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Ban on fees charged by Landlords and Lettings Agents from 1 June 2019

From 1 June certain fees charged to tenants by landlords/letting agents will be banned and failure to adhere to the change in law could result, at best, in a £5,000 penalty or at worst, the committing of a criminal offence.

The Tenant Fees Act 2019 (“the Act”) restricts what landlords and lettings agents can charge residential tenants.  The Act will apply immediately in relation to any new residential tenancies and will apply to all existing residential tenancies after a period of one year, from 1 June 2020.

The restrictions will apply to most residential tenancies including assured shorthold tenancies, student lettings and licences to occupy (e.g. to lodger agreements).  Some lettings such as those let to companies are excluded.

The following charges that have traditionally been levied on tenants, will be prohibited:

  • Inventory check-in and check-out fees,
  • Viewing fees,
  • Cleaning costs,
  • Credit checks and
  • Other costs associated with setting up the tenancy.

It is also prohibited under the Act for a landlord or letting agent to require a “relevant person” (tenant, guarantor, licensee etc.) to make a loan in connection with a tenancy.  Any provisions in the tenancy agreement requiring prohibited payments will not be binding on the tenant.

The Act provides that the following payments will still be allowed:

  • Rent;
  • Repayable Tenancy deposits (although this is now subject to a cap at 5 weeks’ rent if the rent is less that £50,000 per annum or 6 weeks’ rent if more);
  • Repayable holding/reservation deposit (which will now be capped at 1 week’s rent – there are strict rules setting out how long this can be held and when it becomes repayable);
  • Payments in relation to certain breaches or default of the tenancy by the tenant (e.g. failure to pay rent on time, subject to a statutory limit);
  • Fees in relation to changes to the tenancy e.g. a variation of the terms or assignment of the tenancy (subject to a cap);
  • Early termination fees;
  • Council tax;
  • Certain Utilities;
  • TV licence and other services.

If a tenancy agreement was entered into before 1st June 2019, agents/landlords can continue to require a tenant to pay fees set out in the tenancy agreement until 31st May 2020. After 1st June 2020, the term requiring that payment will no longer be binding. If the tenant is asked to make a payment in error, the payment will need to be returned within 28 days to avoid being treated as having requested a prohibited payment.

It appears that there is no need to return any amount of tenancy deposit that is over the cap for tenancy agreements that were entered into before the Act came into force.

A breach of the fees ban will be a civil offence with a financial penalty of up to £5,000.  Each request that a landlord or letting agent makes for a prohibited payment is a separate breach which means that a financial penalty of up to £5,000 can be imposed for each breach.  The prohibited payment will also need to be returned to the tenant and in certain circumstances compensation may also be payable. If a second offence is committed within 5 years, a penalty of up to £30,000 is payable. In addition, a second offence is a criminal offence.

Furthermore, a section 21 notice (no fault possession notice) cannot be served on a tenant where a landlord is in breach of the Act.

If you require any further information in relation to the above or in relation to any landlord and tenant issues, please contact Yezdan Izzet in our Property Litigation team on 020 7288 4737 or email at YezdanIzzet@boltburdon.co.uk

You can also contact one of our other solicitors in the Property Litigation team here.

 

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