Say “Hello” to the ‘Tenant Fees Act 2019’, the shiny new legislation that swings into force on the 1st June 2019. It was given birth to ban and restrict letting agents and private landlords (in England) from charging tenants with certain fees, which includes charging referencing fees and oversized deposits.
While the legislation mostly throttles letting agents by the short n’ curlies, there’s no need for landlords to feel unmolested, because there’s also [potentially] plenty of reasons for us to cry to mummy about.
Alas, this one is important, so grab the bottle of the nearest poison to hand so we can run through this garbage…
Quick question: did you hear about the “Tenant Fees Act 2019” before now, even in its most vague form? ’cause according to this article on JustLandlords (don’t bother clicking the link, it’s not a particularly engaging or useful piece), there’s a “lack of awareness about the change”
So, is it true or a pile of rotten cobblers? Just curious!
Before you scamper off because you know it all…
Unlike with the last few legal updates I was, let’s say, ‘not absolutely dreading’ this Act after reading the early headlines and highlights, because on the surface the implications for landlords sounded minuscule and simple, which meant I’d have an easy time throwing this crap together and readying for publish. A lazy blogger’s dream! Yup, a totally self-serving victory that I cherished with all my heart.
If it’s at all humanly possible to piss one’s pants from excitement over a new landlord legislation – which it is unequivocally not – then this one would have resulted in a couple of nappy changes.
Unfortunately, the victory was nothing but a devastatingly disappointing figment of my wild imagination; regrettably, my pants are drier than a Nun’s…!
The deeper I buried my cranium into the finer details of the Act – which was approx 10 minutes before I planned on going to print – the quicker my heart started to sink and slip out of my ass like a greasy 12 inch saveloy, because it became apparent that there’s more to this monstrosity than I’d ever had hoped to imagine, and the mere few minutes I put aside to get the job done was comically too little. Not the first time I’ve heard that.
I’m definitely going to need something injected into my heart, and quite possibly, my ass, to get through this one.
My point is, there’s more to this act than a simple “tenant fee ban” that mostly applies to letting agents, so I must issue a word of warning for those that also threw the book in the bin after reading the headlines and thinking the story’s already been told. It hasn’t! So you may wish to stick around in case you accidentally learn something new.
If you happen to be a passer-by tenant on the wrong side of town, don’t fret! You’re in safe and tender hands. While this blog post is written for landlords by a landlord, you’ll still be able use the information to determine how the Act will [positively!] impact you.
Page contents:
Quick overview of what the ‘Tenant Fee Ban’ means (for landlords)…
The Act specifically stipulates what fees landlords and letting agents can impose on Tenants. If any fee incurred by the tenant is not permitted by the Act it will be deemed unlawful.
Tenancy deposits capped to five weeks’ worth of rent.
Holding deposits capped to one week’s rent, and must be returned (there are a few exemptions).
Only ONE holding deposit per property is permitted i.e. taking holding deposits from multiple applicants for the same property is not allowed.
Section 21 notices cannot be served until any unlawfully charged fees or any unlawfully retained holding deposits are fully returned.
Breaching the terms of the Act can lead to fines starting from £5,000.
Introduction to the ‘Tenant Fees Act 2019’
You can find the official details of the Legislation on the GOV website. As per, it’s not written for mere mortals or anyone that is limited to regular English.
Essentially, the Act defines what charges/fees a landlord or letting agent may require “in connection with a tenancy of housing in England.”
The starting point – actually, the primary principle – to understand is that ALL payments are prohibited unless the payment is expressly “permitted” under the Act. You can find a list of the “Permitted Payments” in Schedule 1 of the Legislation (I’ll go through them shortly in any case).
The Disclaimer & what you should expect from this blog post…
Okay, so onto the mandatory and crucial disclaimer, which I suspect many of you are already familiar with: I’m not even remotely qualified to provide legal advice, therefore nothing I say should be construed as such. You should always seek advice from an expert regarding any legal matters.
Anything I say on this matter – or any other legal matter – should be taken with a pinch of salt. If that. Taking my ramblings as anything else would be foolish. I still find farts of every variety funny, so let that be an indicator of what kind of mind you’re dealing with here.
