Tenant Fees Legislation Explained: Permitted Payments vs. Banned Fees

Navigating the rental market as either a landlord or a tenant can be complex, especially with evolving legislation. One of the most significant pieces of legislation impacting the UK private rental sector in recent years is the Tenant Fees Act 2019. This act fundamentally changed what landlords and letting agents can charge tenants, introducing a clear distinction between permitted payments and banned fees. Understanding this legislation is crucial for ensuring compliance, avoiding penalties, and fostering a fair and transparent rental experience. This comprehensive guide will delve into the Tenant Fees Legislation Explained: Permitted Payments vs. Banned Fees, providing clarity on what is legally permissible and what is not.

The Purpose and Scope of the Tenant Fees Act 2019

The primary objective of the Tenant Fees Act 2019 was to protect tenants from excessive and unfair charges by landlords and letting agents. Prior to the act, it was common for tenants to face a wide array of fees, often for services that were either unnecessary or already covered by the landlord’s responsibilities. These fees could significantly inflate the initial cost of renting a property, creating financial barriers for prospective tenants.

The Act applies to all new tenancies entered into on or after 1 June 2019, and to all existing tenancies that are renewed after this date. It covers most private residential tenancies in England, including assured shorthold tenancies (ASTs), which are the most common type of rental agreement.

What Constitutes a Permitted Payment?

The Tenant Fees Act 2019 clearly defines a list of payments that landlords and letting agents are legally allowed to charge tenants. These are often referred to as “permitted payments.” It’s important to note that while these are permitted, they are subject to certain conditions and caps.

Rent

This is the most fundamental payment and, of course, remains fully permissible. Rent can be charged weekly or monthly, and the amount is agreed upon in the tenancy agreement. There are no restrictions on the amount of rent that can be charged, beyond market forces.

Tenancy Deposit

Landlords and agents can request a tenancy deposit. However, the Tenant Fees Act 2019 limits the amount that can be charged. For tenancies with an annual rent of less than £50,000, the deposit is capped at a maximum of five weeks’ rent. If the annual rent is £50,000 or more, the deposit is capped at a maximum of six weeks’ rent. This deposit is held to cover any damages to the property beyond normal wear and tear, or unpaid rent at the end of the tenancy.

Holding Deposit

A holding deposit can be taken to reserve a property while the tenant’s application is being processed. This deposit is capped at a maximum of one week’s rent. Crucially, the holding deposit must be returned to the tenant within seven days of the tenancy commencing, or if the landlord decides not to proceed with the tenancy. There are specific circumstances where a landlord can lawfully retain a holding deposit, such as if the tenant withdraws their application or provides false or misleading information.

Payments for Changes to the Tenancy Agreement

If a tenant requests a change to the tenancy agreement after it has been signed, landlords can charge a reasonable fee to cover the administrative costs associated with making that change. This is capped at a maximum of £50. If the landlord can demonstrate that the costs of the change are greater than £50, they can charge a higher fee, but this must be evidenced.

Payments for Early Termination of the Tenancy

If a tenant wishes to end their tenancy agreement early, they may be liable for certain costs. The Tenant Fees Act 2019 allows landlords to charge a fee to cover the landlord’s actual, demonstrable losses incurred as a result of the early termination. This could include costs such as advertising for a new tenant, referencing fees, and the rent lost until a new tenant is found, up to the amount of rent that would have been paid for the remainder of the original tenancy term. This is often referred to as the “landlord’s loss.”

Payments for Utilities, Council Tax, Television Licence, and Communication Services

Tenants are responsible for paying for utilities such as gas, electricity, water, and council tax, as well as for a television licence and communication services like broadband or phone. These are standard costs associated with occupying a property and are not considered prohibited fees under the legislation.

Default Fees

If a tenant defaults on their rent payments, landlords can charge a reasonable fee for late payment. This fee can only be applied if rent is more than 14 days overdue. The fee is capped at 3% above the Bank of England’s base rate for each day the rent is late. Additionally, if a tenant loses their keys or other access devices, a reasonable fee can be charged for replacement. This fee should reflect the actual cost of the replacement.

What Constitutes a Banned Fee?

The Tenant Fees Act 2019 explicitly bans a wide range of fees that were previously common in the rental market. Charging any of these banned fees can result in significant penalties for landlords and letting agents.

