Tenant Fees Act: What can you charge tenants and guarantors?

28 March 2019

A guide to what the tenant fees ban means for  letting agents and landlords when it comes to charging tenants fees, holding deposits, security deposits,  renewals, shortfall payments, and interest on late rental payments.

The Tenant Fees Act came into law in England on 1st June 2019, banning letting agents and landlords from charging tenants any fees in connection with a tenancy, unless they are specifically permitted by the legislation.

Fees

After 1st June 2019, anyone involved in the application of undertaking a tenancy cannot be charged any monies as a condition to taking on a property. But what does this mean in practice?

Charges cannot be applied to anyone on the tenant’s side for anything other than rent, holding deposits, a security deposit or deposit insurance, alterations to existing AST agreements (capped to £50) and for replacing lost keys (limited to the cost of the key).

Holding deposits

Holding deposits will be limited to a maximum of one week’s rent and only one payment will be able to be taken per property under application. A week’s rent must be calculated as (monthly rent x 12) ÷ 52 weeks.

They can also only be held for 15 days. This means that, if after 15 days from taking the deposit, the tenancy is not finalised in agreement, it either has to be refunded to the tenant, or an extension to this period has to be agreed in writing.

A deposit can only be withheld if the tenant pulls out of the application of their own accord, or if they have provided false information as part of their application. However, the burden of proof may lie with the agent as to whether this is the case - obtaining written confirmation from the tenant regarding key information such as base earnings and credit history to assess their suitability before taking holding deposits may prove to be the best option.

The holding deposit can be used towards the security deposit or first month’s rent, but the tenant has to give consent for this to happen.

Security deposits

Security deposits will be limited to five weeks’ rent for tenancies with an annual rent below £50,000, and six weeks’ rent for tenancies with an annual rent above £50,000. A week’s rent must be calculated as (monthly rent x 12) ÷ 52 weeks.

Renewals

No fees can be charged to the tenant for the renewal of a tenancy that was entered after 1st June 2019.  If a tenancy that started before 1st June 2019 and is renewed after this date, the deposit limits apply. If a deposit over five or six weeks’ rent was initially taken, then the difference must be refunded.

Shortfall payments

The first month’s rent should not be higher than the following months, as this will be deemed a fee.

Interest on late rental payments

Late rental payment interest is fixed at 3% above the Bank of England base rate. This can only be levied after 14 days’ worth of arrears and is backdated.

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