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Tenant Fees Bill receives Royal Assent

On 12 February 2019, the Tenant Fees Bill 2017-19 received Royal Assent and became the Tenant Fees Act 2019. The Act will come into force on 1 June 2019 for new and renewal leases and Read more...

Gregory Palos

Senior Director

  • Secured Lending & Banking
  • Property Finance
  • Bridging Finance
  • Property Portfolio Management

On 12 February 2019, the Tenant Fees Bill 2017-19 received Royal Assent and became the Tenant Fees Act 2019. The Act will come into force on 1 June 2019 for new and renewal leases and licences (excluding periodic tenancies), and from 1 June 2020 will apply to all existing leases and licences.

The Act was passed to restrict the ability of landlords and letting agents to charge certain fees to tenants, and prospective tenants, of assured shorthold tenancies and student accommodation in England – though it excludes social housing and long leases. The Act additionally applies to residential licences, with a few limited exceptions.

The main terms of the act are as follows:

  • For security deposits, if the annual rent is less than £50,000, the deposit cannot exceed five weeks’ rent
  • If the annual rent is £50,000 or more, the cap will be six weeks’ rent
  • Landlords may not set a rent at a higher level for the first part of the tenancy and then reduce it later, in an attempt to recoup costs indirectly
  • Holding deposits must not exceed one week’s rent and must (except in limited circumstances) be fully repaid
  • Other permitted charges (aside from rent) are limited to: payments for loss of keys and late payment of rent; variation, assignment or novation of tenancies; early termination by the tenant; council tax, utilities, TV licences and communication services
    • In some cases there are restrictions on the amounts of these permitted charges, but they are mainly limited to the reasonable costs incurred by the landlord or letting agent

Terms which breach these provisions will not bind the tenant or licencee, and may see the offending party incur a fine of up to £5,000. Furthermore, if a second breach is committed within five years, a criminal offence is committed and a fine and banning order may be imposed, although the enforcing authority may alternatively impose a civil penalty of up to £30,000. Under the Act, tenants and licencees are enabled to recover money wrongly paid, and landlords will be unable to serve section 21 notices to terminate tenancies whilst holding prohibited payments. The provisions of the act will be encorced by trading standards authorities (TSAs) and district councils, with TSAs gaining the responsibility to enforce mandatory client money protection scheme membership for letting agents. The Act also extends the duties of letting agents to online property portals.

With the latest English Housing Survey finding that a fifth of the UK population now lives in privately rented accommodation, double the number 20 years before, legislation in this sector is an increasingly hot button issue: in fact, London mayor Sadiq Khan is expected to form his 2020 re-election campaign on wide-ranging rent control. The news of the Tenant Fees Act’s Royal Assent was warmly welcomed by its proponents, who estimate the Act will save tenants £240 million a year. The UK government intends to publish guidance on the Act shortly.

If you would like to discuss any of the topics raised in the above article, please call us on +44 (0)20 7936 8888, email on enquiries@lawstep.co.uk or contact a member of the team below.

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