What you should expect: since the unanticipated depth of the Tenant Act Fee 2019 nearly made me choke on my own saliva and keel over like a sack of donuts, I’m only going to cover the parts that I feel to be most relevant to me (as a private landlord in England), which in turn, I suspect will also be the most relevant to the average landlord (in England).
Ready? Let’s do this…
Who does the Tenant Fees Act apply to?
The Tenant fee ban applies to:
Assured shorthold tenancies in England
Tenancies of student accommodation (Student lettings) in England
Licences (lodger lettings) in England
“Prohibited Payments” (i.e. Fees landlords can’t charge tenants under the Tenant Fees Act)
I hope I’ve already made the message clear: you can’t charge tenants for anything other than the “Permitted Payments” listed further down the page.
So, that means a lot of the classics and golden oldies – which have contributed nicely to many beer funds over the years (not my own, mind you. My delicate palate seems to render beer in the same vein as horse urine) – are strictly prohibited:
Viewing Fees
Tenancy set-up fees
Inventory
Check-out fees
Professional end of tenancy cleaning (tenants will still be required to return the property in the state they received it in, and landlords can still recoup any repair costs from the deposit)
Referencing fees / Credit Check fees
Third-party fees (i.e. you can’t pull a fast-one and get a credit check company to directly communicate with the tenant on your behalf).
“Permitted Payments” (i.e. Fees landlords can charge tenants under the Tenant Fees Act)
The only payments you can charge in connection with a tenancy are:
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.
So, for example, if the rent is £580pcm, the calculation to determine the max deposit of five weeks is:
580 (rent pcm) x 12 (months) = £6960 6960 (annual rent) / 52 (weeks) = £133.84 133.84 (weekly rent) x 5 (maximum weeks) = £669.23
Please note, the calculation is an example based on a one year tenancy and for demonstration purposes only. You should seek guidance from the deposit scheme you secure your deposit with to assist in calculating the maximum amount you can charge.
Couple of critical noteworthy points to chew on here:
There are no exceptions for taking a larger deposit for tenants with pets. I suspect this will have a significant impact, and it will make it even more unbearable than it already is for tenants with furry companions to find rental accommodation.
Horrendous decision!
If you’ve taken a deposit that exceeds five weeks’ rent for a tenancy that started before the 1st June 2019, then you are not obliged to refund the excess (as this payment was not made after the cap came into force). However, you will be required to refund the deposit at the end of the tenancy in the usual way and any new tenancy agreed after this will need to comply with the new tenancy deposit cap.
From my understanding, if the tenancy is periodic or rolls into one, the landlord is not obligated to refund any of the excess.
To make life easier, the Deposit Protection Scheme (DPS) are now offering a facility to calculate the amount of deposit that should be returned to a tenant if a tenancy with the same tenant is renewed where a cap has been exceeded. I suspect the other two schemes will follow suit shortly (if they haven’t done so already). Either way, you should seek guidance from your deposit scheme on the best way to return any money to comply with the new legislation.
I’ve personally taken six weeks’ deposit for all my tenancies, so fuck my life! Urgh, just one week shy! ONE WEEK, you lousy son of a bitches!!!!
A refundable holding deposit (to reserve a property) capped at no more than one week’s rent.
Only ONE holding deposit is permitted per property; if you accept more than one holding deposit for the same housing from different applicants, you will be in breach of the Tenant Fees Act. The holding deposit must be returned to the tenant either in payment back to the tenant, or put towards the first rental payment, or the security deposit. However, there are some exceptions which allow the landlord to keep the holding deposit:
The tenant withdraws
The tenant doesn’t take all reasonable steps to enter the tenancy
The tenant fails a right to rent (immigration) check
The tenant provides misleading information which materially affects their suitability to rent the property
Landlords will only be able to hold the holding deposit for 15 days unless an alternative ‘deadline’ date is agreed in writing. After the deadline, the holding deposit must be repaid within 7 days.
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 (and if agreed by the landlord).
Generally, the costs charged for early termination must not exceed the loss incurred by the landlord (usually the loss in rent resulting from a tenant’s decision to leave and/or the costs of re-advertising or referencing).
