The Tenant Fees Act 2019 introduced significant changes to tenancy fees in England.
Starting from 1st June, 2019, for new tenancies and extending to all tenancies from 1st June, 2020, the Act aims to protect tenants by banning most fees that landlords and letting agents can charge.
In this blog post, we’ll explore how the Act impacts both tenants and landlords and highlight the key changes you need to know.
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Landlords or their agents are no longer allowed to charge tenants for anything except the rent, the tenancy deposit and a holding deposit.
This means landlords cannot ask tenants to cover the cost of referencing. Landlords also can’t charge mandatory check-in, inventory, cleaning or admin fees.
There are only three exceptions: fees for contract amendments and two types of ‘default’ fees. These are charges landlords can make when a tenant breaks the tenancy agreement.
These fees must be included in the contract for landlords to charge them.
A landlord can charge fees for rent payments that are more than two weeks late. The fees can be up to 3% plus the Bank of England base interest rate.
Since this is an annual interest rate, you’ll need to calculate the pro rata interest on the overdue rent.
Landlords can still charge tenants for losing keys or damaging security devices, but only a reasonable amount. They must provide evidence of the cost to the tenant.
Remember, default fees must be included in the tenancy agreement to be charged, and previous rules about fair clauses still apply.
Landlords can charge up to £50 for changing the terms of the tenancy, such as adding a new tenant or allowing a pet.
They can charge more than £50 only if they can show their costs are higher, but this is rare.
This rule doesn’t apply to renewals or changes in the length of the tenancy.
Optional fees are still legal but must be truly optional.
For example, if you have the choice to return the property in a clean state or pay for a professional cleaning service, the cleaning fee is optional because you can avoid it by cleaning yourself.
Before the Tenant Fees Ban, tenants often paid around £300 in extra fees. OpenRent has never charged admin or agency fees, so tenants remain protected from unfair charges.
Tenancy deposits, also called security deposits, are limited to five weeks’ rent for properties with an annual rent under £50,000.
Landlords will note that this is hardly more than a month’s rent, meaning tenants could in theory not pay the last month’s rent, allowing the landlord to deduct it from their deposit.
At that point there would only be a small amount of the deposit left to cover any damage to the property.
For properties whose annual rent is £50,000 or more, tenancy deposits will be capped at six weeks’ rent.
In practice, deposits have never been uncapped. They have always been kept below two months’ rent due to the fear of the tenancy becoming a premium tenancy.
Likewise, holding deposits are limited to one week’s rent.
This is a big change from before when holding deposits were often much higher than a week’s rent.
An OpenRent poll before the Tenant Fees Act came into effect found that 47% of tenants had paid a holding deposit of over £750 – far more than the average weekly rent for a property in the UK.
OpenRent can collect your holding deposit any time of day, seven days a week.
The Act also sets out new rules for how holding deposits should be handled.
The holding deposit must be returned to the tenant, either as a refund or put towards the first rent payment or the tenancy deposit.
However, there are a few exceptions where the landlord can keep the holding deposit:
If that last one sounds a little vague to you, then you’re not alone. You can read the exact wording here in paragraph 9 of the Tenant Fees Act.
Landlords are only able to hold the holding deposit for 15 days unless another ‘deadline’ date is agreed in writing.
After the deadline, the holding deposit must be repaid within seven days according to the above rules (see 5).
The holding deposit can be repaid to the tenant, or it can be put towards the first month’s rent or tenancy deposit.
Landlords (or letting agents) who charge illegal fees will face paying huge fines.
The first offence would be a civil offence, with a fine of £5,000.
If the offence is repeated within five years, there would be either a criminal offence or a fine of £30,000.
There are also plans to help tenants recoup any illegal fees they paid from the landlord (or letting agent).
Local Trading Standards organisations will enforce the ban.
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No, unless the tenancy is renewed. If the tenancy becomes a periodic tenancy, it’s not considered a ‘new tenancy’ under the Tenant Fees Act.
However, if the tenancy is renewed, the deposit must not exceed the maximum of five weeks’ rent.
If the landlord has charged more than this limit, they will need to return any excess amount to the tenant.
The only fees a landlord or letting agent can charge a tenant as part of the rent are for bills like: