Tenant Fee Ban and Reduced Deposits
What are the Tenant Fees Act and the Deposit Cap?
The Tenant Fees Act restricts what money agents and landlords can ask tenants to pay in addition to rent. Certain fees and charges are ‘permitted payments’. Everything else is a ‘prohibited payment’.
As part of the incoming legislation, the level of deposit landlords and letting agents in England can collect from tenants will be capped at the equivalent of five weeks’ rent for tenancies where the annual rent is up to £50,000. For those tenancies where the annual rent exceeds £50,000, the deposit will be capped at the equivalent of six weeks’ rent.
When does the Tenant Fees Ban and Deposit Cap apply?
The Tenant Fees Act, and Deposit Cap outlined within this legislation, comes into force on 1 June 2019. It will apply to:
- Agents and landlords in England
- New Assured Shorthold Tenancies (ASTs) and renewed tenancies (excluding statutory periodic tenancies for a period of 12 months) that arise after the legislation comes into force.
What does this mean for existing tenancy agreements?
If a tenancy agreement began before 1 June 2019, agents and landlords can continue to charge tenants fees written into that agreement (e.g. check-out or renewal fees) until 31 May 2020. From 1 June 2020 onwards, the tenancy term requiring that payment will become null and void.
Should a tenant make such a payment, it must be returned within 28 days. Failing this, agents and landlords will be treated for the purposes of the Act as having required the tenant to make a prohibited payment.
What are the penalties for taking a prohibited payment?
Trading Standards can order an agent or landlord to repay a prohibited payment to a tenant, together with interest. They can also impose a financial penalty of up to £5,000 for each breach of the legislation. Repeated breaches are a criminal offence which can lead to unlimited fines and/or banning orders.
A Section 21 notice seeking possession of a property let on an Assured Shorthold Tenancy cannot be used until any prohibited payments have been returned to the tenant.
How does the legislation affect tenancy deposits?
The legislation does not affect agents or landlords from taking tenancy deposits; they are a permitted payment. Deposits for ASTs still need to be protected in a government-approved tenancy deposit protection scheme.
There is no requirement to refund deposit amounts exceeding the applicable five or six eek limit where a fixed-term agreement entered into before 1 June 2019 becomes a statutory periodic tenancy.
Where a tenant renews their tenancy by signing a new fixed-term agreement on or after 1 June 2019, any amount of their existing deposit which exceeds the applicable five or six week limit for the new tenancy must be refunded.