The tenant fee ban - what landlords need to know
What is the Tenant Fee Ban?
The Tenant Fees Act, put in force from 1st June 2019, means that charging tenants most letting fees is banned. The aim is to provide pricing clarity for tenants, with no hidden fees. The Act will affect landlords in the private rental sector, student accommodation and assured shorthold tenancies in England.
What do landlords need to know about the Act?
The Tenant Fees Act goes further than just banning letting fees. It has also brought in caps for tenancy deposits. Rental agreements affected are all those signed on or after 1st June 2019.
What fees can a landlord charge?
The Act has clarified what a landlord can charge. Any payments not defined below are now known as a prohibited payment and are illegal.
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A landlord can charge rent. There is no minimum or maximum set, although it should be priced competitively for the market. Landlords are also banned from charging more at the start of the rental period than later. For example, a landlord cannot require a rental payment for £600 for the first month and £500 for each month thereafter – the excess £100 in the first month is a prohibited payment.
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A refundable deposit can be charged, but this is now capped at 5 weeks for annual rent under £50,000 and 6 weeks for annual rent over £50,000. This deposit must still be held in a government-backed tenancy deposit scheme within 30 days, as before. If a tenant provides misleading or untruthful information that leads the landlord to not accept the tenants or if they fail the referencing checks, then in these cases, the landlord or agent can keep the holding deposit.
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A holding deposit, a deposit requested in order to hold the property prior to signing a tenancy agreement, can still be required but is now capped at 1 week’s rent. The holding deposit should be refundable on signing the tenancy agreement or can be worked into the rental payments. Landlords can only hold one deposit per property at any given time.
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Termination fees can be charged, but only if the rental termination is instigated by the tenant - not by the landlord. If a landlord wishes to terminate a contract, no termination fee can be charged to the tenants.
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Changing a tenancy agreement - landlords can charge tenants up to £50 as a fee for changing the tenancy agreement in certain situations – for example, to allow a tenant to keep a pet.
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Landlords can charge additional fees to the tenants for utilities like electric and gas, for phone lines and WiFi, for a TV licence and council tax. Often, these are paid by the tenant anyway, but building it into the rental agreement is still allowable. Be aware that legislation exists prohibiting overcharging for these types of charges.
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A fee for late payment of rent (more than 14 days overdue) or for the replacement of a lost key is also allowable.
Should any prohibited payments have been charged, including unlawful fees or an unlawful deposit, the landlord must repay these before evicting a tenant.
Make sure to stay on the right side of the law and consult your letting agent for further information.