What is the Tenant Fees Act? The key facts for landlords
New legislation which bans landlords in England from charging tenants a wide range of fees came into force on June 1, 2019. The Tenant Fees Act prevents landlords from charging tenants to set up or renew a tenancy in the private rented sector. It also caps the amount of refundable security deposit to five weeks’ rent, and a tenant’s holding deposit to secure a property to one week’s rent. The Act, soon to be joined by legislation banning “no-fault” evictions, is part of the government’s drive to make renting a property more transparent. But landlords and letting agents face losing a combined income of an estimated £240 million in the first year, according to research by the Association of Residential Letting Agents (ARLA). This could see rents rise – by an average of £103 a year according to ARLA – as property owners and agents try to mitigate their losses.
What fees are banned by the Act?
Fees previously charged to tenants but now banned under the legislation, applicable to tenancy agreements signed on or after June 1, include tenancy renewal fees, referencing fees, and credit check fees. Inventories, services such as cleaning and gardening, the cost of assessing guarantors, and all other administration fees can also no longer be charged to tenants. The government expects letting and estate agents to pass on the costs of these fees, which average £400 per tenancy according to Citizens Advice, to landlords.
What fees can still be charged?
The Act effectively bans all landlord and estate agent fees, other than those expressly permitted by the new law.
Specifically, from June 1, the only costs landlords and agents will be able to charge tenants for are:
- Rent: the agreed rent as specified in the tenancy agreement
- Deposits: a security deposit to cover damages etc up to five weeks’ rent, and a holding deposit to secure a property up to one week’s rent
- Council tax and utilities: if included in the tenancy agreement
- Defaults by the tenant: including charging “reasonable costs” for late payment of rent more than 14 days past the due date, and for replacement of lost keys or other security devices with evidence writing of the costs incurred
- Early termination requested by the tenant: payments must not exceed the “loss suffered” by a landlord as a result of early termination, and the “reasonable costs” to a letting agency.
- Payment for changes to a tenancy: capped at £50, or “reasonable costs”, charges can be made where the tenant requests anything that necessitates a change to the tenancy agreement
- TV licence and communication services: Payments made to the BBC for a TV licence are permitted if in the tenancy agreement, as are those for phone, internet and paid TV services if in the agreement
- Breach of the tenancy agreement: for example, payments for damages at the end of a tenancy agreement.
What are the penalties for breaching the Act?
Landlords or agents found charging unauthorised fees face fines of £5,000 for a first offence, with unlimited fines for a repeat offence within five years.
If you’re a landlord and have questions about landlord insurance, or are thinking about protecting yourself with Rent Guarantee, get in touch with our award-winning team on 01603 216399.