Understanding the Tenant Fees Act is crucial for landlords aiming to stay compliant and steer clear of penalties.
The Tenant Fees Act came into force on June 1, 2019 for new tenancies and was then extended to cover all tenancies on June 1, 2020.
At the centre of the new rules is a ban on landlords and agencies charging fees, including admin and inventory fees.
Here you’ll find everything you need to know about the Tenant Fees Act (2019).
- When are agency fees being banned?
- What’s in the Tenant Fees Act?
- What are the penalties for landlords who charge tenant fees?
Rest assured, our legal partners are always here to help if something goes wrong.Get Legal Advice
When are agency fees being banned?
If you’re reading this after June 2019, then agency fees are already banned.
Only payments specifically permitted by the Tenant Fees Act can be charged. Keep in mind, the permitted list doesn’t include fees such as referencing, inventories, and generic admin fees.
- Limit tenancy deposits to five weeks’ rent
- Limit holding deposits to one week’s rent
- Ban any other payments (except contractual default penalties)
- Fines of £5,000 for first offence (civil)
- Fines of £30,000 for second offence (criminal)
What’s in the Tenant Fees Act?
1. All payments prohibited except rent, deposits and three exceptions
Landlords or their agents are no longer allowed to charge tenants for anything except: the rent, the tenancy deposit and a holding deposit (more on these below).
This means landlords cannot ask tenants to cover the cost of referencing. Landlords also can’t charge mandatory check-in, inventory, cleaning or admin fees.
2. What fees can agents and landlords charge?
The only three exceptions are for contract amendments and two kinds of ‘default’ fees. These are fees landlords can charge when a tenant breaks the tenancy agreement. These clauses must be written into the contract in order for landlords to be able to charge tenants these fees.
(a) late rent fees
A landlord can charge fees for rent payments that are over two weeks late. The fees can be up to 3% plus the Bank of England base interest rate. Because this is an annual interest rate, you will have to calculate the amount of pro rata interest accrued on the outstanding rent.
It’s debatable, however, whether late fees have ever been effective at making tenants pay on time, and if the threat of eviction is a much better deterrent.
(b) lost keys
Landlords can still charge tenants for losing their keys (or other security device if your property is high-tech). Landlords can only charge a reasonable amount for which they need to provide evidence of the cost to the tenant.
Remember: default fees need to be included in the tenancy agreement for them to be charged, and previous rules about fair clauses still apply.
You might also be interested in…
- New Right to Rent Code of Practice & Penalty Hikes – Are You Prepared?
- Why Short-Term Lets Aren’t All They’re Cracked Up to Be
- Best Landlord Practices to Prevent Flooding Damage
- How to Avoid Online Rental Scams as a Landlord
- What Is a Holding Deposit? A Guide for Landlords
(c) changes to tenancy
Landlords can charge up to £50 for making changes to the terms of the tenancy. For example, adding a new tenant to the tenancy or allowing a pet.
Landlords can charge more than £50 if they are able to demonstrate their costs exceeded £50.
Crucially, this exception doesn’t apply to renewals or changes to the length of the tenancy.
3. Cap on tenancy deposits
Tenancy deposits, also called security deposits, are limited to five weeks’ rent for properties with an annual rent under £50,000.
Landlords will note that this is hardly more than a month’s rent, meaning tenants could in theory not pay the last month’s rent, allowing the landlord to deduct it from their deposit. At that point there would only be a small amount of the deposit left to cover any damage to the property.
For properties whose annual rent is £50,000 or more, tenancy deposits will be capped at six weeks’ rent.
Not sure what your maximum deposit is? You can check your maximum tenancy deposit using our new deposit calculator.
In practice, deposits have never been uncapped. They have always been kept below two months’ rent due to the fear of the tenancy becoming a premium tenancy.
4. Cap on holding deposits
Likewise, holding deposits are limited to one week’s rent.
This is a big change, since most holding deposits are currently much more than a week’s rent. An OpenRent poll before the TFA came into affect found that 47% of tenants had paid a holding deposit of over £750 — much more than the average weekly rent for a UK property.
5. New rules on holding deposits
The Act includes new rules about how holding deposits must be treated.
The holding deposit must be returned to the tenant: either in payment back to the tenant, or being put towards the first rental payment, or the security deposit.
There are some exceptions. In these cases the landlord can keep the holding deposits:
- The tenant withdraws
- A tenant doesn’t take all reasonable steps to enter the tenancy
- The tenant fails a right to rent check
- The tenant provides misleading information which materially affects their suitability to rent the property
If that last one sounds a little vague to you, then you’re not alone. You can read the exact wording here in paragraph 9 of the Tenant Fees Act.
OpenRent can collect your holding deposit any time of day, seven days a week.Explore Rent Now
6. Repayment of holding deposits
Landlords are only able to hold the holding deposit for 15 days unless another ‘deadline’ date is agreed in writing.
After the deadline, the holding deposit must be repaid within 7 days according to the above rules (see 5).
The holding deposit can be repaid to the tenant, or it can be put towards the rent or tenancy deposit.
What are the penalties for landlords who charge tenant fees?
Landlords (or agents) who charge illegal fees will face paying huge fines.
The first offence would be a civil offence, with a fine of £5,000.
If the offence is repeated within five years, there would be either a criminal offence or a fine of £30,000.
There are also plans to help tenants recoup any illegal fees they paid from the landlord (or agent).
Local Trading Standards organisations will enforce the ban.
If a tenancy began before 1st June 2019 and the deposit is more than five weeks’ rent, does the excess amount need to be returned?
No, not unless you renew the tenancy. If the tenancy lapses into a periodic tenancy, then this is not a ‘new tenancy’ as defined in the Act.
If you renew the tenancy, however, then yes; you will need to make sure any tenancy deposit does not exceed the maximum amount of five weeks’ rent.
You can do this by returning the excess to the tenant. Here is how to return excess deposit amounts to a tenant.
Can a landlord still charge fees as part of the rent?
Yes, rent can still include bills for the following utilities and services:
- Council tax
- Utilities, e.g., gas, water, electricity
- Television license
- Communication services (e.g., broadband)