The Tenant Fees Act 2019

From 1 June, the Tenant Fees Act 2019 provides new restrictions on what payments and deposits a landlord can impose on tenants.

Summary

On 1 June 2019, the Tenant Fees Act 2019 (“TFA”) comes into force. The TFA provides new restrictions on what payments and deposits a landlord can impose on tenants. This note is split into three parts. Firstly, we provide the main changes that have been brought in by TFA. Secondly, we explain which tenancies TFA applies to. Finally, we advise on the impact TFA will have on landlords.

What are the main changes?

From 1 June 2019, TFA prohibits all payments imposed by landlords and letting agencies on most residential tenants unless they are one of the “permitted payments”. Examples of the fees that are prohibited under TFA are viewing fees, tenancy set-up fees, credit-check fees and check-out fees.

The list of “permitted payments” in Schedule 1 of TFA includes rent, tenancy deposits and holding deposits, to name a few. However, TFA also puts extra restrictions on some of these “permitted payments”. For example, any holding deposit must not exceed 1 week’s rent. Moreover, landlords will only be able to take a tenancy deposit of:

  • No more than 5 weeks rent for tenancies with rent of up to £50,000 per annum; or
  • No more than 6 weeks rent for tenancies with rent between £50,000 and £100,000 per annum.

TFA does not apply to tenancies with rent of over £100,000 per annum as these tenancies are not assured shorthold tenancies (“ASTs”), see below.

Which tenancies does TFA apply to?

TFA applies to ASTs except for social housing tenancies and leases granted for longer than 21 years. It also applies to student lettings and most licences to occupy housing. TFA applies to new tenancies entered into from 1 June 2019 and on fixed-term rent tenancies being renewed after 1 June 2019.

Initially, TFA does not affect any tenancies that were agreed before 1 June 2019. However, from 1 June 2020, the prohibition on the above mentioned fees will apply to all relevant tenancies agreed prior to 1 June 2019. It is worth nothing from 1 June 2020 landlords will not be required to return any part of the tenancy deposit that exceeds TFA limits.

Impact on landlords

Landlords need to comply with TFA because there are significant financial penalties for non-compliance. Landlords could face a fine of up to £5,000 for each breach of TFA. If a further breach occurs within 5 years of the first financial penalty being imposed, landlords could face a further penalty of up to £30,000.

Given that the prohibition on the above fees will affect all relevant tenancies from 1 June 2020 onwards, it would be good practice for landlords to no longer charge tenant’s any prohibited payments on all tenancies, even those agreed before 1 June 2019.

Landlords will not be able to evict a tenant under section 21 in order to avoid compliance with TFA because the section 21 process can only commence once any prohibited fees have been repaid to the tenant and any unlawfully retained holding deposit returned to the tenant.

Please note that a new prescribed form section 21 notice will come into force from 21 June 2019.

If you have any questions or would like to know more about our legal update, please contact Sian Evans (Partner).

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