Payments in respect of utilities, communication services, TV licence and council tax.
A default fee for late payment of rent and replacement of a lost key/security device, where required under a tenancy agreement.
The default fee for late payment of rent can be charged where the rent payment has been outstanding for 14 days or more (from the date set out in the tenancy agreement). Any fee charged must be no more than 3% above the Bank of England’s base rate for each day that the payment has been outstanding.
I must confess, I’m not actually sure how to calculate the late payment fees (even with the guidance provided), but I’ve been told that it actually works out to pennies, so it’s almost pointless applying the penalty in the first place. I’ve always considered late payment penalties pointless anyways. In any case, if anyone is smart enough to provide a real example of how to do the maths (using simple figures), please leave a comment! It would be super appreciated.
Please! Please! Please! Let’s not get into the “what about this fee” and “what about that fee” tango! If it’s not listed above, then it is *almost* certainly a prohibited payment so you should not charge your tenants for it, or continue trying to charge for it via stealth strategies. For example, if your playful and unimaginative little mind is thinking about contractually charging a higher than normal rent for month one in order to recoup any losses, you’re bang out of luck, because they’ve plugged that anticipated dirty, gaping hole:
if the amount of rent payable in respect of any relevant period (“P1”) is more than the amount of rent payable in respect of any later relevant period (“P2”), the additional amount payable in respect of P1 is a prohibited payment.
As referenced earlier in this post, you’re very, very, very welcome to read the full details of the ‘Permitted Payments’ in Schedule 1. However, I accept no responsibility for the consequences of that tedious journey.
When does the Tenant Fee Ban start?
The ban is being introduced in two delightful stages:
Tenancies that start on or after 1st June 2019: if you enter into a tenancy agreement, student let or licence to occupy housing in the private rented sector, you will be prohibited from charging any fees or other payments that are not included in the list of permitted payments.
Where a tenancy agreement was entered into before 1st June 2019, you will still be able to charge fees until 31st May 2020, but only where these are required under an existing tenancy agreement. This might include, for example, fees to renew a fixed-term agreement where a tenant had already agreed to pay these.
From 1st June 2020: the ban on fees will apply to all applicable tenancies and licences to occupy housing in the private rented sector. You will not be able to charge any fees after this date (other than those permitted by the Act), even if they are mentioned and agreed upon with in the tenancy agreement.
Penalties for not complying
Financial penalties: a breach of the legislation will usually be a civil offence with a financial penalty of up to £5,000, but if a further breach is committed within 5 years of the imposition of a financial penalty or conviction for a previous breach this will be a criminal offence. The penalty for the criminal offence, which is a banning order offence under the Housing and Planning Act 2016, is an unlimited fine.
Where an offence is committed, local authorities may impose a financial penalty of up to £30,000 as an alternative to prosecution.
Section 21: you cannot evict a tenant using the section 21 eviction procedure until you have repaid any unlawfully charged fees or returned an unlawfully retained holding deposit.
Meanwhile, all the other rules around the application of the section 21 will apply as normal.
On a side note, Section 21 notices for England have been updated to reflect the Tenant Fee Act – so going forward you should be using the latest version which includes a section mentioning it.
You’ll still have the Tenancy Deposit at your disposal
Just to clarify, and to bore you further to death, the Tenant Fee Act does NOT affect the landlords right to recoup any legitimate costs via the tenancy deposit. For example, costs to cover any damages and repairs.
I spotted a landlord having a hissy-fit on a forum a few weeks ago, about how deposits will become futile once the Act gets introduced.
I don’t know what she was drinking, but I want IN!
How will the ‘Tenant Fees Act 2019’ impact the average landlord?
Good question. Now you’re thinking like a winner!
1) Updating Tenancy Agreements
I’ve said it before and I’ll gladly say it again: the problem with most circulating tenancy agreements is that they are riddled with horseshit clauses and penalties (most of which aren’t even legally enforceable), which are often the amalgamation of several Frankenstein contracts being squashed together. They’ll certainly be even more toxic after 1st of June 2019.
