What Are Tenant Fees? Which Fees Can Landlords Legally Charge?
Navigating the rental market can be a complex process, especially when it comes to understanding the financial obligations involved. For tenants, a significant part of this understanding revolves around tenant fees. These are charges that landlords or letting agents may ask tenants to pay. However, the landscape of tenant fees has undergone significant changes in recent years, with legislation aimed at protecting tenants from excessive or unfair charges. This article aims to provide a comprehensive overview of what tenant fees are and, crucially, which fees landlords can legally charge in the UK. For those searching “What Are Tenant Fees? Which Fees Can Landlords Legally Charge?”, this guide will demystify the subject.
Understanding the Tenant Fees Act 2019
The most significant piece of legislation governing tenant fees in England is the Tenant Fees Act 2019. This act came into effect on June 1, 2019, and it has fundamentally changed what landlords and letting agents can charge tenants when renting a property. The primary aim of the act is to ban most upfront fees, making renting more affordable and transparent for tenants.
Before the Tenant Fees Act, it was common for tenants to face a wide array of fees, often amounting to hundreds or even thousands of pounds, before they could even move into a property. These could include application fees, referencing fees, check-in fees, and more. The Act sought to put an end to these practices by prohibiting all but a few specific types of payments.
It’s important to note that the Tenant Fees Act 2019 applies to assured shorthold tenancies, student domestic tenancies, and licenses to occupy. It does not apply to lodgers who live with their landlord or to commercial tenancies. For Scotland and Wales, separate legislation exists, and while the principles are similar, specific details may differ.
What Are Tenant Fees?
Tenant fees are payments that a tenant might be asked to make to a landlord or letting agent in connection with their tenancy. These fees can be broadly categorized into two groups: prohibited fees and permitted fees.
Prohibited Fees
The Tenant Fees Act 2019 bans a wide range of fees that landlords and letting agents can no longer charge tenants. These prohibited fees are those that were commonly charged before the act and were deemed unfair or excessive. Some of the most common prohibited fees include:
- Application fees (also known as referencing fees or admin fees)
- Referencing fees for credit checks, immigration status, or financial checks
- Inventory fees
- Check-in fees
- Check-out fees
- Fees for providing a reference to a new landlord
- Marketing fees or letting agent fees
- Fees for viewings
- Fees for drawing up or renewing a tenancy agreement
- Fees for gardening, cleaning, or decorating services unless specified in the tenancy agreement as part of the rent
- Fees for energy performance certificates (EPCs) or gas safety certificates
If a landlord or letting agent tries to charge any of these prohibited fees, they are acting unlawfully. Tenants are not obligated to pay them, and in some cases, they may be able to reclaim fees paid unlawfully.
Permitted Fees
While the Tenant Fees Act 2019 has banned most fees, it does permit landlords and letting agents to charge for certain things. These permitted payments are those considered reasonable and directly related to the landlord’s costs or the tenant’s actions. The permitted fees are:
- Rent
- A refundable tenancy deposit
- A refundable holding deposit
- Payments for variations to the tenancy requested by the tenant
- Payments for early termination of the tenancy requested by the tenant
- Payments for utilities, communication services, TV license, and council tax
- Default fees for late payment of rent
- Default fees for losing keys or other security devices
It’s crucial for tenants to understand the distinction between prohibited and permitted fees to ensure they are not being overcharged.
Which Fees Can Landlords Legally Charge? A Detailed Look
Let’s delve deeper into the fees that landlords are legally allowed to charge under the Tenant Fees Act 2019.
Rent
This is the most obvious and fundamental payment. Rent is the agreed-upon amount paid by the tenant to the landlord for the use of the property. The Tenant Fees Act does not restrict the amount of rent that can be charged, but it does regulate how and when rent can be increased.
Refundable Tenancy Deposit
A tenancy deposit is a sum of money paid by the tenant at the start of the tenancy, which the landlord can use to cover any damages to the property (beyond normal wear and tear) or unpaid rent at the end of the tenancy. The Tenant Fees Act limits the amount that can be charged for a tenancy deposit.
Deposit Cap
For tenancies where the annual rent is less than £50,000, the maximum tenancy deposit a landlord can charge is equivalent to five weeks’ rent. If the annual rent is £50,000 or more, the maximum deposit is equivalent to six weeks’ rent. This cap ensures that tenants are not required to pay exorbitant amounts as a security deposit.
Crucially, tenancy deposits must be protected in a government-approved tenancy deposit scheme within 30 days of the landlord receiving it. Tenants should be provided with details of the scheme and how their deposit is protected.
Refundable Holding Deposit
A holding deposit is a small sum of money paid by a prospective tenant to reserve a property while their application is being processed and references are being checked. The Tenant Fees Act places strict limits on holding deposits.
