What is the legislation?
The legislation has been introduced to protect residential tenants in the private rental sector against the charging of unfair fees.
The new legislation only permits the following fees to be charged under a new tenancy:
- A refundable tenancy deposit (capped at no more than 5 weeks’ rent where the total annual rent is less than £50,000, or 6 weeks’ rent where the total annual rent is £50,000 or above);
- A refundable holding deposit to reserve a property (capped at no more than 1 week’s rent);
- Payments associated with early termination of the tenancy (when requested by the tenant);
- Payments in respect of utilities, communication services, TV Licence and Council Tax ; and
- A default fee for late payment of rent and replacement of lost key/security device giving access to the housing, where required under a tenancy agreement (the charge is only for interest on the late payment for rent and the rent has to have been outstanding for 14 days or more).2
Unless the fee is one of the above and is, therefore, a “permitted payment”, other fees will be classed as “prohibited payment” and will be an illegal charge.
Although rent is a permitted payment, the TFA 2019 states that if the rent during an earlier rental period is greater than the rent payable for a later rental period the difference is a prohibited payment unless it results from an upwards or downwards rent review provision or is an agreed variation by tenant and landlord. Rent can however be increased annually if the tenancy is an assured shorthold periodic tenancy and notice has been given in line with Section 13 of the Housing Act 1988.3
Landlords or letting agents who charge for tenancy set-up fees, viewing fees, credit-check fees, inventory check fees, check-out fees, fixed penalty charges for late payment of rent and fees for professional cleaning services will now be in breach of the TFA 2019.
Procedures in relation to the repayment of a holding deposit have also been amended. Deposits must now be:
• Repaid within 7 days starting on the date of the tenancy agreement; • Within 7 days if the landlord makes the decision not to enter into a tenancy agreement; or • Within 7 days starting on the date for the deadline for agreement
This obligation to repay does not apply if the tenant provides false or misleading information to the landlord or letting agent.
Who will be affected?
The TFA 2019 defines a tenancy as an assured shorthold tenancy (other than a tenancy of social housing or a tenancy which is a long lease), a tenancy which meets the conditions set out in paragraph 8 of Schedule 1 to the Housing Act 1988 (lettings to students) or a licence to occupy housing.
The TFA 2019 captures landlords, tenants and letting agents. Therefore, a letting agent also must not require a tenant to make a prohibited payment to a letting agent or third party, enter into a contract with a letting agent to a third party for the provision of a service or for insurance or make a loan to anyone.
What if I don’t comply?
As a result of the TFA 2019, an Enforcement Authority may impose penalties up to £5,000 where they are satisfied that a person has breached the prohibitions or repayment obligations or the requirements relating to holding deposits and the initial breach will be classed as a civil offence. However, repeat offenders who breach again within 5 years of the initial breach may face a criminal conviction in the form of a banning order offence under the Housing and Planning Act 2016 which is an unlimited fine. If a Local Authority chooses not to prosecute they can also impose a penalty of up to £30,000 instead.4 Body corporates can also be liable to personal proceedings under the new legislation. If a body corporate is proved to have committed with the consent or connivance of, or to the attributable to any neglect on the part of, an officer of a body corporate, the officer as well as the body corporate commits the offence and is liable to be proceeded against and punished accordingly.
What does this mean going forwards?
The new legislation prohibits all other fees, other than the permitted payments listed above. Guidance drafted in relation to the legislation highlights that there will be a 12 month transition period from 1 June 2019 to 31 May 2020 to allow for landlords and letting agents to renegotiate their agreements.5 If a tenancy was entered into before 1 June 2019, the tenant will continue to be liable for payments agreed in the tenancy agreement within the transitional period. However, the guidance confirms that from 1 June 2020 any breach will no longer be legally binding.