Tenancy Fees & Deposits
As you may be aware, the Tenant Fees Act came into force on 1 June 2019. This government legislation makes it illegal for landlords and letting agents to charge certain fees and sets limits on others that are still allowed. As your mortgage lender, we want you to be aware of the regulation as the changes may affect your buy-to-let property investment plans.
Whilst the Tenant Fees Act only applies to English tenancies, the Welsh government introduced separate similar – but not identical – legislation for Welsh tenancies in September 2019. Find out more here.
Scotland also has separate legislation which places restrictions on Landlords and Letting Agents charging fees. You can find out more about the law that applies in Scotland here.
These changes will apply to ALL new tenancies entered into from 1 June 2019, and any existing tenancies that are renewed on a fixed-term basis. It doesn’t affect any tenancies signed before 1 June 2019 (irrespective of when the tenant actually moved into the property), although the change will apply to any future fixed-term renewals.
The only charges you can charge in connection with a tenancy are:
- refundable tenancy deposit – see below for details of the maximum amounts allowed
- 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.
- You are not required to re-serve Prescribed Information
- 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 above.
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 security deposits will now be capped at the equivalent of 5-weeks' rent for assured-shorthold tenancies with an annual rent of up to £50,000, or 6-weeks' rent for tenancies with an annual rent of £50,000 or more.
To find out more about how the deposit cap works, including how to calculate whether any of your deposits are excessive, The Deposit Protection Service (DPS), have some useful information and a useful calculator here.
Breaches of the Act can 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.
If you’ve taken a security deposit for a new tenancy, you must protect it in a government-approved deposit protection scheme within 30 days of receiving it, or you could face a fine of up to three times the deposit amount.
The Deposit Protection Service (DPS) is the original Government authorised Custodial deposit protection provider. The DPS is one such scheme which keeps deposit money safe for letting agents, landlords and tenants. Their free Custodial scheme is fast and efficient, and they also provide a competitively-priced Insured scheme. They have over 14 years’ experience of protecting tenancy deposits and are authorised by the Ministry of Housing, Communities and Local Government to provide tenancy deposit protection in England and Wales.
The DPS are the top rated UK deposit protection provider on Trustpilot and score 4.7 out of 5.
You can find more information about The DPS and how to protect a deposit here.
The Deposit Protection Service (DPS) is a trading name of Computershare Investment Services plc, which, like Zephyr Homeloans is part of the Computershare group - a global leader in financial services administration, which works with the world's leading organisations to provide a wide range of financial and governance solutions, including mortgage origination, credit management and customer services.