Housing tenants to be protected from spurious charges from 1 June 2019

The scarcity of housing accommodation, particularly in London, has meant that power has been firmly in the hands of landlords and their agents who have increasingly sought to pass on many of the normal operating costs to tenants. In addition to their monthly rent and a deposit, tenants have also found themselves having to pay for a range of administrative activities such as references or credit checks, drawing up an inventory and managing check out, insurance, guarantor agreements, professional cleaning, and even the preparation or renewal of tenancy agreements.

The Tenants Fees Act 2019 comes into force on 1 June 2019 and will have wide reaching implications for tenants, landlords and lettings agents. The stated objective of the Act was to deliver ‘a fairer, more competitive, and more affordable lettings market where tenants have greater clarity and control over what they will pay and where the landlord is the primary customer of the letting agent’ according to Sajid Javid (Secretary of State for Communities and Local Government) in November 2017.

The main thrust of the Act is to prohibit landlords or agents from requiring tenants or guarantors to make any payment associated with the letting of residential tenancies apart from specified “permitted payments”. Basically, if it’s not in the permitted list, it’s out!

Housing law expert, Lou Crisfield, welcomes the changes, saying “This is a big improvement in tenants’ rights. From 1 June 2019, new tenants can wave goodbye to paying fees for admin checks, references, credit checks, inventories, check outs, insurance, guarantor agreements, professional cleaning, preparation / renewal of tenancy agreements etc. And existing tenants will gain this protection in a year’s time.”

Limits to deposits

Deposits will also be limited to a maximum of 5 week’s rent (for tenancies with an annual rent of under £50,000) or 6 week’s rent for tenancies with higher rents.

When a tenancy is renewed after 1/6/19, if the deposit taken previously was worth more than 5/6 weeks, then the excess must be repaid to the tenant on renewal.

Restrictions on suppliers

Landlords and agents will no longer be allowed to require tenants to enter into contracts with third parties such as insurance providers and professional cleaners.

Which tenancies are affected?

• All new assured shorthold tenancies, student lettings and residential licences granted on or after 1/6/19;
• All renewals of assured shorthold tenancies, student lettings and residential licences after this date;
• All assured shorthold tenancies, student lettings and residential licences already in existence on 1 June 2020.

The vast majority of private sector tenancies will be caught by the new law by Summer 2020.

Any existing clauses in tenancy agreements that require prohibited payments after 1 June 2020 will be void and unenforceable.

Permitted fees

Some payments are still allowed, but there are very strict rules about when they can be taken, how much, when they must be repaid and how.

• rent;
• tenancy deposit (limited to 5 week’s rent, or 6 weeks if the annual rent exceeds £50k);
• holding deposit – limited to a maximum of one week’s rent (very strict rules apply and in most cases the holding deposit must be returned);
• payment in the event of a default – only for the actual cost of replacing lost keys and interest on unpaid rent, if specified in agreement;
• payment on the tenant’s request for variation, assignment or novation of a tenancy;
• payment on the tenant’s request to terminate a tenancy (e.g. before the end of a fixed term); and
• payment in respect of council tax, utilities, a television licence, and communication services.

Enforcement

A landlord or letting agent will breach the rules if they require a prohibited payment from a tenant or potential tenant, guarantor or licencee.

The tenant, their guarantor or licencee can take action themselves to obtain repayment of the prohibited payment by bringing a case in the First Tier Tribunal.

Local Authorities will also have duties and powers to enforce the Act by imposing civil penalties on landlords and agents that commit breaches. The first offence attracts a penalty of up to £5,000 and a second offence attracts a penalty of up to £30,000 as well as a potential banning order.

Local Authorities will be able to finance this work by retaining some or all the penalty monies.

A landlord will not be able to serve a section 21 notice (a no fault notice of intention to bring possession proceedings) while they are in breach of the Act until they have repaid any prohibited payment or refunded any wrongly held holding deposit.

Finally, a tenant will have additional redress against lettings agents by making complaints to the relevant redress scheme or the ombudsman. All lettings agents must belong to a government approved scheme.

Conclusion

Overall the Act appears to be very good news for tenants and their guarantors. Some landlords and lettings agents have expressed concerns that the result will simply be an increase in rents, but similar legislation in Scotland did not lead to any noticeable increase in rent.

It is more likely that some of the less scrupulous agents will go out of business, double charging will end, and landlords will be choosier about who they select to be their agent and how much they pay for the services.

For more information on any tenancy problem or any aspect of housing law, please contact Lou Crisfield on 020 7426 0400 or email LC@milesandpartners.com.

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.