The new Tenant Fees Act28-Oct-2019

By John Arnold, Partner and Head of Commercial Litigation

On 1 June this year, a new act came into force that has a profound effect on the rental market.

It’s relevant not just for landlords and tenants, but for agencies that, to date, have made a very nice living out of charging tenancy fees and administration costs for rentals. These fees have affected both tenants and landlords, who have had to fork out hundreds if not thousands of pounds in fees and agency costs.

Now, under the Tenant Fees Act 2019, all tenant payments are banned by default unless the Act specifically makes allowances for them. So tenants and landlords won’t have to pay fees for gathering references or taking inventories, for example. The Act also limits the amount asked for as a deposit to a maximum of five weeks’ rental value, and limits holding deposits to one week’s rent.

What’s listed in the new Act?
The new Act basically puts a cap on tenants being charged anything other than the rent, the tenancy deposit, and sometimes, a holding deposit. However, there are certain fees that are still included, and they kick in if the tenancy agreement is broken.

Two out of the three applicable fees are classed as ‘default’ fees (the third relates to contract amendments). Landlords will need to include notification of these fees into tenancy agreements. They are:

  • Lost keys – a minor infringement, but one that is still included in the Act. You’re probably looking at £5 or so, for a new key.
  • Changes to Tenancy – landlords can now charge up to £50 for changes in the terms of tenancies, such as allowing pets or adding a new tenant to the agreement. It doesn’t apply to tenancy renewals or any changes to the length of an agreement.
  • Late Rent Fees – this is the major change covered by the Act. Landlords now have the right to charge a fee for rent payments that are two weeks or more overdue. These fees can be up to 3% of the rental amount, plus the Bank of England base interest rate, charged on a pro-rata basis. This brings tenancy agreements into line with other contracts, such as invoices for goods, where the ability to charge interest on overdue payments has been a long-established legal right.

  • Landlords do not have the right to charge for letters or phone calls involved in chasing or collecting outstanding rent, and because the amounts are relatively small, they probably won’t act as a deterrent or incentive to a tenant who is already in arrears.

    This new legislation doesn’t really have much of an impact on tenants who default on their rent, it merely adds to the amount they already owe by a few extra pounds a week. Realistically, if the tenant has already defaulted on the rent then it’s highly unlikely they’ll be able to pay the fees as well. In that situation, the landlord has the standard Section 8 notice (for where the tenant is in breach of contract) to fall back on.

    What Notices can be given?
    There are two different types of eviction notice, a section 21 and a section 8. These are standardised notices that can be downloaded from the government’s website GOV.UK. It’s absolutely vital that the letter of the law is followed exactly when evicting tenants, otherwise they may have a case to challenge the eviction on a technicality and you could end up with a situation where a tenant remains entrenched in a property for months without paying any rent at all, while the eviction notice goes back and forth in the courts. This also starts to pile on the legal fees, making the whole process incredibly costly.

    A Section 21 Notice can be served at the end of the term of the tenancy, when the landlord wants the tenancy to come to an end. You cannot serve a Section 21 notice within the first 4 months of a six-month tenancy. A Section 21 Notice requires the tenant to be given 2 months’ notice and has to be served on the correct dates.

    A Section 8 Notice deals with cases where the tenant is in breach of the terms of the tenancy agreement, however unlike the Section 21 Notice, a tenant can seek the assistance of the court. For landlords therefore, the Section 21 Notice procedure can provide more certainty.

    The current legislation makes it fairer and more affordable for tenants to take up a rental property, but for landlords there are a choice of options in relation to the recovery of their property.

    If you’re concerned about your rental agreement, talk to a member of our Commercial Litigation team on 01244 356 789 or email info@cullimoredutton.co.uk

    Please note: This is not legal advice; it is intended to provide information of general interest about current legal issues.