The government has introduced new rules in England, banning landlords and agents from charging fees to tenants associated with setting up or maintaining a tenancy and capping tenancy deposits at a maximum of five weeks’ rent.
Designed to allow tenants to see, at a glance, what a property will cost them in advertised rent, the Tenant Fees Act 2019, applies to all new or renewed tenancy agreements, student lets and licences to occupy housing in the Private Rented Sector (PRS) signed on or after 1 June 2019 – and to all applicable tenancies and licences in the PRS from 1 June 2020.
Allowable fees and charges
Put simply, the only payments that landlords or letting agents can charge to tenants in relation to new contracts are as follows:
- a refundable 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
- a refundable holding deposit (to reserve the property) capped a no more than 1 week’s rent
- payments associated with early termination of the tenancy, when requested by the tenant
- payments capped at £50 (or reasonably incurred costs, if higher) for the variation, assignment or novation of a tenancy
- payments in respect of utilities, communication services, TV licence or Council Tax
- a default fee for late payment of rent and replacement of a lost key / security device giving access to the house, where required under the tenancy agreement
Banned fees and charges
Any fees that aren’t on the list are prohibited and the government’s guidance makes it clear that landlords and agents can’t charge for:
- admin activities or time taken to set up a new tenancy, including reference checks or credit referencing
- providing an inventory
- checking a tenant out at the end of a tenancy
- a professional clean at the end of the tenancy (although landlords may request that a property is cleaned to a professional standard); and
- wear and tear
Prohibited payments are outlawed under the ban and landlords can’t get round the rules by asking tenants to undertake and pay for these items via a third party.Enforcements and penalties
In most areas, the Trading Standards authorities will be responsible for monitoring and enforcing the rules. A breach will usually be classed as a civil offence, carrying a financial penalty of up to £5,000. If a further breach is committed within five years of a financial penalty or conviction, it will be treated as a criminal offence, subject to an unlimited fine.
Landlords will also have to refund any unlawful fees to tenants.
Savings for tenants
The government estimates that implementation of the Tenant Fees Act will save tenants across England at least £240 million a year, or up to £70 per household.
However, ARLA (The Association of Residential Letting Agents) is less sure, and questions whether landlords will be forced to increase rents to cover at least some of the costs.
What’s clear is that landlords can no longer add on fees over and above the headline rent, except for a very limited set of circumstances.