Needless to say, now would be a splendid time to scour through your tenancy agreement and Where’s-Wally any potentially prohibited charges, and then get them scrubbed off the paperwork in preparation for when it’s required next. Or, if it’s a total eyesore, scrap your version altogether and source a clean version from a reputable outlet.
I’d be amiss if I didn’t say that the tenancy agreements available from my little website have never contained any clauses that impede on the requirements of the Tenant Fees Act (Oh, here you go, use this 30% discount code during checkout: TENANTFEEBAN). I know, shameless plug. I apologise for NOTHING!
‘Permitted Payments’ in Tenancy Agreements
Your Tenancy Agreement can set out the details of which a tenant is liable for a ‘default fee’ and how the fee will be determined.
The ‘default fee’ specifically refers to any costs associated to late payment of rent and replacement of a lost key/security device (if necessary, refer back to point number 7 from the list of ‘Permitted Payments’ to recap on the details).
If a tenancy agreement does not permit you to charge default fees (i.e. the charges aren’t mentioned), you may still be able to recover damages by claiming against the tenancy deposit at the end of the tenancy.
For those starting new tenancies after 1st June 2019
You should ensure your tenancy agreement doesn’t include any clauses that may attempt to extract any prohibited charges from your tenants. But even if it does – and the tenant signs the contract – any prohibited charges enforced will be unlawful and therefore could lead to prosecution.
For those tenancy agreements that started before 1st of June 2019
If your current tenancy agreement in circulation is plagued with clauses/charges that won’t be legally obtainable from the 1st of June 2019, you’ll be fine, because you will still be able to charge those fees until 31 May 2020 (assuming the fees are legitimate and fair). This might include, for example, fees to renew a fixed-term agreement (which, of course, has been agreed to by the tenant).
From June 1st 2020, however, the fees will no longer be chargeable, other than those permitted by the Tenant Fee Ban Act, so I’d personally update the tenancy agreement at the most suitable time in order to avoid any confusion.
2) If you’re a self-managing landlord…
I’m reluctant to believe that the introduction of the Act will have any critical impact on landlords in this camp, unless you’ve been getting away with – and relying on – charging tenants with excessive fees for God knows what.
If you’re self-managing and your ship does get rocked as a result of the Act, I’m going to go out on a limb and say you’re most likely doing something you shouldn’t be anyways.
From a personal standpoint, the Act won’t make any difference to me, and if it does, it’s so marginal that I can’t even think of any to mention. Historically, I have never passed on any of the ‘Prohibited payments’ onto my tenants, which from my perspective, is generally the bog-standard way when you’re self-managing. Correct me if I’m wrong, please!
The last time I required letting services, I used OpenRent to find tenants, which cost £29 for their marketing services, and I paid an additional £20 for their tenant referencing service. I undertook the viewings and inventory by my lonesome. It was all, as they say, a piece of piss!
Oh, but perhaps something worth pointing out is that after the 1st of June, many of the online agents *may* increase the base price of their tenant-find services, because while it’s not always clearly disclosed to landlords, many of the agents charge tenants a admin/referencing fee. A hefty one at that (at least, it’s usually relatively hefty compared to the cost of actual letting service you’re paying for).
However, if that does happen, it really shouldn’t inflict any serious pain, because you’re paying pennies for the service in the first place. So what’s a couple more pennies?
3) If you’re using High-street letting agents…
I remember vividly when the “Tenant Fees Act 2019” received the green light – the clear indicator was my Twitter feed lighting up like a Christmas Donkey – by teary eyed letting agents, all wondering how they were going to put food on the table after the Government had confirmed the date for slaughtering one of their most lucrative [and criminal *clears throat*] cash-cows.
Once the ban kicks in, Letting Agents (and landlords) will be forbidden to continue charging tenants with the majority of the shit they have been charging them with. For example, that means the days of letting agents charging tenants with Tenancy Renewal Fees, which is mostly an eye-watering fee for basically photocopying one of their Frankenstein tenancy agreements, will thankfully be a steaming turd of the past. It certainly wasn’t a bad little earner for anyone that didn’t mind charging people for doing sweet F-all.
