Landlord and agent's guide to The Tenant Fees Act
From 1st June 2019, new laws will come into force in England to make charging fees to tenants illegal – including fees for referencing, inventories and ‘admin’. Caps on security and holding deposits are also being introduced, with costly penalties for landlords and agents that breach the new laws.
We’ve broken down the new rules below – so you know exactly what you can and can’t charge for.
You’ll obviously still be able to charge your tenant(s) rent, a tenancy deposit and if relevant, a holding deposit ensuring these are correctly capped (see section further below.)
However, you now won’t be able to charge fees for:
It’s now your responsibility as a landlord/agent to cover these costs. This list isn't exhaustive, however! Bottom line: if it's not on the list of exempt fees, you can't charge a tenant for it.
Fees that are exempt:
There are two kinds of fees that are exempt from the ban.
Late rent fees
If a tenant’s rent is more than two weeks late, you can charge up to 3% plus the Bank of England base interest rate. This is an annual interest rate, so you’ll have to calculate the exact amount of pro rata interest.
You can also still serve a Section 8 eviction notice in extreme circumstances of late rent.
If a tenant loses their keys or other security device (i.e. a building fob), you can charge them a reasonable amount for replacing them. You’ll also need evidence of the cost for the tenant, so they know they’re not being charged unfairly.
Both of these exempt fees must be included in the tenancy agreement to make them valid.
Tenancy (or security) deposits will now be limited to five weeks’ rent.
Holding deposit caps
Holding deposits will be limited too – you can now only charge one week’s rent in advance.
This deposit also now has to be handled differently. It’ll have to be returned to the tenant, or put towards the first rental payment or security deposit.
You can only hold onto the holding deposit if the tenant:
- Backs out
- Doesn’t take reasonable steps to start the tenancy
- Fails a right to rent check
- Provides misleading information
Landlords/agents can only hold onto this deposit for 15 days, unless you’ve agreed another date in writing. After the deadline you must pay the tenant the deposit within seven days.
If a tenant does back out before the deadline for agreement, you must give written notice explaining why the holding deposit isn’t being repaid. This must be done within seven days of the decision not to enter a tenancy agreement having been made.
And the penalties?
Breaking any of these new laws means costly penalties. The first offence will result in a fine of £5,000, further offences within five years will increase this to £30,000 – or be treated as a criminal offence.
Image credit: Christian Stahl.