Tenant Fees Bill Receives Royal Assent

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On 12 February 2019, the Tenant Fees Bill 2017-19 received Royal Assent and became the Tenant Fees Act 2019.

The Act restricts the ability of landlords and letting agents to charge certain fees to tenants and prospective tenants of assured shorthold tenancies (excluding social housing and long leases) and student accommodation in England. It also applies to residential licences (with limited exceptions). The relevant provisions will come into force on 1 June 2019 for new and renewal leases and licences (excluding periodic tenancies). From 1 June 2020, they will apply to existing leases and licences.

For security deposits, if the annual rent is less than £50,000, the deposit cannot exceed five weeks’ rent. If the annual rent is £50,000 or more, the cap will be six weeks’ rent. Landlords may not set a rent at a higher level for the first part of the tenancy and then reduce it later, in an attempt to recoup costs indirectly. Holding deposits must not exceed one week’s rent and must (except in limited circumstances) be fully repaid.

Other permitted charges (aside from rent) are limited to payments for loss of keys and late payment of rent, for variation, assignment or novation of tenancies, for early termination by the tenant, and for council tax, utilities, TV licences, and communication services. In some cases there are restrictions on the amounts that may be charged but they are mainly limited to the reasonable costs incurred by the landlord or letting agent.

Terms which breach these provisions will not bind the tenant or licencee. The offending party may incur a fine of up to £5,000. If a second breach is committed within five years, a criminal offence is committed and a fine and banning order may be imposed. Alternatively, the enforcing authority may impose a civil penalty of up to £30,000. Tenants and licencees can recover money wrongly paid, and landlords will be unable to serve section 21 notices to terminate tenancies whilst holding prohibited payments. Trading standards authorities (TSAs) and district councils will enforce the provisions.

The Act extends the duties of letting agents to online property portals. In addition, responsibility for enforcing mandatory client money protection scheme membership will move to TSAs.

The government intends to publish guidance shortly.

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The content of this update is for the purpose of providing general legal information. It does not constitute legal advice and should not be treated as such.