Commercial Property Update: Tenant Fees Act 2019
The Tenant Fees Act came into force on 1 June 2019 and applies immediately to the grant of any new tenancy, with a grace period of one year for existing tenancies.
It is a very important piece of legislation for landlords and letting agents, restricting the type and amount of payments that they can require from tenants of most assured shorthold tenancies, student accommodation and under licences to occupy. Houses with multiple occupation are also potentially included.
The Act now means that various payments are prohibited unless expressly listed as a permitted payment under the Act.
Permitted payments include the following: rent, tenancy deposits (there are certain caps depending on the amount of rent payable under the tenancy agreement), a holding deposit capped at one weeks’ rent, payments on certain default events such as loss of keys or failure to pay rent, fee for a variation of the tenancy (again this is capped), payment on early termination of the tenancy, Council Tax, utilities, TV licence and payment for communications, i.e. phone, internet, etc.
However, payments that are now prohibited under the Act include tenancy set-up fees, viewing fees, credit-check fees, inventory check fees, check-out fees and fees for professional cleaning services. These prohibitions would apply to any agreement with the tenant, their guarantor or anyone acting on behalf of the tenant.
If a Tenancy Agreement has a term within it that requires a prohibited payment, this will not be binding on the tenant, although the rest of the Agreement will remain binding.
The Act also imposes certain requirements relating to repayment of holding deposits, as well as prohibited payments, but the legislation is complex and cannot be detailed fully in this article. Legal advice should be sought.
The Act provides for enforcement by the relevant enforcement authority by way of financial penalties of up to £5,000 for each breach of a prohibition or repayment obligation.
In addition, if a further breach is committed within five years of having had a financial penalty imposed or the landlord having received a conviction of an offence for an earlier breach, a financial penalty of up to £30,000 can be imposed.
The Act also provides the relevant enforcement authority to require a landlord or letting agent to repay the tenant any monies paid under a prohibited payment, or repay the holding deposit plus interest.
Finally, the Act gives the tenant the power to apply to the First-tier Tribunal themselves for the return of outstanding amounts in respect of prohibited payments/holding deposit.
It should also be noted that if a landlord is in breach of the prohibitions and holds a prohibited payment or deposit, then they cannot serve a Section 21 Notice to terminate the tenancy, unless and until repayment is made to the tenant or, with the tenant’s consent, the money has been applied towards rent or the tenancy deposit.
How Hatch Brenner can help
Our Commercial Property and Residential Property teams have extensive experience in advising Landlords and Tenants on their legal position.
Contact 01603 660 811 to speak to one of the team or email firstname.lastname@example.org.