than £50,000 or if the annual rent is £50,000 or greater the tenancy deposit is capped at six weeks’ rent. Any amount above this is a prohibited payment.
  • If a deposit is taken from the tenant it must be protected in one of the three Government backed tenancy deposit schemes within 30 days of receiving the deposit. The tenant must be provided with details as to where and how their deposit will be protected. In addition if any deductions are required at the end of the tenancy you must give evidence to substantiate the deductions as this money is the tenant’s money. 


Refundable Holding Deposit

  • A refundable holding deposit can be taken from a tenant to reserve a property, it is capped at £50 or reasonable costs incurred if higher.
  • A refundable holding deposit may only be taken once and if accepted more than once, this will be a prohibited payment. A property must not be advertised once a holding deposit has been agreed to be paid by the tenant. 

A holding deposit must be refunded where:

  • Tenant enters into a tenancy agreement;
  • Landlord decides not to rent the property;
  • Agreement is reached before the ‘deadline for agreement’ which is typically 15 days after a holding deposit has been received by you, unless otherwise agreed in writing (and the tenant is not at fault); or
  • If you impose a requirement that breaches the band and/or act in any way that would be unreasonable to expect a tenant to enter into a tenancy agreement with you (i.e unfair terms are in the tenancy agreement or a tenant is harassed into entering the agreement).

You may only retain a holding deposit where:

  • The tenant provides false information which affects your decision to let the property, for example if it causes you to question their suitability as a tenant, which may include their behaviour with regards to providing false or misleading information;
  • They fail a Right to Rent check;
  • The tenant withdraws from the proposed agreement;
  • The tenant fails to take all reasonable steps to enter an agreement (i.e. responding to reasonable requests for information required to progress the agreement) when the landlord and/or agent has done so.


Where you do wish to retain the holding deposit, you must set out in writing the reason for this within 7 days of deciding not to enter into the agreement.


Payment to Change Tenancy

  • When requested by the tenant, the payment must be capped at £50, or reasonable costs incurred if higher.
  • A change of tenancy may be required, for example if there needs to be a change of sharer or permission to keep pets in the property.
  • You are permitted to charge up to £50 for the work involved in amending the tenancy agreement or the amount of reasonable costs if higher than £50. 
  • It is assumed the charge will not exceed £50, therefore you must be able to evidence the reasonable costs of carrying out the work you are charging above £50. Any charge that exceeds the reasonable costs you have incurred will be a prohibited payment. 
  • Please be aware that you cannot charge for a renewal of a tenancy under the Act (this has been effective since 1 June 2019). 


Payment Associated With Early Termination of Tenancy

  • When requested by the tenant you may charge an earlier termination fee.
  • This cannot exceed the financial loss that you (the landlord) has incurred in permitting, or reasonable costs incurred by the agent in arranging for, the tenant to leave early. 
  • Usually this would mean that you cannot charge any more than the rent you would have received before the tenancy reaches its end.
  • Any payment that exceeds the landlord’s financial loss or an agent’s reasonable costs will be a prohibited payment.


Utilities Payments

  • Including communication services, TV licence and council tax.
  • Tenants are responsible for paying bills in accordance with the tenancy agreement, which may include gas, electric, water, council tax and communication services.
  • You cannot overcharge for these services and there is an associated consumer protection legislation which prohibits landlords from over-charging for these services. The Office of Gas and Electricity Markets ‘OFGEM’, fies maximum resale prices under section 44 of the Electricity Act 1989, section 37 of the Gas Act 1986 and the Water Resale order 2006 governs the maximum price for water. 
  • Any payment which constitutes a request for an overpayment of these services will be a prohibited payment. 


Default Fee

  • A default fee can be charged for late payment of rent (which is 14 days overdue) and replacement of a lost key/securiy device, where required under a tenancy agreement.
  • This can only be charged if this has been written into the tenancy agreement.
  • If the fee exceeds interest at more than 3% above the Bank of England’s annual percentage rate for each day that the payment is outstanding or the amount of the reasonable costs incurred by you (i.e. for a replacement key/security device), it will be a prohibited payment. 


