Fees ban

Contents

England

Since 1 June 2019, the Tenant Fees Act bans landlords and letting agents operating in England from charging tenants certain fees before and after they rent a property. This also applies to asking someone to make a payment on the tenant's behalf, such as a guarantor or parent.

The law applies to:

  • Private landlords renting their property under an assured shorthold tenancy (AST)
  • Private landlords renting their property under a licence to occupy, such as to lodgers or students

For now the Act applies to new and renewed licences and fixed-term assured shorthold tenancies created on or after 1 June. By 1 June 2020, it will apply to all other existing licences/tenancies.

Examples of banned fees

Examples of things that landlords and agents can't charge for include:

  • Performing credit checks
  • Obtaining references
  • Performing/obtaining an inventory
  • Providing contractual agreements, such as an AST or for a guarantor
  • Sending rent reminder letters
  • Services such as professional cleaning and gardening during the course of AST/licence agreement
  • Arranging to de-flea the property as a condition of allowing pets
  • General 'administration' charges.

Banned actions

You can't require your tenant, a person acting on their behalf or someone guaranteeing the payment of their rent, to:

  • pay a banned fee to you or someone else connected to the AST or licence agreement;
  • enter into contract for the supply of a service or insurance (excluding contracts for electricity, gas or other fuel; water and sewerage; or for a landline telephone, the internet and cable or satellite television); or
  • make a loan to anyone connected to the tenancy or letting.

You also can't require the tenant, or anyone else connected to the AST or licence, to do any of the above by:

  • requiring it to be done before you'll grant, renew, continue, assign, replace or end an AST or licence, or before you provide them with a reference;
  • inserting a clause in the agreement stating it must be done (or intending/implying that it should be done); or
  • requiring it to be done because they've breached the AST or licence agreement, or for any other reason.

Allowed payments

The following payments are not banned:

Taking a holding deposit

This is allowed, but is limited to a maximum of 1 week's rent. Once taken, you have 14 days to make a decision about the tenant and for an agreement to be made and signed (the 'deadline'). This deadline can be changed so that it's more or less than 14 days if agreed in writing with the tenant.

You must repay the holding deposit:

  • within 7 days of the date of the AST/licence agreement, unless the tenant agrees to it being used towards the first payment of rent or towards the deposit;
  • within 7 days of the deadline, where you or the tenant fail to enter into an agreement to let your property before the deadline; or
  • within 7 days of the day you decide not to enter into an agreement to let your property, if your decision was made before the deadline.

You won't have to make a repayment in certain circumstances, such as if the tenant:

  • informs you before the deadline that they no longer want to rent the property;
  • fails a right to rent check;
  • provides false or misleading information; or
  • fails to take reasonable steps to enter into an agreement before the deadline, provided you took all reasonable steps to help them to do so.

If you can keep the holding deposit you must write to the tenant (or the person who paid it for them) explaining why it's not being returned. This explanation must be given:

  • within 7 days of the deadline, where you or the tenant fail to enter into an agreement to let your property before the deadline; or
  • within 7 days of your decision not to enter into an agreement to let the property before the deadline.

If you don't provide the written explanation in time, you must repay the holding deposit.

To avoid any disputes about keeping the holding deposit, you should consider – before you take it – giving the tenant clear information about why you're requesting it, the amount required and the situations (mentioned above) where they may lose all or part of it.

Deposits

Taking a deposit is allowed, but is limited to a maximum of 5 weeks' rent where the annual rent is below £50,000, or a maximum of 6 weeks' rent where the annual rent is £50,000 or more.

Rent

The law prevents certain practices in an effort to prevent landlords from getting around the ban. For example, you won't be able to set a higher level of rent for the first portion of the AST/licence and then drop it down afterwards.

Utility and communication services

You can continue to charge tenants for the billed amounts (but no more than this) of council tax; electricity, gas or other fuel; water and sewerage; landline telephone, internet, TV licence and cable or satellite television.

Breaches of the agreement during the letting

Only 2 types of losses can be recovered: loss of keys and late payment of rent.

  • Landlords are allowed to charge the reasonable cost of replacing lost keys, as long as they provide written evidence of the cost (e.g. a receipt).
  • Landlords and agents can only charge 3% above the Bank of England base rate in interest on the late payment of rent, starting from the date the payment is missed.

