The Tenant Fees Act 2019 - What has changed?
This is an article I wrote for a different site back in 2019 about the (then) new Tenant Fees Act 2019. I hope this is of some use to those that are browsing this site.
As many have no doubt heard, as of June 2019, many fees charged by letting agents or landlords will become illegal.
But what does this actually mean? What are the new rules that all tenants and landlord should be aware of?
This article attempts to summarises the key points but is not a definitive guide to the complexities the new rules raise.
Who do the new rules apply to?
From the 1st June 2019 the new rules will apply to all new Assured Shorthold Tenancies, student lets and licensees. This includes lodgers.
There is a transitionary period until 31st May 2020 where the new rules will not apply to tenancies created prior to 1st June 2019, or those that became statutory periodic tenancies after a fixed term after 1st June 2019.
As of the 1st June 2020 the rules, broadly speaking, shall apply to all agreements.
The Prohibited Payments
In short, the Act prohibits all payments made by a tenant to a landlord or letting agent unless the Act specifically permits them (the “permitted payments”).
The permitted payments are found in section 3(1) Tenant Fees Act 2019 and are:
Rent;
Tenancy Deposits (subject to new caps);
Holding Deposits (subject to new caps);
Fees for variation, assignment or novation of the tenancy (subject to new caps);
Payment on early termination of the tenancy;
Council tax;
Utilities;
TV licence; and
Payments for landline phones, internet and cable and satellite TV.
Any payments that are not one of the above are no longer permitted.
The Caps
The caps are calculated with reference to weekly rent, i.e. dividing the annual rent by 52 and multiplying by the appropriate figure.
Deposits will now be capped at five weeks rent for annual rents of under £50,000 and six weeks rent for annual rents above £50,000.
A Holding Deposit shall now be capped at one weeks rent. There are now strict rules regarding how, and when, a holding deposit should not be returned to the Tenant but this is beyond the scope of this summary.
It also should be noted that there are complex rules on how rents may be increased in order to avoid landlords simply charging higher rent in the first month to effectively charge fees. Such a practice is now prohibited, subject to some caveats.
Interest rates
Of particular note to many landlords is the new limit on interest for unpaid rent. This shall now be capped at 3% above the base rate of the Bank of England.
This is a significant reduction to the usual interest contained in most AST agreements.
Penalties for Non-Compliance
Landlords and agents who do not comply with these new regulations risk both civil claims against them and criminal prosecution.
The tenant shall be entitled to repayment of all prohibited sums in the course of their tenancy.
The appropriate authority to order repayment is usually the local authority Trading Standards. The fines vary from up to £5,000 to £30,000 depending on the nature of the offence committed.
There is a new criminal offence of committing a further breach within five years of having had a financial penalty imposed, or previous conviction. This carries the penalty of a Banning Order under Housing and Planning Act 2016 and an unlimited fine.
The interplay between the repayments, fines and criminal offences is legally complex but it is sufficient for this article to say that landlords and agents risk significant penalties for non-compliance.
Effect on s21 Eviction
As with the rules on deposit protection, a failure to comply with these new rules mean that a s21 notice cannot be served on a tenant until all prohibited sums are repaid.
As has been seen with the deposit protection rules, this rule is likely to be a real complication for landlord’s seeking to use the ‘no fault’ eviction process of s21 and add a further difficulty to obtaining possession of the property.
If you have any questions about whether your AST is compliant, please speak to your solicitor! Don’t risk leaving it!