Tenant Fees Act 2019 Explained for Landlords and Tenants

The Tenant Fees Act, first introduced in June 2019, now affects all residential landlords in England. This is a piece of legislation that landlords can’t afford to ignore, those that do risk a hefty fine.

Being a landlord is a thankless task. There is a lot of demand nationally for rental accommodation, but there are also challenges to overcome. For many landlords, the biggest issue they face is dealing with changing regulations.

Whether you are a landlord or tenant, here is what you need to know about the Tenant Fees Act 2019.

What is the Tenant Fees Act? 

The Tenant Fees Act 2019 bans all letting fees, except a few ‘permitted fees’, and caps tenancy deposits paid by tenants in the UK. In some areas, these tenant fees could have added around £300 to the cost of renting. The ban applies to all assured shorthold tenancies (except social housing), tenancies of student accommodation and licenses to occupy housing in the private rented sector.

Why has the Tenant Fees Act been introduced?  

The Tenant Fees Act should make it cheaper for tenants to rent property by removing the unfair fees charged each time they rent a new property. The costs were especially harsh on those forced to look for a new rental property because their landlord gave notice. 

What fees can I still be charged for? 

Landlords can still charge for rent, security deposits and holding deposits. However, there are restrictions even on these fees. The Tenant Fees Act prevents landlords from charging a higher rent for part of the tenancy term, including a surcharge to the first month’s rent. Holding deposits are capped at one week’s rent, and security deposits cannot exceed five weeks’ rent. There is an exception for properties where the total annual rent exceeds £50,000; in this case, landlords are permitted to charge a security deposit equivalent to six weeks’ rent. 

Aside from the rent, security deposit and holding deposit, landlords can only charge fees for the following three things: 

1. Late rent payments– If your rent is late by over two weeks, landlords and letting agents can charge interest at 3% plus the Bank of England base rate. Landlords are no longer permitted to charge for the administration costs of chasing late rent payments. 
2. Changes made to the tenancy agreement at the tenant’s request– If you ask to change the tenancy agreement to add a permitted pet, your landlord can charge up to £50 to cover administration costs. To charge more than this, they must be able to provide receipts to justify the expenses incurred. Landlords cannot charge for renewing or extending a tenancy. 
3. Replacement of lost keys– The fee must be a ‘reasonable’ amount, and your landlord must be able to provide a receipt for the costs incurred. 

In all cases, if landlords want to charge these fees, they must be included in the tenancy agreement. 

What fees are banned by the Tenant Fees Act 2019?  

Any fees, except those outlined above, are now unlawful and deemed to be ‘prohibited payments’. Types of fees that landlords cannot now lawfully charge for include: 

• Viewing fees
• All fees associated with setting up a tenancy, including credit checks, referencing, drawing up the tenancy agreement and preparing the inventory 
• Check-out fees (unless this relates to early termination at the tenant’s behest)
• Third-party fees 
• Gardening services 

What does the tenant fees act mean for landlords?  

The tenant fees act will reduce the income of landlords and letting agents.  Landlords that use letting agents may find that their fees increase as agents look to recover their losses. Landlords may, in turn, increase the rent they charge. 

Landlords may also cut back on making improvements to their properties as their profits are reduced.  Many landlords may also choose to self-manage their properties, resulting in more breaches of property rules as landlords struggle to keep abreast of the legislation. 

What is the risk of non-compliance?  

Landlords and letting agents who ignore the ban face an initial fine of up to £5,000. Those committing another breach within five years may be fined an extra £30,000 and could also be taken to court. Recently, as reported on the website landlordzone.co.uk, a loophole in the Tenant Fees Act was also tightly closed after a letting agent was ordered to pay back £343 to a tenant because it could not prove the charge for moving in his replacement was out of the ordinary and thus could not justify the substantial fee taken.

What happens if I’m charged a fee that I think is banned by the Tenant Fees Act? 

In the first instance, bring your concerns to the attention of your landlord or letting agent. They should be able to justify why they are entitled to charge you a fee. 

If you still believe you have been charged a banned fee, you can report the matter to trading standards, who will investigate the matter. Use the gov.uk website to find your local trading standards office.  

All professional letting agents must be a member of The Property  Redress Scheme or The Property Ombudsman. You can complain to these bodies, who will investigate and tell the agent to compensate you if necessary. 

Are deposits changing as part of the Tenant Fees Act?  

The Tenant Fees Act caps deposits at five weeks’ rent, provided the annual rent is below £50,000. Security deposits are capped at six weeks for properties with a yearly rental value of over £50,000. 

If your existing deposit is above this amount, your landlord must return the excess amount. 

Landlords can no longer charge a higher deposit for tenants who have pets on the property. This may mean fewer landlords are willing to rent their property to tenants with pets. 

Can I be charged a holding deposit to secure a property?  

The new cap on holding deposits stands at one weeks’ rent. When the prospective tenant pays the holding deposit, the landlord has 15 days to decide if they should move into their rental home. If the landlord chooses against allowing the applicant to move into their rental property, they should return the money in seven days. 

If the applicant made a false claim, withheld information or failed any check carried out by a landlord, the landlord doesn’t have to pay back the full amount. If the application is successful, the application should be paid back within seven days but is often used towards the first months’ rent or the security deposit. 

If you are a landlord looking for help in property disputes, contact XYZ Law, and we’ll be happy to help you.