‘Fees Fees, tell me more’ – New Tenant Fees Act
By Geoff Davies, Housing Advice Specialist, Citizens Advice Staffordshire North and Stoke on Trent
The new Tenant Fees Act comes into force on the 1st June capping the amount that renters can be charged for a deposit and banning letting fees altogether as part of the Government’s bid to reduce hidden costs for tenants.
The Government expects to save tenants across England at least £240 million a year through the changes.
The new act applies to new tenancies, including replacement tenancies entered into on or after the 1st June 2019. It will then apply to other existing tenancies from the 1st June 2020.
If a tenant entered into a tenancy before 1 June 2019, a landlord or agent will still be able to charge fees up until 31 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.
The ban applies to all assured shorthold tenancies, tenancies of student accommodation and licences to occupy housing in the private rented sector in England. Most tenancies in the private rented sector are assured shorthold tenancies
Under the new legislation the only payments in connection with a tenancy that a tenant can be asked to make are:
- the rent
- a refundable tenancy deposit capped at no more than five weeks’ rent where the total annual rent is less than £50,000 ( or six weeks’ rent where your total annual rent is £50,000 or above)
- a refundable holding deposit capped at no more than one week’s rent
- 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
- payments in respect of utilities, communication services, TV licence and council tax; and
- A default fee for late payment of rent and replacement of a lost key/security device giving access to the housing, where required under a tenancy agreement.
The following payments are prohibited by the new act;
- Viewing fees
- Tenancy set-up fees such as credit checks, referencing, guarantor fees.
- Inventory check
- Tenancy check out fees.
- Services provided by a third party.
Crucially, if a prohibited payment or a holding fee is taken a landlord will have to return the prohibited amounts which have been taken or unlawfully retained before being able to serve a valid 21 notice.
Redress and Enforcement
Enforcement will be through Trading Standards. A landlord or agent will be liable for financial penalty of up to £5,000 for an initial breach of the ban. If they breach the ban again, they will be liable for a financial penalty of up to £30,000 or prosecution.
Tenants can also apply to the First-tier Tribunal to recover unlawfully charged fees. If the issues relates to a letting agent tenants can also apply to the relevant redress scheme. According to the Consumer Rights Act 2015, every letting agent must belong to a Government-approved redress scheme.
Other Relevant Legislation
The Consumer Rights Act 2015 prohibits agents and those landlords that are considered traders from including unfair terms in their agreements. A term is unfair if it creates a substantial imbalance in the rights and obligations between a ‘trader’ and a ‘consumer’, contrary to the requirements of good faith, to the detriment of the consumer. An unfair term in a tenancy agreement is one that creates such an imbalance between a landlord and a tenant, to the tenant’s detriment. This would prohibit such landlords from requiring a tenant who fails to fulfil their obligations under their tenancy agreement to pay a disproportionately high sum in compensation.
Whilst the Act is to be welcomed against the backdrop of the current housing shortage and the need for tenants to be treated fairly, it will be interesting to see to what level the Act is enforced given the pressures on cash strapped trading standards departments. It will also be interesting to check to see if landlords and agents try to pass on charges by other means such as increasing rents.