Changing, assigning or replacing an agreement at the request of the tenant/licensee

This must be the reasonable costs of the person receiving the payment and no more than £50.

Ending the agreement early at the request of the tenant/licensee

The cost cannot be more than the loss suffered by the landlord as a result of the early end.

Breaches of the agreement after the letting

Where the tenancy/licence has been breached and caused damage, landlords can still seek compensation via deductions from the deposit or court action.

Restriction on serving a section 21 notice

If your property is rented under an AST, you can't lawfully serve a section 21 notice on your tenant if:

  • You've asked for and then received, a banned fee from your tenant, a person acting on their behalf or someone guaranteeing the payment of their rent.
  • You've received a holding deposit of more than the maximum 1 week's rent.

This won't apply if, by the time you serve the section 21 notice, you've done one of the following:

  • Fully repaid the banned fee and/or holding deposit to the person who paid it.
  • Not repaid any of the banned fee and/or holding deposit and the person who paid it agrees to it being used towards the payment of rent and/or the tenancy deposit.
  • Partially repaid the banned fee and/or holding deposit and the person who paid it agrees to the remaining balance being used for the payment of rent and/or the tenancy deposit.

Breaching the tenancy fee ban

The enforcement authority

An enforcement authority (which could be your either local Trading Standards team or local council) can impose an initial penalty of up to £5,000 if they are satisfied (beyond reasonable doubt) that you've received a banned payment or failed to repay a holding deposit. This initial breach will be classed as a civil offence.

If you breach the Act again within 5 years of your initial breach, they can start a criminal prosecution. This may result in a criminal conviction (a banning order) and an unlimited fine. Alternatively, they may not prosecute you but instead levy a penalty of up to £30,000. Both these penalties can be appealed via the First-tier Tribunal Property Chamber.

If you operate through a limited company, you (as the director or officer of the company), as well as the company, can be criminally liable and punished accordingly.

Enforcement by the person who paid the fee/holding deposit

Tenants (or the person who paid the fee or holding deposit) can claim their money back for a banned payment or failure to comply with the rules on holding deposits, by either:

  • Applying to the First-tier Tribunal
  • Waiting and using the non-payment as a defence to being served with a section 21 notice.

An order made by the tribunal can be enforced at a County Court.

If you used a letting agent, your tenant could also complain to the agent's redress scheme about the charges it imposed. Redress schemes can make awards that are binding. Failing to pay an award may result in the agent being removed from the scheme.

More information

For more information, see the government guidance.

Wales

Since 1 September 2019, the Renting Homes (Fees etc) (Wales) Act bans landlords and letting agents operating in Wales from charging tenants certain fees before and after they rent their property using an assured shorthold tenancy (AST). This will also apply to asking someone to make a payment on the tenant's behalf, such as a guarantor or parent. For now the Act applies to new and renewed ASTs made after 1 September.

Examples of banned fees

Examples of things that landlords and agents can't charge for include:

  • Viewing fees
  • Check-in and check-out fees
  • Performing credit checks
  • Performing/obtaining an inventory
  • Costs of setting up an AST, such as providing contractual agreements
  • Sending rent reminder letters
  • General administration charges
  • Changing, assigning, replacing or ending the AST early at the tenant's request
  • Fees to enter into an agreement with a guarantor.

Banned actions

You can't require the tenant, or anyone else, to do any of the below in order to grant, renew or continue an AST, or as a result of a clause inserted into the agreement stating it must be done (or intending that it should be done):

  • Make a banned payment to you or someone else.
  • Enter into contract for the supply of a service with you or someone else (excluding contracts for electricity, gas or other fuel; water and sewerage; or for a landline telephone, the internet and cable or satellite television).
  • Make a loan to you or someone else.

Allowed payments

The following payments are not banned:

Payments made to your agent

This includes payments to an agent for work done for you to let or manage your property, such as collecting rent, arranging repairs and maintenance or serving notices on the tenant.

Taking a holding deposit

This is allowed, but limited to a maximum of 1 week's rent.

Once taken, you have 14 days to make a decision about the tenant and for an agreement to be made and signed (the 'deadline'). This deadline can be changed so that it's more or less than 14 days if agreed in writing with the tenant.

