The Tenant Fees Ban have come into force on 1st June 2019. The Act limits the fees that private landlords and letting agents are allowed to charge tenants.
A landlord or agent cannot require tenants (or anyone acting on the tenant’s behalf or guaranteeing the tenant’s rent) to make certain payments in connection with a tenancy in England. They cannot require the tenant to enter a contract with a third party for the provision for a service or for insurance or make a loan in connection with a tenancy.
To learn more about the essentials you need to know regarding the ban, head over to our preparation guide here.
Here are some FAQs regarding the Tenant Fees Act based on various scenarios:
Does the ban apply to contractual tenancies?
The new regulations apply to assured shorthold tenancies, licences (lodger lettings for example) and student lettings (provided by a specified educational institution).
The Act does not apply to contractual tenancies which would be used if the tenancy is for a company let or non-assured tenancies.
What can tenants be charged for?
You will still be able to charge tenants the following fees:
Deposit (capped at 5 weeks rent for rents of less than £50,000 pa, or 6 weeks for rents of £50,000 pa or more);
Green deal charges;
Holding deposit (see below for details);
Defaults by the tenant in relation to the loss of a key/security device or late rent (interest can be charged at 3% above the BoE base rate);
Variations of the tenancy agreement at the tenant’s request; and
Early termination of the tenancy at the tenant’s request.
Can I take a higher deposit if the tenant has a pet?
There are no special provisions or exemptions to the maximum permissible deposit if you rent to a tenant with a pet. A landlord or agent can only take a tenancy deposit up to a maximum of five weeks’ rent (where the total annual rent is less than £50,000) or six weeks’ rent (where the total annual rent is £50,000 or more). This provision applies universally, regardless of circumstance.
I have signed a contract before the ban, how will existing tenancy be affected?
If you have a contract that was signed before 1st June 2019, you can still charge any fees that are mentioned in that contract up until 31st May 2020. From 1st June 2020, any prohibited payments listed in any tenancy agreement won’t be enforceable.
If you renew a contract with an existing tenant after 1st June 2019, the fees ban will apply to the new tenancy.
From 1st June, the amount for tenancy deposit you can ask a tenant to pay will be capped at a maximum of 5 weeks rent for the property is less than £50,000, and up to 6 weeks for the property is £50,000 or above. If you renew a contract after 1st June 2019, and the tenant paid more than the permitted deposit amount, you must repay any overpayment.
Can I charge the tenant for late rent payment?
For late payment of rent, a default fee can be charged for late payment of rent but only where the rent payment has been outstanding for 14 days or more (from the date set out in the tenancy agreement).
Any fee charged by a landlord or agent cannot be more than 3% above the Bank of England’s base rate for each day that the payment has been outstanding. A fee which exceeds this amount is unlawful.
Can I charge a tenant for checking-out on the weekend?
No. You cannot require a tenant to pay a fee when they move out of the property, or checks out any time over the weekend. If a tenant chooses to check-out during the weekend, you may charge for this, but only where the tenant has been given a reasonable option that does not require a fee (e.g. a check out during office hours, if this required). However, if the tenancy was entered into before 1 June 2019 and a tenant agreed in their contract to pay such check-out fees, you can charge these fees up until 31 May 2020. From 1 June 2020, the term requiring that payment will no longer be binding on the tenant.
If I charge tenants insurance fee after a few months into the tenancy, will it be considered a breach of the ban?
Yes. Each request you make for a prohibited payment is a breach. For example, the following would be considered multiple breaches:
• Charging different tenants under different tenancy agreements prohibited fees
• Charging one tenant multiple prohibited fees for different services at different times
• Charging one tenant multiple prohibited fees for different services at the same time
• Charging one tenant one total prohibited fee which is made up of different separate prohibited requirements to make a payment e.g. £200 requested for arranging the tenancy and doing a reference check are considered multiple breaches. Where you are being fined for multiple violations at once, and you have not previously been served a financial penalty, the financial penalty for each of these breaches is limited to up to £5,000 each.
What should I do if I charged a tenant prohibited payment accidentally?
Any prohibited payment that you have inadvertently taken from a tenant must be repaid within 28 days, whether it’s been requested by them or not.
You will not be able to serve a section 21 notice until any unlawfully charged fees have been repaid.
Are there penalties if I request a prohibited payment?
Each request you make for a prohibited payment is a breach of the legislation.
A breach will usually be a civil offence with a financial penalty of up to £5k. If a further breach is committed within 5 years of the imposition of a financial penalty or conviction for a previous breach this will be a criminal offence. The penalty for the criminal offence, which is a banning order offence under the Housing and Planning Act 2016, is an unlimited fine.
Where an offence is committed, local authorities may impose a financial penalty of up to £30k as an alternative to prosecution. In such a case, local authorities will have discretion whether to prosecute or impose a financial penalty. Where a financial penalty is imposed, this does not amount to a criminal conviction.
A breach of the requirement to repay the holding deposit is a civil offence and will be subject to a financial penalty of up to £5k.
Also, you will not be able to serve a section 21 notice until any illegally charged fees have been returned to the tenants.
Can a tenant receive compensation under the ban?
A tenant is entitled to be repaid the sum of any unlawfully charged fees, an illegally retained holding deposit or amounts paid under a prohibited contract, as well as any interests awarded by the enforcement authority (in line with the Act).
To learn more about the Tenant Fees Act 2019, check out the official guidance document for letting agents and landlords here.