The Tenant Fees Act 2019 came into force on 1 June 2019 and provided yet another tranche of requirements for private landlords to adhere to on pain of losing the ability to serve a Section 21 notice and regain possession of the premises after the expiry of a fixed-term Assured Shorthold Tenancy.
While initially tenants welcomed the prohibition on agents and landlords charging excessive fees for renewing tenancies, referencing, and holding deposits, others were more equivocal, fearing that letting agents would instead charge greater administration fees to landlords and driving them to put their rents up.
While the rights and wrongs of such a prohibition could fill many a page, it should be noted that from 1 June 2020, this Act will apply to all Assured Shorthold tenancies, not merely those which commenced from 1 June 2019. This post will provide an overview of how Cunningtons can help you prepare for this change in the law.
Why was the Act deemed necessary?
Following a lengthy controversy regarding the increasing cost of private rental of property to tenants, which was seen to be pricing tenants out of the rental market, the Government resolved to take action to limit the amount, in England and Wales, that a landlord or agent could charge its tenant in administration fees and other charges not included in the rent.
The result of this was the Tenant Fees Act 2019. It prescribes what fees can and cannot be charged to a tenant lawfully, and also applies sanctions to landlords or agents for breaches of the law. Where fees are permitted, their amount is also prescribed by statute.
Tenant Fees Act summary
Generally speaking, all payments to a landlord demanded of a tenant are prohibited unless the Act specifically states they are permitted. The permitted payments (as at 12 February 2020) are:
• Indemnifying the landlord against any outgoings such as council tax, utility bills, etc. that they are directly liable for but from which the tenant would benefit;
• A tenancy deposit of no more than five weeks’ rent (or six weeks rent if the annual rent pro rata is over £50,000);
• Administration charges for varying or renewing the tenancy agreement – limited to the greater of either £50.00 or the reasonable cost to the landlord of effecting the variation or renewal;
• A holding deposit of no more than one week’s rent;
• A charge for the loss of a key, limited to the reasonable costs of the landlord resulting from the breach;
• Contractual interest on unpaid rent, limited to 3% above the Bank of England base rate;
• A charge for termination of a tenancy, limited to the reasonably incurred expenses of the landlord.
And if a tenant is overcharged …
If a landlord receives a payment to which they are not entitled, they must return it within 28 days, or face sanctions including civil penalties enforced by a local authority, potential criminal prosecution in extreme cases, and similar.
However, the most immediate and, on balance, the most problematic, sanction is that
if the money over the limit is not refunded to the tenant within the 28 day time period, the landlord will not be entitled to serve a valid Section 21 notice.
Clearly, this can lead to difficulties later on, as this can lead to a landlord having non-paying or problematic tenants in situ who are difficult to evict.
Moreover, from 1 June 2020, this will apply to all residential tenants who are under an Assured Shorthold tenancy, and any provision in a tenancy agreement which requires payment from the tenant of any fee not allowed by the Act or in a sum greater than allowed by the Act is legally not enforceable.
What should a landlord do about the new Tenant Fees Act?
Landlords, therefore, should be considering how they will prepare for this.
One concern is that the Act as written would void the entire clause as a whole should it require the tenant to pay a prohibited fee, leaving the landlord potentially unable to charge any fee from the tenant.
At Cunningtons, we can help you with this, whether by redrafting your standard tenancy agreement to be in compliance with the Act or by seeking variations to currently active agreements to ensure that your interests will still be covered when the transitional period of the Tenant Fees Act ends.
We can also handle tenancy management, problem tenants, and non-paying tenants.
Contact our Litigation team on 01376 326868 for a discussion in complete confidence.