Tenant Fees

From 1st June 2019, the new Tenant Fees Act will come into force, having been introduced because the UK Government wants to see a fairer private rental market, where the fees charged by letting agents for services needed are paid for by the person that contracts them.

What is the Tenant Fees Act?

The government’s ultimate aim is to reduce the costs that tenants usually face when taking out a tenancy. The new Tenant Fee Act will control what payments a landlord or letting agent may require whilst restricting third-party contracts that a tenant may usually be bound by.

This means that a landlord or letting agent :

  • Cannot require a tenant to make certain payments in connection with a tenancy.
  • Cannot require a tenant to enter a contract with a third party in connection with a tenancy.

The Act puts a ban on letting fees paid by tenants in the private sector whilst also putting a cap on tenancy deposits and is just part of a wide range of changes being made to deliver a fairer and more affordable private rental sector.

For the purposes of the Act, a tenancy is defined as:

  • Assured shorthold tenancies
  • Student lettings
  • Tenant licences

The Act does not apply if the tenancy is for a company let or if the tenancy will not be the individuals only or main home. The Act also doesn’t apply to an assured tenancy (where no section 21 notice[link to section 21 article] is ever available to the landlord). The Act also does not apply to an agent who provides a service to a tenant, where as part of that service they are tasked to find a house to rent, which the tenant then rents, provided that the letting agent does not also work for the landlord of the property. The agent is not lawfully allowed to charge fees if they do work for the landlord.

What Fees Can a Landlord Ask a Tenant to Pay?

The only payments that a landlord can now charge in connection with a tenancy are:

  • The rent.
  • A refundable tenancy deposit capped at no more than five weeks’ rent where
    the annual rent is less than £50,000, or six weeks’ rent where the total annual
    rent is £50,000 or above.
  • A refundable holding deposit (to reserve a property) capped at no more than
    one week’s rent.
  • Payments to change the tenancy (when requested by the tenant, capped at
    £50, or reasonable costs incurred if higher).
  • Payments associated with early termination of the tenancy (when requested
    by the tenant).
  • Payments in respect of utilities, communication services, TV licence and
    Council tax.
  • A fee for late payment of rent.
  • A fee for the replacement of a lost key or security device.

The landlord will be responsible for paying the fees for any service that is not listed above. This will ensure that the tenancy fees charged are reflective of the real economic value of the service that is being provided. As a landlord or letting agent, if you are charging a new tenant (whose contract begins on or after 1st June 2019) a fee that is not listed above then you are breaking the law. Local enforcement authorities have the responsibility for enforcing this legislation.

Not only is it an offence for a landlord to require a prohibited payment but it is also unlawful for a landlord to require the tenant to make a payment to a third party for services such as a reference or insurance company.

The Act’s main provisions come into force on 1 June 2019 and will apply to all applicable new tenancy agreements. The requirements of the Act relating to holding deposits will not apply to holding deposits paid before the commencement date. If you are a landlord and want more information about the new tenant fees act, there is guidance available on the Government website to help explain how this legislation affects you.

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