Holding Deposit Cap
The maximum amount a landlord or agent can charge for a holding deposit is one week’s rent. Once a holding deposit is paid, the landlord has 15 days to decide whether to proceed with the tenancy. If the landlord decides to proceed, the holding deposit must either be returned to the tenant within seven days or credited towards the first rent payment or tenancy deposit.
There are specific circumstances under which a landlord can legitimately retain a holding deposit:
- If the tenant provides false or misleading information in their application that the landlord relied upon.
- If the tenant fails a right-to-rent check.
- If the tenant withdraws from the tenancy before the end of the referencing period.
- If the tenant fails to take reasonable steps to enter into the tenancy agreement after expressing their intention to do so.
In all other cases, the holding deposit must be returned.
Payments for Variations to the Tenancy Requested by the Tenant
If a tenant requests a change to the terms of their tenancy agreement after it has been signed, the landlord can charge a reasonable fee to cover their administrative costs. This could include things like adding a new tenant to the agreement or changing the terms of the lease. The fee must be capped at £50, unless the landlord can demonstrate that their reasonable costs exceed this amount, in which case they can charge more.
Payments for Early Termination of the Tenancy Requested by the Tenant
If a tenant wishes to leave their tenancy before the end of the agreed term, they may be able to negotiate an early termination with their landlord. In such cases, the landlord can charge a fee to cover their losses, which may include the cost of re-advertising the property and finding a new tenant. The fee should be proportionate to the landlord’s actual losses and cannot exceed the amount of rent the tenant would have paid for the remainder of the contract term.
Payments for Utilities, Communication Services, TV License, and Council Tax
Tenants are generally responsible for paying for utilities such as gas, electricity, water, and council tax. They are also responsible for arranging and paying for communication services like internet and phone, as well as obtaining a TV license if required. These are not considered tenant fees in the same way as the other charges but are obligations of the tenant as part of occupying the property.
However, if a tenancy agreement includes these services as part of the rent, then the landlord cannot charge an additional fee for them. The Tenant Fees Act also clarifies that landlords cannot charge tenants for services that are not explicitly included in the tenancy agreement.
Default Fees for Late Payment of Rent
If a tenant pays their rent late, landlords can charge a fee, but this is subject to strict conditions. The fee can only be charged if the rent is more than 14 days overdue. The charge must be a reasonable reflection of the landlord’s costs and is capped at 3% above the Bank of England base rate for each day the rent is outstanding.
It’s important that the tenancy agreement clearly states when late payment fees will be applied and at what rate.
Default Fees for Losing Keys or Other Security Devices
If a tenant loses keys or other security devices provided by the landlord, the landlord can charge a reasonable fee to cover the cost of replacing them. This fee should reflect the actual cost of the replacement keys or devices and not be an arbitrary charge.
What About Other Situations?
The Tenant Fees Act 2019 primarily applies to England. Scotland and Wales have their own legislation regarding tenant fees.
Scotland
In Scotland, the Letting Agent Code of Practice and the Private Tenancies (Scotland) Act 2016 govern tenant fees. Letting agents are prohibited from charging tenants for services like referencing, inventory checks, and contract preparation. Similar to England, deposits are regulated and must be protected.
Wales
In Wales, the Renting Homes (Fees etc.) (Wales) Act 2019 came into force on September 1, 2019, and it also bans most letting fees for tenants. The types of fees banned are very similar to those in England, including referencing, administration, and inventory fees. Landlords can only charge for rent, deposits, holding deposits, and certain other specific items.
What if a Landlord Charges Prohibited Fees?
If a landlord or letting agent attempts to charge a tenant for a prohibited fee, they are acting unlawfully. Tenants have several options:
- Refuse to pay: Tenants are not legally obliged to pay prohibited fees.
- Seek advice: Tenants can contact their local council’s trading standards department, Shelter, or Citizens Advice for guidance.
- Report the landlord/agent: Local trading standards departments can take enforcement action against landlords or agents who charge prohibited fees. This can include fines.
- Claim a refund: If a tenant has already paid a prohibited fee, they may be able to reclaim it through the First-tier Tribunal (Property Chamber) if the landlord refuses to return it.
Conclusion
The Tenant Fees Act 2019 has significantly reformed the rental market by banning most upfront fees for tenants in England. Understanding what constitutes a permitted fee is essential for both tenants and landlords. While rent, refundable deposits, and holding deposits remain key financial components of renting, landlords can now only legally charge for a limited range of other items, such as reasonable costs for contract variations or early termination requested by the tenant, late rent payments (after 14 days), and replacement keys. Tenants should be vigilant and aware of their rights, and if they encounter any attempts to charge prohibited fees, they should seek advice and take appropriate action. This clarity ensures a fairer and more transparent renting experience for all parties involved.
