The Tenant Fees Act 2019
The Tenant Fees Act 2019 (the Act) came into force on 1 June 2019 in England. In Wales, the Renting Homes (Fees etc) Wales Act 2019 has been in force from 1 September 2019. Tenants (also referred to as ‘contract holders’ in Wales), landlords, and agents should understand what the ban includes and what fees landlords can charge to tenants.
The legislation is intended to restrict the kinds of payments that landlords and letting agents can charge to tenants in connection with the letting of a property, such as holding deposits and cleaning costs. Note that Welsh and English law are slightly different on the topic of tenants' fees.
Lawful fees
The general position is that if a fee is not specifically allowed it is banned. Landlords and letting agents must not require tenants (including prospective tenants and guarantors for tenants) to make any prohibited payments.
The following fees are the fees that are permitted:
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rent
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utilities, TV licence, communications services (ie internet, broadband, and telephone), and council tax charges – if fees don't exceed the reasonable costs incurred by the landlord for these utilities
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a refundable tenancy deposit – in England, this is capped at no more than 5 weeks’ rent (where the annual rent is less than £50,000) or 6 weeks’ rent (where the total annual rent is £50,000 or above). In Wales, there is no cap
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a refundable holding deposit to reserve the property – capped at one week’s rent
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fees for changes to the tenancy that were requested by the tenant (ie for the variation, assignment, or surrender of the tenancy) – capped at £50 or reasonable costs incurred if higher (England only)
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fees associated with early termination of the tenancy, if requested by the tenant (England only)
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fees for defaults by the tenant – such as fines for late payment of rent or replacement of a lost key/security device, where required under a Tenancy agreement
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payments of service charges to ‘community landlords’, such as local authorities in certain situations (Wales only)
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payment for support services in certain situations (Wales only)
Concerning default charges for rent arrears, in England the rent must be 14 days overdue and in Wales it must be 7 days overdue.
The following are examples of fees which, in England and Wales, are prohibited for landlords to charge:
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fees for signing a tenancy agreement
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fees associated with renewing a tenancy agreement
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fees for requesting a checklist regarding the property (ie an Inventory fee)
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fees for accompanied property viewings
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fees for providing a reference
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check in and check out fees (ie for moving in and moving out)
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administration fees
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inspection fees upon moving out
These fees will still be prohibited if a landlord asks a tenant to pay fees through a third party. However, a tenant might themselves choose to employ and pay a third party for, for example, an inventory service, in which case the tenant would need to pay.
Application of the tenants’ fees restrictions
In England
Since 1 June 2020, the tenants' fees restrictions have applied to all private assured shorthold tenancies (ASTs) in England, regardless of when they were entered into. This includes:
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new tenancies granted on or after 1 June 2019, including first tenancies and renewal tenancies
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statutory periodic tenancies that arose before, on, or after 1 June 2019
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tenancies granted before 1 June 2019, including contractual periodic tenancies and tenancies still within their original fixed term
The law also states that any student let or licence to occupy housing in the private rented sector (for example under a Lodger agreement) must comply with the new rules.
Any term in an already-existing private residential tenancy agreement requiring the payment of a prohibited fee will not be binding on a relevant person (ie the tenant, licensee, guarantor, or any other person acting on behalf of the tenant/licensee).
In Wales
Restrictions have been in place in Wales since 1 September 2019.
In Wales, the restrictions apply to standard occupation contracts. Additionally, everyone who is being asked to pay a prohibited payment in Wales is protected. This is because the law simply bans demanding a prohibited payment.
In Wales, the tenants’ fees ban is not retrospective. Therefore, if a tenancy started or was signed before 1 September 2019, the tenant will have to continue paying relevant fees.
What actions can tenants take?
In England
In England, where a breach has occurred and a banned fee or payment is taken, tenants will be able to get any money they've wrongly paid back via the county court. Local Trading Standards Offices can also assist tenants with this.
In addition, local Trading Standards Offices will be required to enforce this legislation and will issue a fine of up to £5,000 for a first offence. Subsequent breaches are criminal offences or, alternatively, the landlord can be fined up to £30,000 as a civil penalty and be subject to a banning order.
In Wales
In Wales, claims are also made to the county court. However, the 2 main enforcement authorities are the Local Housing Authority and the licensing authority for the area. If it is found that a landlord has committed an offence by charging prohibited fees, the landlord can offer to discharge their liability by paying a £1,000 fixed penalty notice to avoid prosecution. Alternatively, the Local Housing Authority and the licensing authority can prosecute either an individual landlord or agent or a corporate agency.
You can find more information about tenant fees in Wales on the Welsh government’s website.
What can private landlords do?
In England and Wales
If you’re a landlord or letting agent, you may have to re-evaluate your current business model. The prohibition on fees could heavily impact some business models (particularly those of small businesses or individual landlords).
Similarly, landlords and agents must consider whether their current tenancy agreements and holding deposit forms are fit for purpose.
Landlords should consider updating their tenancy agreements or occupation contracts for any new tenancies to comply with the law and should revise their policies on holding deposits and deposit protection schemes.
All of Rocket Lawyer’s tenancy agreements reflect the changes introduced by the tenants' fees legislation. Create your Tenancy Agreement or Occupation contract with Rocket Lawyer and read our guides on renting residential property.
In England
In England, if a landlord collects a ‘prohibited’ fee they should return the payment immediately and, in any event, the fee must be returned within 28 days. They should also return any tenancy deposits over the cap for fixed-term contracts which are renewed for another fixed term, even if this is at the same property.
They also won’t be able to evict the tenant using the section 21 procedure until they have repaid any unlawful fees.
