Tenant Fees Act 2019 - landlords beware!
Overview
The Tenant Fees Act 2019 (“Act”) came into force in England for all new or renewed tenancy agreements signed on or after 1 June 2019 and will apply to all tenancies from 1 June 2020.
The Act seeks to control payments that are “in connection with a tenancy of housing in England”. In essence, most payments are prohibited unless they are permitted by the Act. For the purpose of the Act, a tenancy is defined as one of the following:
- assured shorthold tenancy
- licence (lodger lettings for example)
- student letting (provided by a specified educational institution)
The government asserts that the aim of the Act is to reduce the costs that tenants face at the outset, and throughout, a tenancy, whilst removing hidden costs. Local enforcement authorities have primary responsibility for enforcing this legislation.
Schedule 1 of the Act sets out permitted payments that a landlord (or letting agent) may receive in connection with a tenancy. In effect, under the Act, the permitted payments are:
- Rent
- Tenancy deposit (capped at no more than 5 weeks’ rent where the total annual rent is less than £50,000, or 6 weeks’ rent where the total annual rent is £50,000 or above)
- Holding deposit (capped at no more than 1 week’s rent)
- Payment in the event of a default
- Payment of Damages for Breach of an Agreement
- Payment on variation, assignment or novation of a tenancy
- Payment on termination of a tenancy
- Payment in respect of council tax
- Payment in respect of utilities etc
- Payment in respect of a television licence
- Payment in respect of communication services
Examples of prohibited payments (i.e. non-permitted payments) that are no longer permitted but have commonly been charged include; referencing, administration and credit checks.
Landlords (and/or letting agents) should take particular care with tenancy and holding deposits as these are particularly regulated.
Effects of Breaching the Act
Financial
The penalty for a first offence is up to £5,000. If a second offence is committed within 5 years, a penalty of up to £30,000 is payable. In addition, a second offence is a criminal offence and further, a banning order offence.
Any financial penalty imposed is enforceable as if it were an order of the county court.
If a corporate entity commits an offence, an officer may be liable and proceeded against personally.
Prior to receiving a financial penalty, a “Penalty Notice” must be served on the landlord (or letting agent) giving them the opportunity to make written representations within a certain time frame. This notice is effectively a notice of intent and is required to abide by strict criteria.
Termination of the Tenancy
The Act also has implications when it comes to evicting tenant(s) from a property. Should a landlord require the tenant to make a prohibited payment which subsequently becomes paid, the landlord will be unable to issue a section 21 notice until the prohibited payment has been repaid.
However, it is important to note that a landlord may still serve a section 21 notice even if the letting agent has requested and received a prohibited payment.
Next Steps
If you require more information on the Act or any other aspect in relation to residential Landlord and Tenant matters, please contact the writer, Samuel Lane, at samuel.lane@irwinmitchell.com.
“Landlords and lettings agents must take greater care when requesting payments from tenants in light of this Act, but should not be deterred from making a legitimate request. The question that must be asked is – is the request within the list of permitted payments? If you are uncertain, seek professional advice. Whilst evidently it could be costly to request a prohibited payment, simply deciding not to make the request could result in the landlord missing out on payments that could have accumulated.””
