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Tenant fees: permitted payments

This content applies to England

Payments that tenants/licensees can be lawfully charged by landlords and agents.  

For details about which tenants, licensees and other relevant persons are protected by the prohibition on the charging of fees that are not permitted payments see Tenant fees. The provisions came into force on 1 June 2019.

Most permitted payments are subject to a cap. Any part of a charge that exceeds the permitted amount is a prohibited payment.

Rent

The payment of rent is a permitted payment.[1]

The Act anticipates that to compensate for the loss of income through fees a landlord may want to ‘front load’ the rent, ie charge a higher rent at the start of (or during) the tenancy than later. The Act outlaws this practice by setting out that for the first year of a letting:[2]

‘if the amount of rent payable in respect of any relevant period (‘P1’) is more than the amount of rent payable in respect of any later relevant period (‘P2’), the additional amount payable in respect of P1 is a prohibited payment.’

Within the first year of a tenancy a landlord or agent cannot reduce the level of rent unless:[3]

  • it is agreed with the relevant person after the tenancy/licence has begun
  • there is a rent review clause in the tenancy/licence agreement that allows for both an increase or decrease in the rent.

A rent increase during the first year of the tenancy/licence that is not followed by a period when the rent is lower is not outlawed.

Front loading: an example

For a 12 month fixed-term tenancy where the contractual rent starts off at £1,500 for the first three months, that is reduced to £1,250 for the next three months, and further reduced to £1,000 for the last six months, there is a prohibited payment of £1,500 during the first three months (3 x £500) plus a further £750 (3 x £250) for the second 3 months, making a total prohibited payment of £2,250. If, on the other hand, the rent started off at £1,000 and rose to £1,500 for each of the last three months of the tenancy, there would be no breach of the Act.

Tenancy deposit

The payment of a tenancy deposit is a permitted payment, but it is capped at:[4]

  • five weeks’ rent, where the total annual rent is less than £50,000
  • six weeks’ rent, where the total annual rent is £50,000 or more.

Any amount over and above the capped amount is a prohibited payment.

Where there is a joint tenancy, the cap relates to the total weekly rent for the tenancy. A landlord cannot ask for a tenancy deposit equivalent to five or six weeks’ rent from each of the joint tenants.[5]

Holding deposit

A holding deposit is a sum of money paid to a landlord or agent to ‘reserve’ accommodation prior to the signing of a tenancy/license agreement. This can, for example, allow a landlord to obtain references and carry out credit checks on a prospective tenant. For more information about holding deposits see Paying for private rented accommodation.

A holding deposit is capped at the equivalent of one week’s rent.[6] Any amount over and above the capped amount is a prohibited payment.

Where there is a joint tenancy the cap relates to the total weekly rent for the tenancy. A landlord cannot ask for a holding deposit equivalent to one week’s rent from each of the joint tenants.[7]

A landlord/agent may not accept a holding deposit where they have already received a holding deposit for the same accommodation from a different person and they have not repaid it, unless they can lawfully retain it under the terms of Schedule 2 of the Tenant Fees Act 2019.[8]

Deadline for agreement

There is a ‘deadline for agreement’, which means that a landlord should enter into the tenancy/licence agreement within 15 days from the date on which the holding deposit was received. A landlord and prospective tenant/licensee can agree a shorter or longer deadline in writing.[9]

Return of holding deposit

Unless one of the exceptions apply, the holding deposit must be repaid in full within seven days of the date of the:[10]

  • tenancy/licence agreement is entered into
  • landlord deciding not to grant the tenancy/licence, or
  • expiry of the ‘deadline for agreement’ and the landlord and tenant/licensee do not enter into an agreement.

Where the person who paid the holding deposit agrees and the tenancy/licence is entered into, the landlord may repay the deposit by paying it towards the first payment of rent or the tenancy deposit. If the holding deposit is applied to the tenancy deposit for an assured shorthold tenancy, for the purposes of the deposit protection requirements that money is treated as being received on the date of the tenancy agreement.[11]

Exceptions to return of holding deposit

A landlord/agent can retain a holding deposit only where a prospective tenant/licensee:[12]

  • does not have the right to rent. This is provided that prior to accepting the deposit, the landlord/agent did not know, and could not reasonably have been expected to know, that the tenant/licensee did not have such right
  • provides false or misleading information that was relevant to the landlord granting a tenancy/license, for example a prospective tenant lied about their income. If a tenant/licensee has provided factually correct information, but her/his references are considered unsatisfactory, s/he is entitled to a full refund.[13])
  • notifies the landlord/agent before the ‘deadline for agreement’ that s/he has decided not to enter into the agreement
  • fails to take all reasonable steps to enter into the tenancy/license before the ‘deadline for agreement’ when the landlord/agent has taken all reasonable steps

In respect of the last two bullets above the holding deposit must still be returned where the landlord/agent: [14]

  • imposes a requirement on the tenant/licensee (or relevant person) to make a prohibited payment, or
  • behaves in an unreasonable way towards the tenant (or relevant person), such that it would be unreasonable to expect the tenant to enter into the agreement.

