8 June 2020

The Tenant Fees Act 2019: Key changes now apply to all tenancy agreements

By Danny Turpin, Solicitor, Hayes + Storr.

The Tenant Fees Act 2019 came into force last year and was widely publicised for the affect it had on the private rented sector and specifically the restrictions on the amount and types of payments that landlords and letting agents could require tenants to pay.

When the Act was first passed it only applied to new tenancy agreements entered into after 1st June 2019 with a transition period for existing tenancies. That transition period came to an end at the end of May 2020 with the new legislation applying to all tenancy agreements from the 1st June 2020.

Who does the Act apply to?

The Tenant Fees Act applies to assured shorthold tenancies, student accommodation tenancies and licences to occupy housing in the private rented sector. The Act only applies to landlords, agents and tenants in England.

What does the Tenant Fees Act 2019 do?

The new law prevents landlords and letting agents from charging tenants certain payments in connection with a tenancy of housing in England. It restricts the amount that can be taken as a tenancy deposit and the amount that can be taken as a holding deposit and sets a timeframe for holding deposits to be repaid.

The Act prohibits landlords and letting agents from requiring tenants to enter into agreements with third parties for services and insurance, and imposes sanctions for non-compliance with the Act.

What payments does the Act permit?

As referred to above, holding deposits can be charged but these are capped at one weeks’ rent and only one holding deposit can be taken at any one time.

Rent, of course, is a permitted payment under the Act although landlords are prevented from charging a higher rent at the outset of the tenancy and then reducing the amount of rent payable for the remainder of the agreement.

Tenancy deposits can still be charged but they are now capped at 5 weeks’ rent for most tenancies.

Payments for the loss of keys are a permitted payment but the landlord is only entitled to charge the amount that is reasonably incurred as a result of the loss of the key. Payments where the tenant is in default of their obligation to pay rent is also a permitted payment but the rent must be outstanding for a period of 14 days and the interest that can be charged is capped.

Damages for a breach of the tenancy agreement can still be charged, as can payments for early termination by a tenant and capped fees for assignment, variation or novation. An example of this would be if the tenant requests a change to their tenancy agreement, such as a change of sharer, the letting agent or landlord can charge them up to £50 for the administration involved in amending the tenancy agreement or the amount of their reasonable costs, if higher, but they will need to be able to demonstrate any amount above £50 is reasonable with evidence such as invoices or receipts.

In situations where a tenant is required to pay for utilities these will also amount to permitted payments under the new legislation.

What are the penalties for failing to comply?

The law is enforced by trading standards who can impose civil penalties of up to £5,000 for each breach and where another breach is committed within five years that breach will amount to a criminal offence liable to prosecution or a further fine of up to £30,000. There is an incentive for local authorities to issue fines as they get to keep the money.

A landlord is not permitted to serve a section 21 notice until a prohibited payment has been repaid to the tenant.

If you are a landlord or tenant and require advice on your position in relation to the Tenant Fees Act 2019 please do not hesitate to contact one of our team on 01328 863231 or email law@hayes-storr.com. If you are a letting agent we can review your agreements and advise on the amendments required to bring them in line with the provisions of the Act.

This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek our specific advice.