Tenancy fees & deposits – what you need to know
Tenancy fees
The current Tenant Fees Act came into force on 1 June 2019. This legislation makes it illegal for landlords and letting agents to charge certain fees and sets limits on others that are permitted.
As your mortgage lender, we want you to be aware of relevant regulation as this may affect your buy-to-let property investment plans.
The Tenant Fees Act only applies to English tenancies. However the Welsh government introduced separate similar – but not identical – legislation for Welsh tenancies in September 2019.
Scotland also has separate legislation which places restrictions on Landlords and Letting Agents charging fees.
The regulation applies to ALL new tenancies entered into from 1 June 2019, and any existing tenancies that were renewed on a fixed-term basis after this date.
The only charges you can charge in connection with a tenancy are:
- rent
- a refundable tenancy deposit – see below for details of the maximum amounts allowed
- a refundable holding deposit (to reserve a property) not exceeding one week’s rent
- payments to change the tenancy when requested by the tenant, capped at £50, or reasonable costs incurred if higher
- payments associated with early termination of the tenancy, when requested by the tenant
- payments in respect of utilities, communication services, TV licence and council tax
- default fee for late payment of rent and replacement of a lost key/security device, where required under a tenancy agreement
Notes:
- Provided the deposit stays protected with the same deposit scheme landlords do not need to keep re-serving the prescribed information each time the tenancy is renewed.
- There are no special provisions or exemptions if the tenant has a pet. The maximum deposit amount allowed must still fall within the compliance thresholds below.
It is now illegal to charge any other fees other than those specifically allowed under the 2019 rules. This includes:
- administrative fees
- charges for carrying out reference checks
- fees for check-ins, check-outs, inventories or ending tenancies within the agreed timeframe of the contract
- renewal fees for extending a tenancy
Tenancy deposits
You must place your tenants’ deposit in a tenancy deposit protection scheme if you rent out your home on an assured shorthold tenancy that started after 6 April 2007. You (or your letting agent) must put your tenants’ deposit in the scheme within 30 days of getting it.
Tenancy security deposits are capped at the equivalent of five-weeks’ rent for assured-shorthold tenancies with an annual rent of up to £50,000, or six-weeks’ rent for tenancies with an annual rent of £50,000 or more.
These government-backed schemes ensure your tenants will get their deposit back if they:
- meet the terms of your tenancy agreement
- do not damage the property
- pay the rent and bills
Your tenants can apply to a county court if you do not use a tenancy deposit protection (TDP) scheme. They can do this at any time during the tenancy. If the court finds you have not protected the deposit, it can order you too either:
- repay it to your tenants
- pay it into a custodial TDP scheme’s bank account within 14 days
The court may also order you to repay your tenants up to three times their original deposit within 14 days of making the order.
Breaches of the Act can also incur a fine of up to £5,000. Further breaches within five years could result in a criminal conviction, a banning order and an unlimited fine. If a local authority chooses not to prosecute, they can impose a financial penalty of up to £30,000 as an alternative.
You can use any of the following schemes if your property is in England or Wales:
There are separate tenancy deposit schemes in Scotland and Northern Ireland.
You can find full details of the regulations in the Tenant Fees Act 2019: Guidance for landlords and agents document, issued by the government.
The deposit must be returned to your tenants within 10 days of you both agreeing how much they’ll get back.
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