They’ll certainly be no sympathy from me.
Of course, there’s no mystery and there never was: we all know how our beloved high-street agents’ bellies will remain satisfied, and so did they from the moment the news broke out.
If we Landlords don’t find the decaying residue of the slaughtered cash-cow worming its way onto our bill, I will literally eat the old girl’s udder. Every last square inch of it!
To be honest, I can’t even blame letting agents for doing it. It seems like the most logical solution, other than innovating, re-budgeting, focusing on improving service, and being content with the buttload they generate from their monthly retainers.
Gosh, can I acquire the assistance of a couple of lucky volunteers to fan me down with their flapping testicles and boobies, because I’m tired from just thinking about how much work that would all require? It’s obviously easier just to divert the costs onto the landlord.
So, if you find your high-street agent’s fees rocketing in the near future, the introduction of the Tenant Fee Act will most likely be the catalyst. So perhaps it’s a superb time to get on the Online Letting Agent hype if you’re not already strapped in.
4) Increasing rent…
One of the biggest concerns about introducing this Act is the probable risk of it causing a rise in rent rates, ultimately making the whole exercise pointless and even detrimental to the intended cause. Oh, the irony.
I can only assume that some landlords will be directly hit in the pockets after this Act rolls out (for whatever reason), so I fear the knee-jerk reaction will be to look for the quickest and easiest remedy, and no doubt increasing rent will be the solution calling the loudest.
I personally don’t think that would be the right course of action, but obviously I can’t stop anyone from doing it, especially those that are already barely surviving.
It wasn’t intentional, but I haven’t actually made it clear that I’m all in favour of the Tenant Fees Act, because I believe tenants have been paying a premium to simply ‘buy’ a product, and that seems bonkers to me.
I don’t consider this as tenants getting a break, I see it as tenants finally getting justice, so to hit them from a different angle, only to push them back into a position where they shouldn’t have been in the first place leaves a rotten smell in my pants.
I truly hope this outcome is avoided.
To all the decent tenants out there: I’m with you! Solidarity! *fist bump*
5) Returning portions of the tenancy deposit that exceed the cap
So, the tenancy deposit will be capped to 5 weeks’ worth of rent, so that means I’ll eventually need to return a portion of my deposits’ that exceed the cap if any of my tenancies are renewed [with existing tenants]. I imagine I’m not the only sorry soul in this undesirable situation; there must be plenty of pet-friendly landlords lumbered into this mess, along with non pet-friendly landlords that simply don’t feel fulfilled with anything less than a six week deposit.
To clarify, according to the Gov guide:
You do not need to return any amount of tenancy deposit that is over the cap for tenancy agreements that were entered into before the Tenant Fees Act came into force.
Basically, if you took a deposit that exceeds the cap BEFORE the 1st June 2019 and you don’t renew the tenancy, you don’t need to return the excess amount until the tenancy terminates.
Either way, and as said, I recommend getting in touch with your deposit scheme provider sooner rather than later to determine the best course of action to remain on the right side of the law. They should all have already released some helpful guidelines on their respective websites.
Resources for more information
Tenant Fees Act 2019: Guidance for landlords and agents – this guide provided by GOV.uk is by far the best resource I have encountered, and it’s where I gathered the vast majority of my information. It’s easy to understand, it covers everything in detail, and it also runs through a whole heap of practical Q&As.
If you’re eager to read more on the Act (Lord only knows why that would be the case), then make that your go-to resource!
The official Tenant Fees Act 2019 Legislation – the law in all its full glory. It’s a genuine stiffy-killer. ZzzzzzZZzzzZZZZ!
… DONE!!
Believe me when I tell you that this was far more painful for me than it was for you. So I don’t want to hear of any shitty complaints or smart-ass remarks about lapsing into a comma or twenty while trying to divulge this blog post.
So, anyways, after reading all of that, what are your thoughts?
Lastly, to reconnect with my “Quick question” earlier on; if you did know about the Tenant Fee Ban already, did you do the unthinkable and just learn something new? If not, whooooopsie! Let’s *hug* it out.
Love & Peace all xoxo
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