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Time’s up for residential letting fees

The Tenant Fees Act 2019 received royal assent on 12 February and comes into force on 1 June 2019. The Act aims to improve transparency and affordability in England’s residential lettings market. It bans various fees often charged to tenants – including fees for reference checks, key collection and inventories. It also caps permitted payments. Research indicates that fees charged have far outstripped inflation, rising by 60% during 2010 – 2015, and that the Act will save tenants £70 per household.

The Act applies to assured shorthold tenancies (excluding social housing and long leases), student leases and most licences to occupy (collectively referred to as ‘tenancies’). Initially it will only apply to new and renewal tenancies, but from 1 June 2020 it will apply to existing tenancies too.

Permitted Payments

Rather than listing banned fees, the Act prohibits landlords/agents from requiring any payments from tenants except payments which are permitted. This approach is intended to remove potential loopholes through which the spirit of the legislation could be abused.

The permitted payments are:

  1. Rent: The Act does not allow rent ‘spikes’ at the start of lease terms to offset agents’ letting fees which landlords may now have to pick up.
  2. Tenancy Deposits: tenancy deposits must be capped at five weeks’ rent where the annual rent is less than £50,000 or six weeks’ rent if the annual rent is £50,000 or more.
  3. Holding Deposits: holding deposits must be capped at one week’s rent and returned to tenants except in certain circumstances.
  4. Default Payments: capped default fees are only permitted for late rent or replacement of lost keys.
  5. Payments on variation, assignment, novation or termination at the tenant’s request: Variation, assignment or novation fees are capped at the higher of £50 and the reasonable costs incurred. Early termination fees are limited to landlord’s loss and the agents’ reasonable costs.
  6. Payment of council tax, utilities, TV licence or communication services bills.

Remedies

Enforcement remedies include fines of £5,000 or, in the case of repeat breaches within five years, criminal liability, banning orders and fines of up to £30,000. Lease terms requiring prohibited payments are not binding, but tenants who have paid unlawful fees can seek to recover them via the courts. A landlord who has not repaid a prohibited payment to an assured shorthold tenant cannot use section 21 Housing Act 1988 to regain possession of their property at the end of the term.

Comment

The increasing number of private residential renters will welcome the new law. What remains to be seen is whether the Act will result in increased rents levied by landlords who face increased fees from letting agents.