Posted by Jacqui Walton, Paralegal (Senior)
Tenant Fees Act 2019 – an overview.
Legal restrictions on the amounts that landlords and agents can charge in the way of fees to their prospective tenants come into force on 1 June 2019. The changes are designed to prevent unscrupulous landlords and letting agents from charging huge sums to tenants when they are entering into a tenancy agreement. Landlords and agents can now only charge for the rent, the tenancy deposit and a holding deposit. Tenants can not be charged for referencing, checking an inventory or administrative fees.
The Tenant Fees Act 2019 introduces a tenant fee ban and limitations as follows:-
- Deposits will be limited to 5 weeks rent for annual rent up to £50,000 and 6 weeks rent for annual rent over £50,000;
- Holding deposits will be limited to 1 weeks rent and in most situations must be returned to the tenants within 7 days of the tenancy agreement being completed. All other payments, save for contractual default penalties, will be banned.
The only exceptions are contractual amendments (which are capped at £50 unless the landlord can prove the cost was higher) and late rent fees for rent payments which are over two weeks late. Late rent fees are now limited up to 3% plus the Bank of England base rate. Agents will not be able to charge for chasing rent i.e. sending letters to tenants. Lost keys can only be charged at a reasonable amount and evidence must be produced of the cost to the landlord or agent for providing replacements.
The new law has teeth
A first time breach of the prohibitions or repayment obligations and/or the requirements relating to holding deposits can lead to a civil penalty of up to £5,000 but if a breach is repeated within 5 years, it is a criminal offence and landlords could face a fine of up to £30,000.
By way of a further penalty landlords cannot serve a s21 Notice (to bring a tenancy to an end and take back possession) if they are in breach of the prohibitions or repayment obligations.
When do the changes take effect?
The Act will not apply to tenancy agreements entered into before 1 June 2019 or statutory periodic tenancies commencing after 1 June 2019. The Act will, however, apply to all existing tenancies from 1 June 2020 so tenancies will need to be reviewed in the run up to that date.
The Act will clearly have an effect on the managing agents and it is likely that they will be charging the landlord the fees that they have historically charged tenants. Therefore the cost to a landlord of renting out a property may well increase post 1 June 2019.
Landlords and agents should be aware that on 1 June 2019, the prescribed form of a Section 21 Notice also changes.
To discuss the issues raised above, or should you require further landlord or tenant advice please contact Sarah Taylor or Jacqui Walton at Royds Withy King.
If you have any enquiries, please contact Jacqui Walton on:
01225 730 154 Email us