The Tenant Fees Act: Landlords Take Note

The Tenant Fees Act 2019 (“the Act”) came into effect on 1 June 2019. It applies to all new contracts signed after this date and will also apply to any existing tenancies from 1 June 2020.

The Act prohibits landlords and agents from charging tenants for any unfair additional fees when starting or renewing an Assured Tenancy Agreement (“AST”). This includes viewing fees, check-out fees, third-party fees and any fees associated with the creation or renewal of a tenancy, such as for obtaining references and undertaking credit checks.

The refundable security deposit is also subject to a cap of 5 weeks’ rent and a holding deposit is capped at the value of 1 week’s rent.

Landlords can continue to charge for rent; tenancy deposits (subject to the cap); a holding deposit (subject to the cap); payments on variations to the tenancy, when requested by the tenant, to be capped at £50; an early termination fee; utilities; late payment charges and charges for lost keys.

The penalties for non-compliance include an initial fine of up to £5,000. Any second offence committed within 5 years risks a fine of up to £30,000 and will be treated as a criminal offence.

However, unlike a non-protected deposit, landlords will only be required to refund the prohibited fee; a tenant cannot claim further compensation.

The Act does not apply retrospectively, but it will mean that any existing tenancy agreements containing unfair payment requests, such as for cleaning fees at the end of a tenancy, will now be deemed unenforceable. It will be an offence for a landlord to accept these fees.

The Act will also restrict landlords’ ability to serve a section 21 Notice to terminate an AST. Any prohibited payment must be returned to the tenant before any such notice can be served.

Early indications have shown that the impact will be shared between landlords and agents. Some agents are increasingly looking to recover the shortfall from the landlord directly, rather than the tenant. In turn, landlords may be forced to increase the rent to cover their costs.

Landlords should take note of this new Act and take the opportunity to review their tenancy agreements to ensure they comply.

The Government have published further guidance for landlords and agents which can be found here.