Guidance on the Tenant Fees Act 2019 and how it will affect existing tenancies

(NB This post looks at the law in England only)

One of the biggest changes to the Private Renting Sector will be coming into force on 1 June 2019 – the Tenant Fees Act.

This will have a profound effect on the ability of both landlords and letting agent/property managers to charge fees to tenants.

It will have a particularly damaging effect on many letting agents – as they tend to charge higher fees to tenants.  Indeed it is due to the very high fees charged by some agents that this act has been brought in the first place.

It is estimated that on average fees to tenants form around 20% of letting agents fee income.  Landlords, on the other hand, charge lower fees and many landlords charge no fees at all apart from the rent and a deposit.  So landlords will be less affected by the act.

However, landlords will need to know the rules – and to this end, we are updating our existing content and adding new content on Landlord Law – which is all linked from our Tenant Fees Act Special Information Page.

Here are some general points about the new rules:

• They only apply in England (separate rules will come into force in Wales later)
• Only fees specifically approved by the act are permitted.  All other fees are prohibited payments.

• The ban applies to:
  
  • Assured Shorthold Tenancies
  • Licenses to occupy (which will include lodger licenses)
  • Student lettings provided by specified educational institutions
• The ban does not apply to:
  
  • Assured Tenancies
  • Long leases
  • Non Housing Act tenancies (ie common law tenancies such a company lets, and tenancies with a annual rent of over £100,000 pa)
  • Social housing
  • Holiday accommodation

Transitional Arrangements:

Between 1 June 2019 and 31 May 2020

The new rules will apply to:

• All new tenancies and licenses signed on or after 1 June 2019
• All renewal agreements where new tenancy agreements or renewal/memorandum documents are signed in respect of existing tenancies signed on or after 1 June 2019.  These are classed as new tenancy agreements and only permitted fees can be charged.

For all other agreements signed before 1 June 2019, there is a transitionary 12-month period which will end on 31 May 2020.

During this transition period, you can continue to charge fees written into your existing agreements for:

• All existing tenancies and licenses where the fixed term has not ended
• Statutory or contractual periodic tenancies where the fixed term ends during the transition period but no new document is signed – these are classed as extensions of the existing tenancy agreements

Note – If you took a check out fee upfront for a tenancy which is renewed – this will become a prohibited payment and must be refunded to the tenant within 7 calendar days of signing the renewal document.

On and after 1 June 2020

At this time the Tenant Fees Act will come into force for all relevant tenancies and licenses.  So all prohibited payments will be unlawful regardless of when the tenancy started.

About Prohibited Payments

These are all fees which are not specifically permitted by the act.  Members will find a FAQ here.

If any prohibited payments are accepted they must be returned within 28 days, from the day the payment was accepted.

This must be done whether or not the refund is requested by the tenant or licensee.

Tenancy Deposits

Tenancy deposits are capped at five weeks rent for all tenancies save those with a rent of £50,000 or more where the deposit is capped at 6 weeks rent.

If, after 1 June 2019, you take a deposit which is more than this, the difference is a Prohibited Payment.

If the tenant signs a new fixed term agreement after 1 June 2019 – the difference must be refunded to the tenants.  This should be done at the time of signing the new tenancy or renewal document.

If the tenant wishes the money to be offset against the rent, you should get confirmation of this in writing.

For more information about the Tenant Fees Act and tenancy deposits see our FAQ.  You can calculate the correct sum using our online calculator below.

Further Information

Landlord Law members should also listen to the webinar with David Cox where he explained the transition arrangments – which you can watch (if you are logged in as a Business Level member)  here.