Tenant Fees Act to be implemented from 1st June 2019

Our Litigation and Dispute Resolution team have previously discussed the progress of the Tenant Fees Act through the Houses of Parliament, but the Act has now received royal assent and shall come into force on 1 June 2019. From this date, landlords and letting agents are only able to charge for the deposit, rent and restricted default fees.  Helen Porter, Partner and Head of the team, reviews the changes being introduced and explains the steps landlords should take now to remain compliant.

How much can a landlord charge for a deposit?

From 1 June, the deposit that can be collected from a tenant on commencement of the tenancy is to be limited to 5 weeks’ worth of rent where the annual rent is below £50,000.  Where the annual rent is above this threshold, the amount of the deposit shall be limited to 6 weeks.

What default fees can a landlord charge?

Aside from being able to charge for damage caused by the tenant during their occupation of the property, there are only two other default fees allowed for by the Act.  These are:

1. if the tenant loses their keys; and
2. when the tenant is late paying their rent.

For the ‘key default fee’, a landlord/letting agent can only charge for the key replacement and reasonable costs, which must be evidenced in writing by the necessary party.

If a tenant is in rent arrears, as a landlord you are able to charge interest on the default payments. This is, however, limited to 3% above base rate.

Other fees a landlord can charge

The only other situations in which you can take payment from your tenant which is not rent, deposit or the above default fees are where they request a change in the tenancy or if they want to leave the contract early.

In the situation where your tenant requests to change a tenancy, the fees charged are to be capped at £50 (or “reasonable costs”).  If you wish to charge higher than the £50 cap, you will be required to provide evidence in support of this, which would include receipts and invoices showing that the fee of over £50 is reasonable. If the costs are not deemed to be reasonable, then it would be a prohibited payment.

In the event that your tenant requests early termination of their tenancy, they shall be liable to pay rent up to a maximum of the sum due under the remainder of the fixed term of their tenancy agreement.

What happens if a tenant is charged fees that are prohibited?

If you charge fees that are beyond what is permitted, then Trading Standards can impose a fine of up to £5,000 for a first offence, or an unlimited fine if you are in breach of these rules again within five years.

In addition to this, you would be unable to serve a section 21 notice if your tenant has been charged any fee which is prohibited. That said, the section 21 procedure to evict a tenant is being reviewed by the Government. 

When do these provisions apply?

 The Act shall apply to all tenancies entered into from 1 June 2019.

What do landlords need to do before 1 June 2019 to comply with the Tenant Fees Act?

Ahead of the introduction of this new legislation, we would advise that you review your tenancy agreements to ensure that no prohibited payments are included and are charged to your tenants. You will also need to be proactive in ensuring your agents are not charging such prohibited fees, as you may still be liable in such circumstances.

If you have any queries regarding the Tenant Fees Act, or you would like to discuss your current relationship with your tenants, you can contact Helen or a member of the team on 023 8071 7412 or email laurablakemorewarnergoodman.co.uk.

 ENDS

 This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the     time of publishing and we cannot be held responsible for any changes that may invalidate this article.