If the fee being charged is not in this list, it is a prohibited payment and cannot be charged. A prohibited payment is a payment not permitted under the ban.


Prohibited Payments


Viewing Fees

You cannot charge a tenant for viewing a property and this should be provided free of charge for the purposes of granting a tenancy. 


Tenancy Set-Up Fees

You cannot charge a tenant any fee associated with setting up the tenancy. It is your responsibility to cover the cost for setting up the tenancy for example appointing a letting agent to set up the tenancy on your behalf. This also includes fees in relation to credit checks, referencing, guarantor fees and any administration costs you may incur. 

Although you cannot charge the tenant a fee for setting up the tenancy you are permitted to request the tenant for any information which may assist you in your referencing process, this may include:

  • Bank statements;
  • Reference from a previous landlord;
  • Proof of address history;
  • Details of their current employer.

It is also important to note that you cannot charge the tenant for an inventory check. It is your responsibility to cover the costs of an inventory check if you decide you wish to complete an inventory check at the start of the tenancy. If you do decide to do so, the completed inventory must be agreed by you and the tenant  at the start of the tenancy. 


Tenancy Check-Out Fees

  • You cannot charge a tenant any fee associated with the termination or ending of the tenancy unless it is an early termination requested by the tenant. 
  • The tenant cannot be charged any fees associated with professional cleaning when they check-out. You may request the tenant to clean the property to a professional standard and in the same condition as it was when the tenancy began. Please note, tenants with COVID-19/COVID-19 symptoms cannot be charged for a deep clean of the property as a result of COVID-19. 
  • You cannot make any deductions to the tenants deposit to recover any costs associated with fair wear and tear of the property or if the tenant returns the property in the same condition as it was in at the start of the tenancy. 
  • Payment for check-outs on the weekend are prohibited unless a tenant chooses to check out on the weekend. For example where reasonable alternatives in the week have been provided (where payment is not required) and the tenant wishes to check out on the weekend. 


Third Party Fees

You are not permitted to charge a tenant for any services obtained through a third party. If however, the tenant chooses to employ the services of a third party they are responsible for the associated costs. Prohibited third party fees include:


Referencing fees

  • A tenant cannot be charged for referencing obtained through a third-party referencing service as a condition for granting the tenancy. 
  • You may request the tenant to provide a reference from their previous landlord or agent but they also cannot charge the tenant for this.
  • If you would like to request the tenant's previous landlord or agent for a reference directly and they wish to charge for this service, this is your responsibility and cannot be requested from the tenant. 


Credit checker fees

  • A tenant cannot be asked to pay for any credit checks that may be required in order to grant the tenancy. You may request the tenant for any necessary details to complete adequate credit checks but you must cover the cost for this. However, if the tenant does not provide the information required after a reasonable amount of time and has paid a holding deposit, you may retain the necessary amount to cover the cost of the credit check. 


Gardening services

  • This can not be charged to a tenant unless covered under the cost of the rent when the tenancy is agreed. 


Rent guarantor fee

  • You are permitted to ask a tenant to provide a suitable guarantor but you cannot charge the tenant or a guarantor for this e.g. administration costs.


Insurance

  • A tenant may choose to obtain insurance voluntarily but you can not charge or require a tenant to take out insurance. 


Chimney sweeping services

  • Services of a third party including chimney sweeping services are not permitted and you are responsible for ensuring the property is maintained safely and should cover the cost required for chimney sweeping services. 


If you are uncertain whether you can or cannot charge a payment, consider contacting the Citizens Advice or consulting a lawyer for legal advice. You may also contact your local trading standards authority or the lead enforcement authority.


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This page is for general information purposes only and is not legal advice on which you should rely.


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