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Insights

01 June 2020

Restrictions on fees extended to all ASTs from 1 June 2020: Make sure you are up to date

From 1 June 2020, the Tenant Fees Act shall now apply to all existing qualifying tenancies regardless of when the tenancy commenced.  The Act applied to new tenancies from 1 June 2019 so has now been in operation for a year, but this fundamental change means that all landlords and letting agents will need to be familiar with the requirements of the Act.

The Act applies to the following types of tenancy in the private rented sector in England: 

  • Assured shorthold tenancies (but not social housing tenancies and long leases);
  • Tenancies of student accommodation; and
  • Licences to occupy housing (excluding holiday lets, and licences to occupy social housing).

The Act prohibits all payments from a tenant, unless the payment is listed as a "permitted payment" under the Act. The Act also caps the value of a tenancy deposit a landlord or letting agent is able to hold. 

Permitted payments:

  • Rent;
  • A refundable tenancy deposit (capped at either 5 or 6 weeks' rent, depending on whether the annual rent is above £50,000);
  • A refundable holding deposit (capped at no more than one weeks' rent);
  • Default fees (for late payment of rent and replacement of a lost key/security device);
  • Variation, assignment or early termination of the tenancy agreement (permitted in certain circumstances and subject to various caps on what can be recovered);
  • Payments in respect of utilities, communication services, TV licence and council tax (subject to restrictions).

 Prohibited payments (not an exhaustive list):

  • Property viewings;
  • Referencing;
  • Administration charges;
  • Inventory checks (both check-in and check-out);
  • Right to Rent checks;
  • Pet fees/deposits;
  • Renewal/exit fees; and
  • Gardening services (unless included within the rent).

Effect of breach

In addition to a penalty of £5,000 for breach of the Act, a landlord will be unable to serve a Section 21 Notice until any prohibited payments have been repaid to the tenant. Successive breaches can result in a criminal offence, and an unlimited fine.

For further details of the operation of the provisions of the Act, please see our insight: The Tenant Fees Act 2019 published on 1 June 2019 when the Act came into force.

Changes from 1 June 2020

From 1 June 2020, any term of a tenancy requiring a tenant to pay fees which are not permitted under the Act shall become prohibited and shall no longer be enforceable. Should the tenant, in error, be asked to make such a payment, this should be returned within 28 days.  If a payment is not returned during this period, there will be a breach of the legislation, with the risk that the above sanctions could be imposed.

At a time of increasing change in the residential sector, landlords and agents must ensure that they do not fall foul of the retrospective requirements of the Act. Standard tenancy agreements should be reviewed and current practices regarding payments of deposits, inventory fees, penalties for late payments and other tenancy fees should be considered to ensure they comply with Act's requirements.

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