Q&A on the Tenant Fees Act 2019
The Tenant Fees Act 2019 came into force on the 1 June 2019 and this is what landlords, including housing associations, need to know:
Q: When did the Tenant Fees Act 2019 (the Act) come into force?
A: 1 June 2019. The Act applies to all tenancies signed on, or after, this date.
Q: Who is affected by the Act?
A: All landlords, including social housing providers, are 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 non-shorthold tenancies or where a property is let to a company.
Q: Does the Act apply to letting agents? A) Yes it does. The prohibitions that apply to letting agents are detailed in section 2 of the Act. Q) Does the Act apply in Wales?
A: The Act only applies in England. Scotland introduced a similar ban in 2012, Wales introduced a ban with effect from 1 September 2019 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 only applies to tenancies granted before 1 June 2019 from 31 May 2020. This means that landlords and letting agents can continue charging fees in relation to pre 1 June 2019 tenancies 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 are 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. A tenancy deposit in excess of this is considered to be a prohibited payment;
- Holding deposits. These are capped at one week’s rent. A holding deposit in excess of this is considered to be a prohibited payment;
- Payments in the event of default. Under section 4 of Schedule 1 of the Act, “relevant defaults” for the purposes of the Act are:
- Loss of key or other security device. Only costs reasonably incurred to get access to the property and arranging a replacement item can be charged, and only if the charge is evidenced in writing (for example, receipts) and given to the paying person;
- Where a tenant fails to pay rent after 14 days of it being due. Section 4(5) of Schedule 1 states that the annual percentage rate that can be charged is 3% above the Bank of England base rate. This fee can only be paid to either the landlord or the letting agent, not both;
- Payment for variation, assignment or creation of a new contract between the parties. This payment is limited to £50 or the “reasonable” costs of the landlord/letting agent in connection with undertaking such work. Any excess is considered to be a prohibited payment;
- Payment on termination of a tenancy at the tenant’s request before the expiry of a fixed term or without giving a period of notice where the tenancy is periodic;
- Payments in respect of council tax, television licence or utilities. For the purposes of the Act, “utilities” means electricity, gas or other fuel or water or sewerage only; and
- Payments in respect of communication services. For the purposes of the Act, “communication services” mean telephone (other than a mobile), internet, cable or satellite television. The charges for such services should be reasonable as any excess will be a prohibited payment.
Q: What is the impact of the Act?
A: It is predicted rents will increase to compensate for the ban. However, landlords will need to keep their rents at a level that ensures 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 a 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 this 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.