Ever since the introduction of the Tenant Fees Act in June 2019, drastic changes have been made to what kinds of fees agents and landlords are able to charge tenants. The tenant fee ban was designed to provide fairer renting conditions for private tenants, through the elimination of unnecessary charges and caps on costs from permitted fees. While at first the act affected only tenancies that started on or after June 1 2019, since June 2020, the Tenant Fees Act now applies to all tenancies, regardless of start date.
To learn more about the specifics of the Tenant Fees Act, along with its implications for landlords and the wider industry, see our FAQ down below.
What fees have been prohibited?
- Viewing Fees - viewing fees are prohibited as they are an essential part of the lettings process.
- Tenancy Set-Up Fees - tenants cannot be required to pay for referencing and credit checks, guarantor fees and administrative fees tied to the start of a new tenancy.
- Tenancy Check-Out Fees - tenants cannot be required to pay a fee for check outs, including weekend check outs. Fees for Saturday checkouts are occasionally permitted if other reasonable non-fee paying accommodations have been proposed to the tenant first.
- Inventory Fees - although landlords are encouraged to take inventory of their property before and after tenancies, they request tenants to pay for this service.
- Gardening Fees - tenants cannot be required to pay for gardening services unless these costs have been included as part of the rent.
- Third Party Fees - landlords cannot make tenants pay for third-party reference services or third-party credit checks. Landlords are also prohibited from requesting payments regarding referencing or administrative costs for having a rent guarantor.
- Check-Out Fees - tenancy termination or end-of-tenancy fees are prohibited. Fees associated with early termination, as requested by the tenant and where there is a cost to the landlord, are permitted.
- Professional Cleaning Fees - instead, landlords can request that their property be cleaned to a professional standard. Landlords can only expect their property to be left as clean as it was at the start of the tenancy. Requiring chimney sweep cleaning is also prohibited.
What charges are still permitted?
Landlords are allowed to charge for the following:
- A refundable holding deposit which cannot exceed more than 1 week’s rent.
- A refundable tenancy deposit capped at no more than 5 weeks’ rent where the total annual rent is less than £50,000, or 6 weeks’ rent where the total annual rent is £50,000 or above.
- Payments associated with early termination of the tenancy, when requested by the tenant.
- Payments for the variation, assignment or novation of a tenancy which are capped at £50 (or reasonably incurred costs, if higher).
- Payment for utilities, broadband, TV, and phone (if included in the tenancy).
- Council Tax payments.
- A default fee for late payment for outstanding rent, after 14 days or more (of which the rate cannot exceed 3% of the Bank of England’s daily base rate).
- Additional fees for the replacement of any lost keys or fobs, if required under the tenancy agreement.
What types of tenancy does the fee ban apply to?
Assured shorthold tenancies refer to tenancies that are privately rented and started after 28 February 1997. They are the tenant’s main accommodation and do not share the living space with the landlord. Licence to occupy housing refers to a living situation in which personal permission is granted for an individual to live in someone’s accommodation on a fixed term or periodic schedule. Examples of residents who might have a licence to occupy include lodgers and friends staying in your home while you’re away.
What does the Tenant Fees Act say about tenancy deposits?
The Tenant Fee Act now places a maximum limit on tenancy deposits, which depends on the annual total rent amount for your property. For annual rent lower than £50,000, landlords and agents can, at most, request tenants pay up to five weeks’ rent in their security deposit. For annual rent more than £50,000, the maximum limit that can be requested is six weeks’ rent.
What are the penalties for breaching the tenant fee ban?
A breach of the Tenant Fee Act will result in a landlord being charged with a civil offence with a penalty of up to £5,000. In the event that another breach occurs within five years of the original penalty, the breach will be considered a criminal offence. Instead of prosecution, a financial penalty of up to £30,000 may be imposed. However, local authorities may choose to prosecute the landlord instead of a financial penalty.
What are steps that can be taken to avoid violating the act?
To ensure all your documents and requested payments are compliant with the Tenant Fees Act, vet your entire tenancy agreement. Double check to make sure all the required payments are permitted by the government guidance and that there are no legacy clauses in your contract from the time before the tenant fee ban. Additionally, keep an audit of any time you have charged a tenant for future reference. A well organized list of all requested payments, along with their necessary details, can act as proof for any potential disputes.
How does the Tenant Fee Act affect my running costs as a landlord?
The Tenant Fees Act helps keep additional letting costs low for tenants by capping fees, such as tenancy and holding deposits, while banning unnecessary and extortionate fees traditionally charged by letting agents. In response, many agencies have tried to recover revenue lost from tenants by charging landlords more.
However, Home Made’s tech-enabled model has never relied on tenant fees for substantial revenue due to our operational efficiency and belief in only charging fees when it’s fair to do so. As a result, we haven’t increased our prices for landlords in response to the ban.
Our commitment to upholding the highest professional standards with regards to regulatory compliance also means that landlords working with us can have total peace of mind - we keep on top of the rules and regulations so that our clients don't have to.
At Home Made, we offer a hybrid lettings solution that adds value at every stage of the rental process. With our proprietary technology and data-driven marketing processes, we can help you to achieve higher rental yields and significantly lower operating costs, all while providing exceptional customer service that improves the rental experience for all stakeholders.
Our median time-to-let from point of listing is just 8 days and our clients save an average of £2,300 per tenancy with us. We charge 3% plus VAT for tenant-find services, 4% plus VAT per month for full management services, and there are no fees for renewals. For more information on our services, visit our landlord page.Book valuation