The introduction of the Tenant Fees Act 2019 leaves landlords exposed to fines for failure to comply with the new legislation.
New legislation has been introduced for residential tenants to restrict the type and amount of payments that landlords and letting agents can require from tenants of most assured shorthold tenancies, student accommodation and under licences to occupy. The new legislation does not apply to social housing tenancies or long leases i.e. a lease granted for more than 21 years.
The Act applies to all new tenancies entered into from 1 June 2019 and from 1 June 2020, it will apply to all private assured shorthold tenancies, even those entered before June 2019.
Landlords must take note of this new legislation because if they charge a fee that is outside what is permitted under the new Act, landlords will not be able to evict their tenants until such time as the unlawful payment has been refunded. Additionally, if landlords are in breach of the Act, they could face a fine of up to £5,000 per breach or an unlimited fine if another breach occurs again within 5 years of the first breach. This therefore opens landlords to a risk of (i) not being able to evict their tenants and (ii) having to pay a large sum in fines.
In summary, landlords can now only require tenants to pay the following fees:
- Tenancy deposit up to a maximum of five weeks’ rent (or six weeks’ rent if annual rent is £50,000 or more);
- Holding deposit of up to a maximum of one week’s rent;
- Reimbursement of bills such as utilities, council tax, internet and TV licence, provided such costs are reasonable;
- Payment on certain default events such as for late payment of rent or replacement of lost keys, or breach of the tenancy, provided this is set out in the tenancy agreement;
- Payment on early termination of the tenancy;
- Costs capped at a maximum of £50, unless it can be shown that further costs are reasonable, to cover a tenant’s request for a variation, assignment or surrender of a tenancy.
Landlords and letting agents cannot require tenants to make any of the following prohibited payments:
- Tenancy set-up fees;
- Viewing fees;
- Credit-check fees;
- Inventory check fees;
- Check-out fees; and
- Fees for professional cleaning services.
As a result of this new tenant friendly legislation, it is important for landlords to take the following steps:
- Check their deposits: if they are holding more than 5 weeks’ rent they may have to provide a partial return of the deposit on or before 30 May 2020.
- Ensure any bills which they seek to recover from the tenant are reasonable: landlords should ensure that they keep any receipts for any such bills.
- Ensure any costs over £50 can be shown to be reasonable: landlord’s should consider obtaining multiple fee estimates in order to demonstrate this.
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