Where the landlord/agent  is permitted to retain the holding deposit, s/he must set out in writing why it is retained within seven days of:[15]

  • deciding not to grant the tenancy/license if this is before the ‘deadline for agreement’ or
  • the ‘deadline for agreement’ passing.

If this is not done the holding deposit must be returned in full.

Default fees and damages

A default fee is only permitted where this is allowed for in the tenancy agreement and relates to either the:[16]

  • loss of a key or other security device giving access to the accommodation, or
  • late payment of rent.

A payment for damages for a breach of a tenancy/license agreement (or of an agreement between a letting agent and a relevant person) is permitted.[17] This allows for damages to be deducted from a tenancy deposit or claimed via court action, for example to cover the cost of repairs caused by the tenant’s action.

Key/security device

The fee must not exceed the reasonable cost of replacing a key or other security device. The landlord must provide written evidence to the tenant of the cost of replacement. Any amount above the reasonable cost is a prohibited payment.[18]

There might be situations where the reasonable cost could be more than just replacing the key. For example, if the key when lost was on a key ring with the property address on it, it might include the cost of replacing the lock.

Late rent

Rent must be outstanding for 14 days or more before a fee can be charged.[19]

The fee cannot be more than three per cent above the Bank of England’s base rate to the amount of rent that remains unpaid at the end of that day (see page 65 of the guidance for tenants for a helpful illustration of how to work this out).[20]

Unfair terms

The Consumer Rights Act 2015 requires that any term of a tenancy is ‘fair’, as such fixed penalty charges or disproportionately high sums for contractor’s work are likely to be unfair and unenforceable. For more information see Unfair terms and consumer law.

Changes to tenancy

A payment in respect of the ‘variation, assignment or novation of a tenancy’ at the tenant/licensee’s request is a permitted payment.[21]

This could, for example, include agreeing to a tenant’s request to:

  • keep a pet
  • replace one joint tenant with another on the tenancy agreement (in effect agreeing to a surrender of the original joint tenancy and granting a fresh joint tenancy)
  • take in a lodger.

Charging more than £50 for each change requested is not permitted, unless the landlord/agent’s reasonable costs are greater.

Surrender

A landlord/agent can charge a fee if a tenant/licensee asks to surrender their tenancy/licence.[22]

The fee charged must not exceed the loss incurred by the landlord (for example, any loss in rental income) or the reasonable costs of the agent (such as marketing costs).

Other allowable payments

A landlord/agent can charge a tenant/licensee for utilities, TV licence, council tax and communication services, where payment is to be made to the landlord under the tenancy agreement.[23]

Communication services’ means telephone landlines, broadband and cable/satellite TV. It should also be noted that other legislation prohibits landlords overcharging tenants for the provision of utilities.[24]

A landlord/agent cannot require a tenant/licensee to make payments to a third party, unless the payment is for utilities, TV licence, council tax or communication services.

An agent is permitted to charge a tenant/licensee fees for services if it is:[25]

  • not acting for the landlord in respect of the property in question, and
  • it finds accommodation for the tenant/licensee that they then rent.

[1] para 1, Sch.1 Tenant Fees Act 2019.

[2] para 1(2), Sch.1 Tenant Fees Act 2019.

[3] para 1(6), Sch.1 Tenant Fees Act 2019.

[4] para 2, Sch.1 Tenant Fees Act 2019.

[5] p.39, Tenant Fees Act 2019: guidance for tenants, MHCLG, April 2019.

[6] para 3, Sch.1 Tenant Fees Act 2019.

[7] p.44, Tenant Fees Act 2019: guidance for tenants, MHCLG, April 2019.

[8] para 3(5), Sch.1 Tenant Fees Act 2019.

[9] para 2, Sch.2 Tenant Fees Act 2019.

[10] paras 3 and 4, Sch.2 Tenant Fees Act 2019.

[11] para 6 and 7, Sch.2 Tenant Fees Act 2019.

[12] paras 8 to 12, Sch.2 Tenant Fees Act 2019.

[13] p.41, Tenant Fees Act 2019: guidance for landlords and letting agents, MHCLG, April 2019.

[14] para 13, Sch.2 Tenant Fees Act 2019.

[15] para 5(2) Sch.2 Tenant Fees Act 2019.

[16] para 4(2), Sch.1 Tenant Fees Act 2019.

[17] para 5, Sch.1 Tenant Fees Act 2019.

[18] para 4(3), Sch.1 Tenant Fees Act 2019.

[19] para 4(2)(b), Sch.1 Tenant Fees Act 2019.

[20] para 4(5) and (6), Sch.1 Tenant Fees Act 2019.

[21] para 6, Sch.1 Tenant Fees Act 2019.

[22] para 7, Sch.1 Tenant Fees Act 2019.

[23] para 9, Sch. 1 Tenant Fees Act 2019.

[24] s.44 Electricity Act 1989, s.37 Gas Act 1986, s.150 Water Industry Act 1991.

[25] s.2(8) Tenant Fees Act 2019.

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