Tenant Fees Act 2019 – Charging banned fees can lead to landlord fines
15th June 2020 by Byron Sims
Last year, the Tenant Fees Act 2019 (TFA) came into force. Put briefly, the TFA prohibits landlords and letting agents from taking payments from tenants, apart from those which are specifically permitted. To do so risks hefty fines, among other penalties.
What is the Tenant Fees Act 2019?
The starting point of the TFA is that landlords and letting agents must not take any payments from tenants, apart from those contained in a list of “permitted payments” within the Act. Among these permitted payments are rent and tenancy deposits, though deposits are limited to a maximum of five weeks’ rent in most cases. We looked at the provisions of the TFA in more detail when it was introduced last year, which you can see by following this link.
What is changing?
The TFA came into force a year ago and any new tenancy which started on or after 1 June 2019 was subject to the legislation. However, landlords and letting agents were given a grace period of a year for existing tenancies. These included periodic (or rolling) tenancies that came about after the fixed term of the original tenancy had finished.
In practice, this meant that up until now there have been three different categories into which tenancies may fall:
- tenancies which were still in their original fixed term (including contractual periodic tenancies);
- periodic/rolling tenancies which started before 01 June 2019; and
- new tenancies created on or after 01 June 2019.
Until the end of May this year, for tenancies in the first two categories above, it was still possible to charge tenants fees which are otherwise prohibited under the TFA. However, from 1 June, the TFA applies to all tenancies, regardless of when they were created.
This means that if a landlord or letting agent charges any tenant any fees which are not classed as a permitted payment, the landlord or agent will be subject to a fine or other sanction.
Any provision in existing tenancy agreements which go against the TFA will be deemed not to apply. While this does not necessarily mean that it will be necessary to enter into a new, TFA compliant agreement, it may still be prudent to do so, for the sake of clarity and certainty for landlord, agent and tenant.
What do the sanctions include?
Penalties include fines, a banning order, being added to the database of rogue landlords and property agents, or even criminal prosecution.
For a first offence, a landlord or letting agent can be subject to a financial penalty of up to £5,000. Significantly, the fine is for each breach, which means that the cost could very quickly spiral, even on a first offence.
The situation is even more serious if a landlord or agent commits a further breach. If this takes place within five years of receiving a financial penalty, landlords and agents may be committing a criminal offence and be prosecuted. Alternatively, the fine can increase to up to £30,000.
It will come as no surprise to experienced landlords or agents that it would also be impossible to properly serve a section 21 notice if any prohibited payments have been taken. In such a case, a section 21 notice cannot be effectively served until any unlawfully demanded fees or unlawfully retained holding deposit have been returned to the tenant. Because of this, tenants and their representatives will certainly be checking carefully over if and when any payments have been taken by landlords or their agents.
If it is found that a prohibited payment has been taken, it is very likely that the section 21 procedure would need to be started again from the beginning, or the landlord will need to find an alternative way to regain possession of their property. If any mistakes are made in this process, it will necessarily make it more difficult, time consuming and, ultimately, more costly, for a landlord to evict a tenant.
If you or your business needs any assistance in navigating the issues of starting a residential tenancy or recovering possession of a residential property, please contact our team today and we will be happy to help.