Admin Fees

This is one of the most widely banned categories. General administrative fees, such as those for setting up a tenancy, referencing, credit checks, or inventory reports, are now prohibited. These costs are considered part of the landlord’s overheads and are not permissible to pass on to the tenant.

Referencing and Credit Check Fees

Even if the landlord or agent performs these checks themselves, they cannot charge the tenant a fee for them. The costs associated with tenant vetting are for the landlord or agent to absorb.

Inventory Fees

Charges for compiling or checking an inventory report at the start or end of the tenancy are banned. This includes professional inventory services.

Check-in and Check-out Fees

Fees charged for the process of checking a tenant into or out of a property are also prohibited.

Viewings Fees

Landlords and agents cannot charge tenants for the cost of viewings or for showing them around the property.

Cleaning Fees (unless specified in tenancy agreement for professional cleaning at end of tenancy)

While general cleaning fees are banned, a specific clause can be included in the tenancy agreement requiring professional cleaning at the end of the tenancy. If this clause exists and the tenant fails to have the property professionally cleaned, the landlord can deduct the cost of this cleaning from the deposit.

Pet Fees

Charging tenants extra fees for having pets is now banned. However, landlords can still request a higher tenancy deposit if they agree to allow pets, provided it adheres to the overall deposit cap (five or six weeks’ rent).

Gardening Fees

Landlords cannot charge tenants for garden maintenance unless it is explicitly stated in the tenancy agreement that the tenant is responsible for specific gardening tasks, and failure to do so incurs a charge. This is rare and usually falls under general property upkeep.

Professional Cleaning Fees (if not agreed in tenancy)

As mentioned above, unless a clause for professional cleaning at the end of the tenancy is written into the tenancy agreement, this fee is banned.

Repairs and Maintenance Fees

Tenants are generally not responsible for the costs of routine repairs and maintenance. These are the landlord’s responsibility. Fees for general repairs or maintenance are therefore banned.

Fees for Guarantors

If a tenant requires a guarantor, any fees associated with the guarantor’s application or referencing are banned.

Fees for Ending a Tenancy Early (unless a landlord’s loss)

While a fee can be charged for early termination to cover the landlord’s actual losses, blanket fees for ending a tenancy early are banned.

Any other fee not explicitly listed as permitted

The legislation is clear: if a fee is not on the list of permitted payments, it is likely banned.

Consequences of Non-Compliance

Landlords and letting agents who fail to comply with the Tenant Fees Act 2019 can face significant penalties. Local trading standards authorities are responsible for enforcing the Act. They have the power to issue fines, which can be substantial:

• A first breach can result in a financial penalty of up to £5,000.
• A further breach within five years of the first breach can result in a financial penalty of up to £30,000, or prosecution.

In addition to fines, non-compliant landlords may also be required to repay any banned fees that have been unlawfully charged to tenants. Furthermore, if a landlord has charged banned fees, they may not be able to regain possession of their property through a Section 21 notice until the fees are repaid.

Key Takeaways for Landlords and Tenants

For landlords and letting agents, understanding and adhering to the Tenant Fees Act 2019 is paramount. This involves:

• Ensuring all tenancy agreements are compliant and only list permitted payments.
• Being transparent with tenants about all costs involved in renting a property.
• Keeping meticulous records of all payments received.
• Being aware of the caps on deposits and holding deposits.
• Familiarising yourselves with the detailed guidance published by the government.

For tenants, the Act provides greater protection and clarity:

• Know your rights regarding what you can and cannot be charged.
• If you believe you have been charged an unlawful fee, seek advice from a tenant’s union or local trading standards.
• Ensure your tenancy agreement clearly outlines all permitted payments.
• Keep copies of all payments made and any correspondence with your landlord or agent.

Table: Permitted vs. Banned Fees Summary

Conclusion

The Tenant Fees Act 2019 has undeniably reshaped the landscape of the UK private rental market, bringing much-needed transparency and fairness to tenant-landlord relationships. By clearly delineating between permitted payments and banned fees, the legislation aims to reduce the financial burden on tenants and ensure that only legitimate costs are passed on. Both landlords and tenants must remain informed about these regulations to ensure compliance and avoid potential legal and financial repercussions. Understanding the specifics of what can and cannot be charged is not just a matter of legal obligation but also of fostering a more equitable and trustworthy rental environment for all parties involved.