Having received Royal Assent earlier this year, the Tenant Fees Act 2019 will come into force on 1 June.
As a responsible landlord, it is imperative that you understand your statutory obligations under the new Act, and review any existing letting procedures accordingly, otherwise you potentially face a hefty financial penalty or even criminal conviction.
What is the new Act designed to do?
In broad terms the Tenant Fees Act 2019 is designed to improve fairness, competition and affordability in the private lettings sector by reducing the costs at the outset of a tenancy. In particular, the Act prohibits landlords and their agents from charging certain fees to tenants on assured shorthold tenancies, student lettings and licences to occupy housing in England.
The Act effectively achieves this end by banning landlords and their agents from requiring tenants and licensees of privately rented housing to make any payments in connection with a tenancy with the exception of the following:
Fees relating to late rental payments
The loss of keys or any security device to access the property
The net effect of the new provisions means that landlords, or letting agents on their behalf, will no longer be able to charge additional letting fees to tenants. This includes administration fees relating to tenant references, credit checks, contract negotiations and inventory services.
What additional changes has the Act introduced?
In addition to a ban on various letting fees, the Tenant Fees Act 2019 also imposes a cap on tenancy deposits, based on the value of the annual rent, as well as on holding deposits.
For tenancy deposits, where the annual rent for the property is less than £50,000, the deposit amount must be capped at no more than five weeks’ rent. In the case of property where the annual rent is £50,000 or more, the maximum deposit amount is six weeks’ rent.
For holding deposits, a new statutory cap will restrict landlords from taking a deposit of more than one week's rent. In addition, there are new rules relating to the refund or retention of holding deposits, albeit with provision for where the tenant withdraws, fails a right-to-rent check or fails to take all reasonable steps to enter into the tenancy when the landlord or agent has done so.
The landlord or their agent may also retain the holding deposit if the tenant provides false or misleading information before entering into the tenancy.
What penalties can be imposed under the new Act?
For landlords who fail to comply with the new provisions, this could result in a civil penalty of up to £5,000, not to mention the possibility of criminal conviction for those found to be repeatedly in breach, liable on summary conviction to an unlimited fine.
Furthermore, where an offence has been committed, local authorities will be given the discretion to impose a financial penalty of up to £30,000 as an alternative to criminal prosecution.
Needless to say, either way, the cost of getting caught for breach of the fee ban is likely to be significant, so landlords and letting agents beware!