Legislation is due to come into force on 1 June 2019 introducing new protections for most residential tenants in the private rented sector in England under the Tenant Fees Act 2019 (“TFA”). The new legislation will apply to all new tenancies with a grace period for compliance of 1 year for existing tenancies.
The purpose of the TFA is to restrict the type and amount of payments which landlords/letting agents may require from tenants renting a property under an assured shorthold tenancy (AST), student accommodation and licences to occupy (e.g. lodger agreements). The new restrictions will apply to the following:
- The amount that can be taken as a tenancy deposit;
- The amount that can be taken as a holding deposit;
- A prohibition on a tenant being required to enter into a contract with a third party for a service or insurance (with limited exceptions relating to utilities and telecommunications).
If a landlord/letting agent fails to comply with the provisions of TFA, the Act also provides for sanctions to be imposed against them.
Under TFA taking a payment is not allowed unless it is one of the payments specifically specified in section 3 of the Act as permitted. The following are payments that can be requested from a tenant (subject to certain conditions and caps) and also from a tenant’s guarantor (if applicable) are as follows:
- A tenancy deposit (subject to a cap of 5 weeks’ rent if the annual rent under the tenancy agreement is less than £50,000, or 6 weeks’ rent if the annual rent exceeds £50,000)
- A holding deposit (capped at one week’s rent);
- Payments in respect of certain acts of default of the tenant (loss of a security device, failure to pay rent or breach of the terms of the tenancy);
- A fee to vary, assign (i.e. pass on) or novation of the tenancy (i.e. changing a party to the tenancy) (capped at £50 or reasonable costs);
- Payment for early termination of the tenancy;
- Council Tax;
- Utilities (electricity, gas, other fuel, water and sewerage);
- TV licence; and
- Payments for landline phone, internet, cable or satellite TV.
Some examples of payments that would not be allowed under TFA are:
- Tenancy set-up fees;
- Viewing fees;
- Credit check fees;
- Inventory check fees;
- Check-out fees; and
- Fees for professional cleaning services.
If a tenancy agreement or letting agent agreement contains a provision to pay a prohibited payment, this will not be binding on the tenant, the tenant’s guarantor or anyone else acting on their behalf and they cannot be compelled to pay it. Other provisions in the specific agreement which do not contravene the TFA will continue and be binding on the tenant, however.
In relation to holding deposits (i.e. a sum of money paid by a prospective tenant to reserve a property), this must be repaid to the tenant either by the date specified in writing between the landlord/letting agent and the tenant or, if no such date has been agreed, on the fifteenth day beginning on the date the landlord/letting agent receives the holding deposit money from the tenant.
Where a tenancy agreement is entered into between the landlord and the tenant, the holding deposit must also be repaid within 7 days of the date the tenancy commences.
If the landlord decides not to go ahead with the letting, again, the holding deposit must be repaid to the tenant within 7 days of the date of the landlord’s decision.
If no tenancy is entered into before the deadline for agreement between the parties, the holding deposit must be return also within 7 days, starting on the date of the deadline.
The local Weights and Measures Authority (usually Trading Standards) is the body which will deal with enforcement of the TFA. It may impose a financial penalty of £5,000 where it is satisfied beyond reasonable doubt that a person has breached the provisions relating to prohibitions or repayment obligations, or requirements relating to holding deposits. If a landlord/letting agent, after being found liable of a breach and fined, then goes onto breach the provisions again within 5 years of the penalty being imposed, a criminal offence may be committed which could result in a banning order being issued against the landlord/letting agent under the Housing and Planning Act 2016 and an unlimited fine being imposed.
Get in Touch
The above is intended as a brief summary of the important aspects for landlords, letting agent and tenants to note under the TFA and, if you would like further advice on this, please contact our Commercial Property Department on 0118 958 9711 or [email protected] where a team of specialists will be happy to help.