Tenant Fees Ban Guidance for 2020/21

Posted by Alan Boswell Group on 17th December 2020 -

The Tenant Fees Act 2019 applies to all shorthold tenancies in England and Wales. It means that landlords are banned from charging certain fees – but what’s prohibited and what are the consequences for breaking the rules? Here’s what landlords and letting agents need to know about the tenant fees ban.

What is the Tenant Fees Act?

The Tenant Fees Act 2019 came into force on 1 June 2020. Under the legislation, it is now illegal for landlords and letting agents to charge tenants certain fees. The act aims to make rental contracts and associated fees clearer to tenants.

The tenant fees ban applies to the following types of rental agreements:

• Assured shorthold tenancies – this is the most common type of tenancy in the private rental sector.
• Student accommodation – this covers housing provided by educational organisations.
• Tenancy licences – where tenants don’t have exclusive possession of a property, for example lodgers that share a house with their landlord.

What fees are banned under the Tenant Fees Act?

Almost all service charges are banned, as are charges to do with administration. In fact, it’s probably easier to assume all landlord and letting agent fees are banned unless they are on the list of allowable expenses.

The full list of fees you can no longer charge can be found at GOV.UK, Tenant Fees Act, guidance for landlords. Some examples of prohibited payments include:

• Viewing fees.
• Tenancy set-up fees.
• Inventory checks.
• Referencing and credit checks.
• Gardening and cleaning services – unless they are included in the rent.

What fees can landlords still charge?

Under the rules set out by the act, landlords and letting agents can only charge a limited number of fees, they are:

• Rent – rental costs must be consistent throughout the year so you can’t charge more in the first month to make up for lost fees. The only time you can increase the rent, is if there is a rent review clause in your tenancy agreement.
• Refundable tenancy deposit – this is capped at five weeks’ worth of rent (for tenancies where annual rent is less than £50,000). Where rent is £50,000 or more, you can charge up to six weeks rent as a deposit.
• Refundable holding deposit – you can ask potential tenants to pay a reservation fee to hold the property, this is capped at one week’s rent.
• Early termination of contract – you can only charge tenants if they have asked to end the tenancy before the original agreed date.
• Changes to the tenancy contract – this is only allowed if tenants have asked to make changes to the tenancy. This is limited to £50 maximum.
• Utilities – you can charge for utilities such as electricity and gas if they are part of the tenancy contract.
• Communication services – this covers broadband payments TV licence costs if included in the tenancy.
• Default fees – these are charges for late payments and can also apply to acts of negligence, but you can only charge default fees if it’s a clause set out in your tenancy contract. Default fees only apply if a tenant is 14 or more days late with their rent or if they have lost their keys (or other security device) and need replacements.

If fees are not one of the permitted payments listed, you cannot ask tenants to pay them.

What are the penalties for breaking the Tenant Fees Act?

Breaking any of the rules is considered a civil offence and you can expect to pay a £5,000 penalty. You’ll also need to pay back any prohibited payments you’ve taken from tenants.

Violating the rules a second time will be classed as a criminal offence. If this happens, you can be fined up to £30,000 by the local authority.

In some cases, local authorities may decide to prosecute landlords who are caught breaching the act a second time. If that happens, landlords face an unlimited fine and a banning order offence which means they won’t be allowed to rent out property.

Can letting agents charge fees?

Under the Tenant Fees Act 2019, letting agents (and landlords) can only charge permitted fees. Any other costs are considered ‘prohibited payments’ and asking tenants to pay them, can lead to penalties.

What fees can letting agents charge?

Letting agents and landlords can only charge permitted fees. These include rent, and a tenancy or holding deposit. You can also ask tenants to cover reasonable costs if they have requested a change to the tenancy agreement or if they choose to leave the property early.

The only services letting agents can charge for, are utilities (including water and sewage disposal), communication (such as broadband), and TV licences.  Making tenants pay for services that are not listed under permitted fees is a civil offence and can result in a hefty fine.

Can letting agents charge for a reference?

No, letting agents can ask prospective tenants for a reference, but they can’t be made to pay for this service.

Tenants may decide to pay for their own referencing checks from a third party, but this will be up to them.

How can landlords prevent losses?

Being a landlord comes with a number of challenges but our experts at Alan Boswell are here to help you protect your investment and minimise financial losses.

Along with our tenant fees ban guidance, our handy landlords hub can help you navigate the many challenges that come with renting out property – whether that’s understanding your obligations or getting to grips with EPC ratings.

Plus, with our five-star rated landlord insurance, you can be confident about finding a policy that suits your needs. For tailored packages that cover a wide range of events and incidents, speak to one of our experts on 01603 216399.