What fees can landlords and letting agents charge?
By Hayley Grantham, Solicitor specialising in Property Disputes.
From the 1 June 2019, the Tenants Fees Act 2019 (“the Act”) prohibits landlords or agents charging fees to tenants in England unless it is specifically permitted under the Act.
The Act applies to assured shorthold tenancies, tenancies of student accommodation and licences to occupy signed on or after 1 June 2019 (excluding statutory and contractual periodic tenancies that arise after this date).From 1 June 2020, the Act will apply to all tenancies (including those predating the Act).
If a landlord or agent takes the prohibited payment after that date, they will have 28 days to return it or it will be considered a breach of the legislation.
The prohibition includes any payment that the tenant (or someone acting on their behalf like a guarantor or parent) is required to pay as a condition of the “grant, continuance, assignment, termination or renewal” of an Assured Shorthold Tenancy or Licence Agreement. This includes payments to third parties, either for services throughout the tenancy or for a specific performance of a job and loans from third parties. Pretty much any fee that is in the Tenancy Agreement will be void unless it is exempt under the Act.
Permitted Payments include:
- The rent
- A refundable tenancy deposit which is capped at 5 weeks’ rent where the annual rent is less than £50,000. If the rent is over £50,000, a deposit the equivalent of up to six weeks’ rent is permitted
- A refundable holding deposit (capped at one week’s rent)
- Payments to change the tenancy (capped at £50 or “reasonable costs”)
- Payments associated with early termination of the tenancy
- Payments in respect of utilities, telephone, broadband, TV and council tax as far as the landlord pays any of these costs and then charges them back to the tenant
- A default fee for late payment of rent which is subject to 3% above the Bank of England base rate interest cap, they may not charge for sending reminder letters
- Reasonable costs of replacing a lost key.
Landlords and agents need to be aware that deposits are now considered to be taken at the start of every new tenancy. As such, if they renew the tenancy on or after 1 June 2019 then they should make sure that the deposit is not more than five weeks’ rent (six weeks if the annual rent is £50,000 or more). If the deposit is larger than permitted as above, any amount above the limit should be returned to the tenant. For statutory periodic tenancies, if the deposit is created on or after 1 June 2020 then they should return any amount above the limit within 28 days of the start of the statutory periodic tenancy.
Examples of some prohibited payments include:
- Charging for a guarantor form
- Credit checks
- Cleaning services
- Professional cleaning
- Admin charges
- Requirements to have specific insurance providers
- Gardening services.
Penalties for Non-Compliance
Penalties for breaching the Act include the tenants being able to apply to the County Court to get the fees repaid. The landlord or agents may be charged interest on this from the date the prohibited payment was taken. Local Trading Standards will be required to enforce this legislation and will issue a fine of up to £5,000 for a first offence. Subsequent breaches are criminal offences or alternatively, the landlord can be fined up to £30,000 as a civil penalty and be subject to a banning order.
No Section 21 Notice may be given so long as the prohibited payment was requested, paid by the tenant and is still being held by the landlord or agent. Landlords and agents can either refund the prohibited payment, or with permission of the tenant, use that money as payment towards rent or the deposit.
For more property disputes advice please contact Hayley Grantham.
Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.