Simply put, the legislation states that agents or landlords can only take money from tenants in respect of a rented property if the law allows it.
What Payments are Involved?
From 1 June 2019, landlords and their agents will no longer be able to charge fees, such as tenancy renewal fees, referencing fees and credit check fees. This represents a big saving to tenants as the average amount paid is £400 according to Citizens Advice.
Historically the tenancy agreement and the inventory were always the main charges – previously shared between landlord and tenant. Landlords will now have to bear this cost.
If a tenancy is entered into before 1 June 2019 but continues as a statutory periodic tenancy beyond 1 June 2019, no part refund of fees paid is due.
From 1 June 2019 a renewal fee can be charged when renewing a tenancy that commenced before 1 June 2019 but only if:
a) It is renewed on or before 31 May 2020; and
b) If the renewal fee is written into the original tenancy – that was entered into before 1 June 2019.
Check out fees that have already been charged for need to be refunded within 28 days of 31 May 2020, or when a renewal tenancy is signed after 1 June 2019, whichever is earlier.
What Payments are Allowable?
From 1 June 2019, the “permitted payments” that tenants must pay are:
- Utilities and council tax if included within the tenancy.
- A refundable deposit, capped at six weeks' rent. The cap could be five weeks' rent for properties where the annual rent is less than £50,000, under an amendment put forward in the House of Lords.
- A refundable holding deposit to reserve the property, capped at one week's rent.
- Changes to the tenancy requested by the tenant, capped at £50 (or "reasonable costs").
- Early termination of the tenancy requested by the tenant.
- Defaults by the tenant, such as fines for late rent payments or lost keys. These must be "reasonable costs", with evidence given in writing by the landlord or agent.
Importantly, landlords cannot evict a tenant until any unlawfully charged fees have been repaid or an unlawfully retained holding deposit has been returned.
Are any Fees Exempt?
The only fees exempt from the ban relating to default in payment of rent is the specified interest payment. Any other specific costs would need to be met by the landlord. The landlord can then recover damages for breach of a tenancy agreement – these are known as contractual damages. The tenancy agreement is likely to include a clause which states that the tenant will be liable for damages payable for the loss arising from any breach of contract. However this cannot be a specified sum. The landlord would then seek to recover this through the tenancy deposit scheme or through the courts.
What Penalties are Involved?
A breach of the legislation will usually be a civil offence with a financial penalty of up to £5,000, (per breach). If a further breach is committed within five years of the imposition of a financial penalty or conviction for a previous breach this will be a criminal offence.
Where an offence is committed, local authorities may impose a financial penalty of up to £30,000 as an alternative to prosecution. In such a case, local authorities will have discretion whether to prosecute or impose a financial penalty.
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 £5,000.
“This new legislation is another big change to the rules of property rental,” says Jason Dyer of JTM Homes. “Ultimately, we welcome any developments that increase the transparency and fairness of lettings.”
The Tenants Fees Act involves a lot of detailed information and big changes to how tenancies are entered into and managed. Full details of the new Act are available here. Do you have questions about how the Act affects you? Talk to the friendly lettings experts at JTM Homes. We’re here to help.