The Tenant Fees Act is due to come into force on 1 June this year and will affect all Assured Shorthold Tenancies granted from that date. It will also apply to all such existing tenancies, including those predating the Act, from June 2020.

Image Credit

Full details can be found at the government’s site outlining the legislation.

The act aims to ensure tenants can see exactly how much the property will cost and property owners will have to ensure that their procedures for payment of fees relating to holding deposits, rent deposits, late payment penalties, inventory charges and all-in tenancy fees are fully compliant with the new law.

Penalties

Any tenancy agreement which has a clause relating to the recovery of a prohibited payment from the tenant will be unenforceable, and any landlord or letting agent accepting such a payment may face prosecution. Fines can reach £5,000 for a first offence or £30,000 if the landlord has been found guilty of a similar offence in the previous five years. Furthermore, where a prohibited payment has been accepted, the landlord will not be able to issue a Section 21 notice, until that payment has been repaid.

Image Credit

The legislation does not list prohibited payments, but rather indicates permitted payments. Charges for reference and inventory checks will be prohibited despite currently being standard procedure. In the case of inventory, many landlords may find that using property inventory software, found at sites answering what are the main benefits of using property inventory software, will help to alleviate the need for added costs.

Permitted payments

Permitted payments include rent, and this may include rent reviews during the term of the lease. New rules apply to tenancy deposits, which are limited to five weeks rental if the yearly rent is under £50,000, or six weeks if the annual rental exceeds £50,000.

Holding deposits are limited to one week’s rental, and the landlord must not currently hold a deposit for the same property, where a renewal is taking place. It must not be held for longer than 14 days, unless otherwise agreed, and must be repaid within seven days of the tenancy being signed. The deposit may be retained if the tenant fails the right to rent checks, provides false information or withdraws from the deal.

A full list of permitted payments can be found in the legislation.