If you have breached the new rules on tenant fees, then you won’t be able to evict your tenants using Section 21.
The Tenant Fees Act 2019 restricted the fees which landlords and tenants may charge to tenants, introduced a cap on tenancy deposits and regulated the operation of ‘holding deposits’. The Act currently applies to assured shorthold tenancies (ASTs) and licences to occupy housing in England which were entered into from 1st June 2019 onwards, and from 1st June 2020 it will start to apply to existing tenancies.
Enforcement of the fee ban falls primarily to local authorities, but tenants can enforce the ban directly by making a claim to recover unlawful fees in the First-tier Tribunal.
Section 21 and the Tenant Fees Act
In addition to reclaiming unlawful fees, tenants can also make use of the effect fees have on Section 21 eviction notices.
The Tenant Fees Act prevents a landlord from serving a valid Section 21 notice where:
- The landlord has required the tenant (or guarantor) to pay a prohibited payment, and such a payment has in fact been made; or
- The landlord has breached the rules relating to holding deposits at Schedule 2 of the Act.
In other words, if the landlord took a prohibited payment, then they will not be able to use Section 21 to evict the tenant.
What if the fee is repaid?
If the landlord returns the prohibited payment or holding deposit to the tenant (or guarantor), then the restriction is lifted and the landlord will be able to use Section 21. Alternatively, the landlord may agree with the tenant that the money is to be used as rent or credited towards the deposit. Landlords can also return part of a prohibited payment and put some towards the rent or deposit, but again this must be with the tenant’s consent.
Compared to some of the other rules concerning the validity of Section 21 notices, these rules are comparatively simple. Landlords should check, before serving a Section 21 notice, whether any payments they have taken breach the Tenant Fees Act. Any unlawful payments must be returned even if the tenant is not asking for the money back.
What if my agent took a prohibited fee?
Where a prohibited payment was taken by an agent the effect of these rules is more complicated. The Act does not expressly make a Section 21 notice invalid where an agent had committed a breach of the fee ban, but this does mean that landlords still need to think about money taken by their agents. An agent usually collects money on behalf of their ‘principal’, the landlord. If the agent has taken a payment from the tenant, for most legal purposes the landlord would be treated as having received the money. An agent can demand and receive money on behalf of a landlord, and the landlord is (usually) treated as having received that money. This is going to create some difficulties for landlords if their agents are taking fees when they ought not to be.
The very first tenancies which were subject to the Tenant Fees Act began in June 2019, meaning that the first Section 21 notices relating to such tenancies will already have been served and will have expired in December 2019. This means that there may already be some cases reaching the courts where judges will find that Section 21 notices are invalid due to prohibited payments.
Landlords should take care to check that neither they nor their agents have received any prohibited payments before serving a Section 21 notice, and take further advice if there are doubts about this.
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Robin is senior associate solicitor at Anthony Gold. He specialises in residential landlord and tenant law, and the regulation of the private rented sector.