You must repay the holding deposit:

  • within 7 days of the date of the tenancy, unless it's used towards the first payment of rent or towards the deposit; or
  • within 7 days of the deadline, where you or the tenant fail to enter into an agreement to let your property before the deadline.

You won't have to make a repayment in certain circumstances, such as if the tenant:

  • informs you before the deadline that they no longer want to rent the property;
  • provides false or misleading information, or
  • fails to take reasonable steps to enter into an agreement before the deadline, provided you took all reasonable steps to help them do so.

Deposits

These are allowed.

Rent

Any attempt to forcibly change the rent between each rent period to get around the ban, will be unlawful. For example, you won't be able to set a higher level of rent for the first portion of the AST and then drop it down afterwards, unless this is agreed between you and the tenant.

Utility and communication services

You can continue to charge a tenant for the billed amounts of council tax; electricity, gas or other fuel; water or sewerage; landline telephone, internet, TV licence and cable or satellite television.

Breaches of the agreement during the letting

These losses can be recovered but only if the tenancy agreement states they will be payable, and include (but are not limited to) payments for:

  • Late payment of rent
  • Replacing lost keys
  • Avoidable or intentional damage to your property
  • Costs incurred due to a missed appointment – such as if you've arranged a date for a surveyor to attend the property with your tenant and they refuse entry or aren't at home
  • Costs incurred for emergency/out of hours call-outs caused by the tenant.

Any demand for payment must be made in writing. The Welsh government may introduce future legislation to limit what can be claimed.

Breaches of the agreement after the letting

Where the tenancy has been breached and caused damage, you can still seek compensation via deductions from the deposit or court action.

Restriction on serving a section 21 notice

You can't lawfully serve a section 21 notice on your tenant if:

  • You've asked for and received a banned fee.
  • You've received a holding deposit of more than the maximum 1 week's rent.
  • You've received a holding deposit of 1 week's rent and not repaid it even though it was lawfully due.

The restriction won't apply if, by the time you serve a section 21 notice, the banned fee and/or holding deposit (including any overpayment of it) has been:

  • Fully repaid to the person who paid it; or
  • Used towards paying the rent and/or the tenancy deposit.

Breaching the tenancy fee ban

It is a criminal offence to:

1. Request and receive a banned payment or insert a clause into the AST stating it must be paid (or intending that it should be paid)

2. Require a banned fee before you'll grant, renew or continue an AST

3. Enter into contract for the supply of a service (excluding contracts for electricity, gas or other fuel; water and sewerage; or for a landline telephone, the internet and cable or satellite television)

4. Request and receive a loan from anyone connected to the AST

5. Fail to comply with a request from the enforcement authority to provide documents or information needed to investigate if there's been a breach

6. Intentionally alter, suppress or destroy a requested document

7. Provide false or misleading information to the enforcement authority

If you operate through a limited company, you (as the director or officer of the company), as well as the company can be criminally liable and punished accordingly.

The enforcement authority

The enforcement authority will be your local council or licensing authority for the area where your property is located.

If found guilty, you could be imprisoned or fined, and ordered to repay the banned fee. It must also inform Rentsmart Wales of any convictions, which may mean you risk losing your licence. If you've committed any of the offences set out in 1 to 4 above, the enforcement authority can choose to give you a fixed penalty notice (under civil law), instead of imposing a criminal conviction.

Enforcement by the person who paid the fee/holding deposit

A tenant (or the person who paid the fee or holding deposit) can claim their money back by applying to the County Court. But this can only be done if the enforcement authority hasn't already started criminal proceedings against you.

More information

For more information, see the government guidance for landlords and letting agents.

Scotland

In Scotland there has been a ban on charging fees to tenants since 2012 following changes made to the Rent (Scotland) Act 1984.

The law states that any fee other than rent and a refundable deposit is not allowed. This includes charging fees for references, tenancy paperwork, inventories and the renewal of a tenancy agreement.

If a fee is charged for anything other than rent or a deposit, the tenant can reclaim it from you or the letting agent.

Northern Ireland

There are no laws banning the charging of fees to tenants, though there have been recent cases of tenants successfully challenging in court certain fees charged by letting agents.

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