Could it be farewell to unfair letting fees?

The Tenant Fees Act 2019 – Limiting payments charged by residential landlords and letting agents

From 1 June 2019, restrictions will come into force limiting the fees that tenants can be charged by residential landlords and letting agents. These limitations will apply following the introduction of the Tenant Fees Act 2019 (“the Act”) which will apply to all residential assured short-hold tenancies, licences to occupy and student accommodation tenancies.

Whilst initially, the Act will only apply to arrangements made between tenants and residential landlords or letting agents after 1 June 2019, from 1 June 2020, it will also apply to pre-existing arrangements. It is therefore vital that all residential landlords and letting agents become familiar with the restrictions imposed by the Act.

Payments that will be permitted

The introduction of the Act will mean that residential landlords or letting agents will not be able to charge fees to tenants unless they are expressly stated as being permitted within the Act. At present, fees permitted by the Act include the following:

• 1) Rent
• 2) Tenancy Deposits, providing said deposit is refundable and does not exceed five weeks’ rent (or six weeks’ if the annual rent is £50,000 or more)
• 3) Holding Deposits, providing it is refundable and does not exceed one weeks’ rent. Note that a landlord or agent will not be allowed to charge a holding deposit if they have already taken one for the same property that is yet to be refunded.

In terms of time-frames for refunding such deposits, the Act states that refunds must be seen to:
– Within 7 days after the tenancy is entered into;
– Within 7 days after the landlord makes the decision not to grant the tenancy;
– By the “deadline for agreement”, being 15 days after the deposit is paid unless otherwise agreed in writing.

If a holding deposit has been taken from a tenant but the tenant withdraws, fails a right to rent check or provides false or misleading information regarding their financial suitability or honesty, the landlord or agent may serve notice on the tenant confirming that they intend to retain the deposit and their reason(s) for doing so.

If no such notice is served, the landlord or agent will lose the right to retain the deposit and must refund it to the tenant within the time frames specified above.

• 4) Reimbursement for lost keys – limited to the costs reasonably incurred by the landlord or agent.
• 5) Daily interest on unpaid rent – limited to an annual rate of 3% above the Bank of England’s base rate.
• 6) Early termination payments – limited to the reasonable loss suffered by the landlord for early termination or the costs charges by the letting agent for arranging the termination.
• 7) Payments for utilities, council tax, and television licence.
• 8) Payment for communication services including landline telephone, internet, cable television and satellite television.
• 9) Payments on assignment, novation or variation of a tenancy – limited to £50 unless the landlord or agent can evidence the fact that it would be reasonable to charge a higher fee.

Consequences of failing to comply with the Act

The sanctions that landlords could face as a result of failing to comply with the Act are severe and include the following:

1. Civil fines of up to £5000 for a first offence and criminal fines of up to £30,000 for subsequent offences.

2. The repayment of prohibited payments plus interest.

3. Being banned from letting property of carrying out residential lettings and management work under the Housing and Planning Act 2016.

Any Section 21 Notice served upon the Tenant would also be rendered invalid and unenforceable until any prohibited payment has been repaid in full. Landlords and letting agents must therefore ensure that the Act has been complied with prior to service any Section 21 Notice upon a tenant.

The Dispute Resolution Team here at Franklins are on hand to provide advice and assistance with a variety of landlord and tenant disputes as well as rental repossessions. If you are a Landlord, Letting agent or Tenant seeking said advice, please do not hesitate to contact our team on 01604 828282 or litigation@franklins-sols.co.uk.