|The Tenant Fees Act comes into force on 1st June 2019. At the centre of the new laws is a ban on tenant fees, including admin and agency fees.
As from the 1st June, it will be illegal for Landlords or Agents to charge tenants any fees, except those fees that are exempt, see (2) below.
Here is an overview of what a Landlord needs to know about the Tenant Fees Act (2019).
Summary of Tenant Fee Ban
- Limit tenancy dilapidation deposits to the equivalent of five or six weeks’ rent, subject to the annual rental amount
- Limit holding deposits to one week’s rent
- Ban any other payments (except contractual default penalties)
- Fines of £5,000 for first offence (civil)
- Fines of £30,000 for second offence (criminal)
What’s in the Act?
Here are the key new rules contained in the Act.
1. All Payments Prohibited Except Rent, Deposits and Three Exceptions
Landlords or their agents will no longer be allowed to charge tenants for anything except the rent, the tenancy deposit and a holding deposit (more on these below).
This means you will no longer be allowed to ask tenants to cover the cost of their own referencing. You also won’t be able to charge check-in, inventory or admin fees.
2. Three Fees Are Exempt
The only three exceptions are for contract amendments and two kinds of ‘default’ fees. These are fees you can charge when the tenant breaks the tenancy agreement. You will have to write these clauses into your contract to be able to charge tenants these fees while the tenancy is in progress.
(a) Late Rent Fees
You will be able to charge fees for rent payments that are over 14 days late. The fees can be up to 3% plus the Bank of England base interest rate calculated on a daily basis. Because this is an annual interest rate, you will have to calculate the amount of pro rata interest accrued on the outstanding rent.
It’s debatable, however, whether late fees have ever been effective at making tenants pay on time, and if the threat of eviction is a much better deterrent. Landlord will of course still be able to serve Section 8 notices for late payment of rent.
(b) Lost Keys
You will also be able to charge tenants for losing their keys (or other security device if your property is high-tech). Lost keys or fobs to a maximum of £50 inc. vat. This will include the cost of call-out, repair or replacement.
(c) Changes to Tenancy
Landlords/Agents can charge an administration fee of up to £50 for making changes to the terms of the tenancy. For example, adding a new tenant to the tenancy or allowing a pet.
Landlords/Agents can charge more than £50 if they are able to demonstrate their costs exceeded £50, but it is expected that this will not happen often.
3. Cap on Tenancy Deposits
Tenancy deposits, also called security deposits, are to be limited to five weeks’ rent for all annual rents under £50,000 and limited to six weeks’ rent for annual rents over £50,000.
4. Cap on Holding Deposits
Holding deposits will be limited to one week’s rent.
5. New Rules on Holding Deposits
The Act includes new rules about how holding deposits must be treated.
The holding deposit must be returned to the tenant, either in payment back to the tenant or being put towards the first rental payment, or the security deposit.
6. Repayment of Holding Deposits
The legislation also dictates that the landlord will have 15 days to decide whether the tenancy proceeds once a holding deposit has been paid by a tenant. If the tenancy doesn’t proceed, the money must be re paid to the tenant in full within 7 days of either the 15-day deadline being reached, or the landlord deciding against the tenancy proceeding.
What are the Penalties to Landlords/Agents Who Charge Tenant Fees?
Landlords or Agents who charge illegal fees will face paying huge fines.
The first offence would be a civil offence, with a fine of £5,000.
If the offence is repeated within five years, there would be either a criminal offence or a fine of £30,000.