The Tenants Fees Act – are you compliant?

With the Tenants Fees Act now set to come into force on June 1, having being given Royal Assent earlier this week, landlords and lettings agents must start to look carefully at what this may mean for them and take any necessary action to ensure they remain legally compliant.

This new legislation will impose bans on landlords imposing certain charges to their tenants, and will affect every landlord and lettings agency operating in England. All assured shorthold tenancies (ASTs), student accommodation and licences will be affected, although company lets and non-assured tenancies are not.

While initially it will only apply to the renewals of tenancies, from June 1, 2020, it will also affect pre-existing tenancies and clauses that charge fees in them will become ineffective.

Once the Tenants Fees Act becomes applicable, a landlord or agent taking a prohibited payment will have 28 days to return it, or be considered in breach of the legislation. Fines can be up to £5,000 for a first offence; subsequent breaches can be criminal offences and can carry a financial penalty of up to £30,000.

The changes contained in this Act are significant and directly impact on landlords’ and agents’ existing operations. Ignorance of these changes is no excuse, so landlords and lettings agents must establish now how they will be affected and what they need to do.

Many fees which were previously widely imposed will now be banned, these include:

• Charging for guarantor forms
• Credit checks
• Inventories
• Cleaning services (including removing fleas after pets have lived there)
• Referencing
• Admin charges
• Requirements to have specific insurance providers
• Gardening services.

However, there are four main exemptions to this ban, although landlords are now subject to additional restrictions:

• Holding deposits – limited to a maximum of one week’s rent; the terms of repayment depend on whether the tenancy went ahead or not, and if not, what the circumstances were
• Rent – setting rent at a higher level at first and then reducing it will become banned (as a means of preventing attempts to offset the ban on fees by initially inflating the rent to cover costs)
• Deposits – limited to five weeks’ rent maximum for tenancies with an annual rent under £50,000; deposits are limited to six weeks’ rent for annual rents over this amount
• Charges for defaulting on a contract.

We would advise that, with the introduction of this new legislation now only months away, landlords and lettings agents need to carefully consider their current arrangements – these changes will heavily impact on some business models, so careful consideration needs to be given to how best to manage this.

Furthermore, current tenancy agreements and holding deposit forms must be revisited, and updated where necessary, to ensure they will still be fit for purpose in view of the introduction of the Tenants Fees Act.

For any assistance with understanding the implications and obligations required by this new legislation, please get in touch and our specialist team can help guide you through the process. Fixflo, the UK’s market-leading repairs and maintenance software, have also produced a very helpful guide about how the introduction of the Tenants Fees Act can in fact yield opportunities for landlords.

Lewis Couth is senior associate in the dispute resolution team at Sintons, and a specialist in advising landlords. To speak to Lewis further on this topic, contact him on 0191 226 3653 or lewis.couth@sintons.co.uk.