Banned tenant fees and penalties for landlords

A landlord or letting agent cannot charge a fee unless it is expressly permitted. All payments which are not expressly permitted are prohibited payments, also known as banned fees.[1]

The payments which a landlord or agent is permitted to charge are:[2]

• rent payments

• tenancy deposits, up to a maximum of five or six weeks’ rent

• holding deposits, up to a maximum of one week’s rent

• damages for breach of agreement

• fees in connection with tenant’s request for a variation, assignment, or surrender of a tenancy

• fees in respect of council tax, utilities, communication services and TV licence

• fees in the event of a relevant default, such as the loss of a key or rent payments which are more than 14 days overdue

Most permitted payments are capped. Any part of a fee that exceeds the permitted amount is a prohibited payment.

The banned fees rules apply to payments made by tenants, licensees, guarantors and anyone acting on the tenant or licensee's behalf.[3]

Find out about fees a landlord or agent can lawfully charge on Shelter Legal.

Payments made by local authorities

A payment is not a banned fee if it is made by a local housing authority, the Greater London Authority or a person acting on their behalf.[4]

An authority can make and offer payments to private landlords and agents on behalf of tenants. For example, tenancy deposits or 'finder's fees’ payments made by authorities exercising homelessness functions.

A landlord cannot charge a banned fee in relation to:[5]

• an assured shorthold tenancy

• a student letting provided by specified educational institutions

• most licenses to occupy housing

This includes resident landlords with lodgers and houses in multiple occupation.

Any term in these agreements requiring the payment of a prohibited fee is not binding.[6]

The banned fees rules only apply to social landlords when letting an assured shorthold tenancy in the private rented sector.[7]

When banned fees rules do not apply

A payment is not a banned fee if it is in connection with:

• other private rented sector tenancies, including assured tenancies

• tenancies and licenses of social housing

• long leases

• holiday lets

• 'excluded licences' in the private rented sector, such as Homeshare agreements

Tenancies which began before 1 June 2019

For tenancies that began before 1 June 2019 and have not been renewed since, the ban applies only to prohibited payments on or after 1 June 2020.

If the landlord or agent charged a tenancy deposit above the permitted cap before 1 June 2019, they are not obliged to refund the part that is above the cap until the tenancy is either renewed or terminated. If the deposit is protected in a tenancy deposit protection scheme, the government guidance suggests a 10-day time limit from either the renewal or termination of the tenancy for the refund to take place.[8]

An enforcement authority can take action where a landlord or agent has breached the banned fees rules. Local trading standards, district councils and National Trading Standards can all act as enforcement authorities.[9]

Notice of intent

An enforcement authority must serve a notice of intent on the landlord or agent before it imposes a civil penalty or requires the money to be repaid.[10]

The notice of intent must set out the date, amount of the civil penalty, the amount to be repaid, the reasons for imposing the penalty and information about the right to make representations.

Any notice must be served within six months of the authority having sufficient evidence that the landlord or agent committed the breach. If the breach is or was ongoing, the notice must be served while the breach is continuing or within six months of the last day on which the breach occurred.

The landlord or agent has 28 days from the day after the date of service of the notice to make written representations to the authority.[11] After the end of this period, the enforcement authority must decide whether to impose a civil penalty and the amount of any penalty.[12]

Final notice

The authority must serve a final notice on the landlord or agent if it decides to continue with enforcement action.

The final notice must set out the date, the amount of the civil penalty, the amount to be repaid and details on how the payment should be made. The notice should also include information about rights of appeal and the consequences of failing to comply.

The final notice must require payment of any civil penalty within 28 days, or repayment of a prohibited payment or holding deposit within 7 to 14 days from the date of service.

Appeals by the landlord or agent

A landlord or agent can appeal to the First-tier Tribunal against a final notice.[13]

An appeal can be made against the decision to impose a civil penalty or the amount of the penalty.

If appealing against a financial penalty, the appeal must be brought within 28 days from the day after the date of service of the final notice. If appealing against an order to repay a prohibited payment or holding deposit, the appeal must be brought within the repayment period specified in the notice.

An enforcement authority can impose a civil penalty if it is satisfied beyond all reasonable doubt that a landlord or agent has committed a breach of the tenant fees rules.

A civil penalty can be up to £5,000 for an initial breach and £30,000 for any subsequent breach within 5 years.[14]

A subsequent breach is a criminal offence and a banning order offence.[15] A landlord or agent cannot be both subject to a civil penalty and convicted of a criminal offence for the same breach.[16]

An enforcement authority cannot impose a financial penalty for failure to repay a holding deposit if the landlord or agent decided that the tenant did not have the right to rent as a result of incorrect information provided by the Home Office.[17]

Repayments to the tenant

An enforcement authority can require a landlord or agent who has committed a breach to repay to the tenant the amount of any prohibited payment or holding deposit that has not been repaid, unless the tenant has already made an application to the First-tier Tribunal to recover the payment.[18]

A tenant or licensee who has paid a prohibited fee can take direct action to recover the payment in the First-tier Tribunal.

An enforcement authority can assist the tenant or licensee, for example by providing advice or by conducting proceedings.[19]

There is no prescribed time limit for bringing a claim. However, if the claim is made more than six years after the breach occurred, a landlord or agent might rely on the Limitation Act 1980.

A landlord cannot serve a section 21 notice to end an assured shorthold tenancy until any prohibited payment or unlawfully retained holding deposit has been repaid, or with the relevant person’s agreement, credited towards their rent or tenancy deposit.[20]

The restriction on serving a section 21 notice does not apply where the prohibited payment was made before 1 June 2019.[21]

There is no restriction on a landlord serving a notice to quit on licensees or tenants who are not assured shorthold tenants.

Find out more about what makes a section 21 notice invalid on Shelter Legal.

The government has published guidance for tenants, landlords, letting agents and local authorities on how the rules should be applied.

Enforcement agencies must have regard to this guidance when exercising functions under the Act.[22]

Read gov.uk's Tenant Fees Act guidance.