On 1 June 2019 the Tenant Fees Act 2019 (the “Act”) came into force. The Act sets out the law on prohibited payments: landlords and managing agents, from 1 June 2019, are prohibited from charging fees (prohibited payments) other than those expressly permitted by the Act. Viewing fees, tenancy set-up fees, tenancy check-out fees (including payment for cleaning the property at the end of a tenancy), inventory check fees and third-party fees are no longer recoverable from tenants by the landlord. In addition, the Act also places a limit on the amount of security deposit a landlord can collect – a cap of five weeks’ rent for tenancies where the rent is less than £50,000 per year.
When the Act was first introduced in the main it applied only to new (granted after 1 June 2019) assured shorthold tenancies, licences to occupy and tenancies of student accommodation. However, the one-year transition period attached to the legislation ended on 1 June 2020, meaning that the Act now applies to existing tenancies too. Any tenancy agreement agreed before 1 June 2019 should be reviewed to establish whether the Act applies to it; statutory periodic tenancies or contractual periodic clauses that specify a separate periodic contract will also be caught. However, if the tenancy has a contractual periodic continuation of the existing tenancy then it is likely that the Act will not apply even if their periodic tenancy starts after the commencement date. Any term in the tenancy agreement that requires a prohibited payment will be void, and if a landlord does accept such a payment it must be returned within 28 days of receipt to avoid being in breach of the Act.
The end of the transition period is particularly onerous for landlords, as non-compliance can lead to fines of up to £5,000 for each offence, with larger financial penalties reaching up to £30,000 for repeat offenders. If the landlord fails to refund the prohibited fee the tenant can inform their local Trading Standards office or can apply to the First Tier Tribunal for a refund. Other penalties for non-compliance include a banning order and, for more serious breaches, criminal prosecution.
Landlords should also note that non-compliance will also affect their ability to recover possession of their property using a s.21 notice. If a prohibited payment has been received by a landlord, they will not be able to successfully serve a s.21 notice until the payment has been paid back to the tenant in full.
Historically landlords may have asked for and received deposits that exceed the cap. It should be noted that they will not be obliged to automatically refund the excess part of a tenancy deposit; if a tenant signed a tenancy agreement before 1 June 2019, and that tenancy is continuing as a contractual or a statutory periodic tenancy, the amount over the cap will remain protected until the tenancy ends or is renewed.
For more information please contact Bryony Darnell