The Act prohibits landlords and agents from charging privately renting tenants and licensees any other fees in connection with a tenancy except those that are ‘permitted payments’ under the Act.
What can you charge?
You can charge tenants and licensees permitted payments which are:
- The rent.
- A refundable tenancy deposit (capped at five weeks’ rent where the annual rent is less than £50,000).
- A refundable holding deposit (capped at one week’s rent).
- Payments to change the tenancy (capped at £50).
- Payments associated with early termination of the tenancy.
- Payments in respect of utilities, telephone/broadband costs, TV licence and council tax (so far as the landlord pays any of these costs and then charges them back to the tenant).
- A default fee for late payment of rent or replacement of a lost key.
What you cannot charge?
You cannot charge any payment that is not one of the permitted payments listed above. Any charge that is not a permitted payment is a ‘prohibited payment’ and is banned by the Act.
For example, a common clause in tenancy agreements is to require the tenant to pay for the property to be professionally cleaned at the end of the tenancy. Under the Act, this would be a prohibited payment. A tenant can be obliged to clean the property to a professional standard but they cannot be required to pay for a professional clean.
What happens if you do charge a prohibited payment?
It is a civil offence to charge a prohibited payment and you could be liable for a fine of up to £5,000. If you commit a second offence within five years, this will be a criminal offence and you could be liable for an unlimited fine.
Furthermore, if a prohibited payment is charged or unlawfully retained, you will not be able to serve a s.21 notice to terminate the tenancy until the prohibited payment is returned to the tenant. In practice we expect this to be the most effective sanction as it will delay getting back possession of the property at the end of the term, even if the landlord would otherwise be entitled to possession.
Who will enforce the Act?
Local authority trading standards officers have a duty to enforce the Act. Tenants and licencees can also seek to recover unlawfully charged fees through the First-Tier Tribunal.
When will the Act apply?
The restrictions apply for all new tenancies from 1 June 2019.
If a tenancy was entered into before 1 June 2019, you can still charge fees (even if they are prohibited payments) under the terms of the tenancy until 31 May 2020.
From 1 June 2020, the restrictions will apply to all tenancies and licences no matter when they were entered into.
What should you do now?
You should review your tenancy agreement and make the necessary changes to ensure that the terms of the agreement do not request prohibited payments from the tenant or licensee.
The content of this article is for general information only. If you would like to discuss the Tenant Fees Act 2019 further please contact Alice Harris or another member of our Property Litigation Team.