Q&A on the Tenant Fees Act 2019
The changes introduced by the Tenant Fees Act 2019 were promised in the Autumn Statement in 2016. The legislation was introduced into Parliament last May. Here is what you need to know:
Q: When does the Tenant Fees Act 2019 (the Act) come into force?
A: 1 June 2019. The Act will apply to all tenancies signed on, or after, this date.
Q: Who will be affected by the Act?
A: All landlords, including housing association, will be prohibited from charging tenants fees for anything which is not categorised as a "permitted payment" in Schedule 1 of the Act.
The ban applies to all assured shorthold tenancies, student accommodation and most licences. It does not apply to assured nonshorthold tenancies or where a property is let to a company.
Q: Does the Act apply in Wales?
A: The Act only applies in England. Scotland introduced a similar ban in 2012, Wales is considering introducing a ban and in Northern Ireland, fees are still permitted.
Q: Why was the Act introduced?
A: To minimise the additional costs tenants have to pay especially when entering into a tenancy for the first time. It is estimated the ban will save tenants up to £700 for each move.
Q: Does the Act apply to current tenancies?
A: No, the Act will only apply to tenancies granted before 1 June 2019 from 31 May 2020. This means that landlords and letting agents can continue charging fees but only where they are required to be paid under the terms of the tenancy agreement. From 1 June 2020, the ban will apply to all tenancies regardless of when they were granted.
Q: What is a permitted payment?
A: Details of these are contained in Schedule 1 of the Act and are:
- Tenancy deposits. These will be capped at five weeks' rent if the annual rent is less than £50,000 and six weeks rent if the annual rent is more than £50,000. Any excess will be considered to be a prohibited payment;
- Holding deposits will be capped at one week's rent. Any excess will be a prohibited payment;
- Payments in the event of default. Under section 4 of Schedule 1 of the Act, a "relevant default" for the purposes of the Act are:
i. Loss of a key or other security device;
ii. Where a tenant fails to pay rent after 14 days of it being due. Section 4(5) of Schedule 1 states the annual percentage rate that can be charged is 3% above the Bank of England base rate;
iii. Payment for variation, assignment or creation of a new contract between the parties. Limited to £50 or the "reasonable" costs of the landlord/ letting agent in connection with undertaking such work;
iv. Payment on termination of a tenancy at a tenant's request before the expiry of a fixed term or without giving a period of notice where the tenancy is periodic;
v. Payments in respect of council tax, television licence or utilities. Utilities under the Act are electric, gas or other fuel or water or sewerage only; and
vi. Payments in respect of communication services which are defined as telephone (other than a mobile), internet, cable or satellite television. Charges should be reasonable as any excess will be treated as a prohibited payment
Q: What will be the impact of the Act?
A: It is predicted rents will increase to compensate for the ban. However, landlords need to keep their rents at a level to ensure they are competitive to avoid long void times. Letting agents will need to decide whether to increase their fees to landlords. If they do it could make them less competitive and the lettings market could contract as a result.
Q: What are the implications of breach?
A: Trading Standards has enforcement powers. Action can be taken against any landlord/letting agent who breaches the Act which could lead to a fine of up to £5,000 in respect of a first breach. If there is a further breach within five years, Trading Standards can prosecute in the Magistrate's Court alternatively; they can impose a fine of up to £30,000. Local authorities are able to keep the fines and may be an incentive for robust enforcement. A fine will not amount to a conviction.
Q: Where can I obtain further information?
A: The Government has introduced statutory guidance for enforcement authorities, guidance for landlords, letting agents and tenants, together with a glossary of terms.
This documentation can be found at www.gov.uk.