Real Estate Tip of the Week: Residential Lettings – Redressing the Balance

Published 4 marzo 2019

The Tenant Fees Act 2019 brings in new law affecting the way landlords and their letting agents have traditionally operated on the grant of assured shorthold tenancies (excluding social housing and long leases) and the letting of student accommodation in England.

The Act:

• bans letting fees paid by tenants in the private rented sector and restricts the ability of landlords and letting agents to charge certain other fees (see further below) to tenants;
• introduces a cap on security deposits: if the annual rent is less than £50,000, the deposit cannot exceed five weeks' rent. If the annual rent is £50,000 or more, the cap will be six weeks' rent; and
• requires that holding deposits must not exceed one week's rent and must (except in limited circumstances) be repaid in full.

The provisions come into force on 1 June 2019 for new and renewal leases (excluding periodic tenancies) and 1 June 2020 in relation to existing leases. Anti-avoidance provisions are also included in the Act preventing landlords from recovering fees indirectly by falsely setting a high rent during the first weeks/months of the tenancy and then reducing it later to the market level.

Other permitted charges which might crop up during a tenancy (aside from rent) are limited to payments for loss of keys, late payment of rent, for variation, assignment or novation of tenancies, early termination by the tenant, and for council tax, utilities, TV licences, and communication services. In some cases there are restrictions on the amounts that may be charged but they are mainly limited to the reasonable costs incurred by the landlord or letting agent.

Terms of letting documents which breach these provisions will not bind the tenant and significant penalties for breach of the legislation apply: the offending party may incur a fine of up to £5,000 and if a second breach is committed within five years, a criminal offence is committed and a fine and banning order may be imposed. Alternatively, the enforcing authority may impose a civil penalty of up to £30,000. Tenants can recover money wrongly paid, and landlords will be unable to serve section 21 notices (under the Housing Act 1988) to terminate tenancies whilst holding prohibited payments.

Residential lettings are becoming ever more regulated. If you have any concerns about the new legislation and how it might affect your operations, do get in touch for advice.