Banned tenant fees and penalties for landlords

Which tenant fees cannot be charged by a landlord or agent and enforcement, sanctions, financial penalties and appeals.

This content applies to England

Relevant person

Landlords and letting agents must not charge tenants and other relevant persons a fee unless the payment is a permitted payment.

A ‘relevant person’ is a:[1]

  • tenant

  • licensee

  • guarantor

  • any person acting on the tenant/licensee’s behalf

The following authorities are not relevant persons, and are otherwise exempt from the provisions of the Act:[2]

  • local housing authorities

  • the Greater London Authority

  • any organisations acting on behalf of the above two

The exclusion of these authorities from the definition of 'relevant person' is not limited to any particular functions, but will often be relevant where authorities are exercising homelessness and prevention/relief functions. The effect of the exclusion is that where any such authority makes any payment on behalf of a tenant/licensee, it cannot be a 'prohibited payment'. That in turn means that the list of 'permitted payments' and the restrictions and caps in Schedule 1 to the Act do not apply. In practice this means that any such authority can offer as much as it likes to private landlords and agents, not only in 'finders’ fees’ and other inducements, but also by way of a tenancy or holding deposit. They can make any payments in connection with any tenancy/licence for or on behalf of tenants/licensees and when guaranteeing their rent.

However, the Act applies to registered providers of social housing (both local authorities and housing associations) where they are letting an assured shorthold tenancy in the private rented sector.[3]

Tenancies and licences covered

The Act bans payments of fees in connection with:[4]

  • an assured shorthold tenancy

  • a licence to occupy housing (other than an 'excluded licence')

  • a tenancy granted to a student by a specified educational institution

Lodgers of resident landlords and tenants of houses in multiple occupation are covered.

The only ‘excluded licences’ in the private rented sector are Homeshare type of licences. The exclusion is intended to exclude certain charities that help facilitate home sharing arrangements in the private rented sector which have a social benefit, for example the prevention of loneliness of the elderly. These licences must be:

  • arranged between the licensee and licensor with the assistance or advice of a registered charity or Community Interest Company (usually a registered Homeshare organisation) in connection with the grant, renewal or continuation of the licence

  • arranged in order to provide the licensor with companionship sometimes combined with care or assistance (other than financial assistance), and

  • for no rent or other consideration, except for payments in respect of council tax, utility bills, a communication service or a television licence

Payments of fees in connection with the following are not covered:

  • other types of letting in the private rented sector, including fully assured tenancies

  • tenancies and licenses of social housing

  • long leases

  • holiday lets

Permitted payments

A landlord cannot charge a relevant person a fee, unless it is expressly permitted by the Act.[5]

The permitted payments are:[6]

  • rent

  • tenancy deposit (up to maximum of five or six weeks’ rent)

  • holding deposit (up to maximum of one week’s rent)

  • a fee in the event of a ‘relevant default’

  • damages for breach of agreement

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

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

When the prohibition takes effect

The Act came into force on 1 June 2019.[7]

From 1 June 2020, the ban on fees applies to the following agreements regardless of their start date:[8]

  • all private rented sector ASTs

  • licences

  • student lettings

Any term in an agreement requiring the payment of a prohibited fee on or after 1 June 2020 is not binding on a relevant person.

Between 1 June 2019 and 31 May 2020 the prohibition applied only to tenancies that started or were renewed on or after 1 June 2019.[9] It did not apply to statutory periodic tenancies arising between 1 June 2019 and 31 May 2020.

Guidance

The government has published guidance on how the provisions of the Act can be applied for:

  • tenants (and other relevant persons)

  • landlords and letting agents

  • enforcement authorities

Enforcement agencies must have regard to this guidance when exercising functions under the Act.[10]

Restriction on section 21 notice

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.[11]

Form 6A (the prescribed form for section 21 notices) has been amended to take account of the provisions of the Tenant Fees Act 2019.[12]

There is no similar sanction restricting the service of a notice to quit on licensees or tenants who are not assured shorthold tenants.

Enforcement authorities

Local trading standards are responsible for enforcing the Act.

District councils (that are not trading standards authorities) also have the power to take enforcement action against a landlord or letting agent that has required a relevant person to make a prohibited payment or breached the requirements relating to holding deposits.[13]

Financial penalties

Where an enforcement authority is satisfied beyond all reasonable doubt that a landlord/agent has committed a breach of the Act it can impose a civil penalty of up to:[14]

  • £5,000 for an initial breach of the Act

  • £30,000 for any subsequent breach within five years

A subsequent breach is a criminal offence and a banning order offence.[15] The enforcement authority can either prosecute the landlord/agent or impose a civil penalty.

A landlord/agent cannot be either:

  • subject to a civil penalty if they have already been convicted or acquitted of an offence in relation to the conduct, or criminal proceedings for the offence have been commenced[16]

  • convicted of an offence if a civil penalty has already been imposed in respect of the same breach[17]

An enforcement authority cannot impose a financial penalty for failure to repay a holding deposit if the landlord/agent decided that the tenant did not have the right to rent as a result of incorrect information provided by the Home Office.[18]

An enforcement authority can require a landlord/agent who has committed a breach to repay to the relevant person the amount of any prohibited payment or holding deposit that has not been repaid, unless the relevant person has already made an application to the First-tier Tribunal to recover the payment.[19]

Notice of intent

Before the enforcement authority imposes a civil penalty or requires the repayment of any amount to a tenant/licensee (or other relevant person), it must serve a ‘notice of intent’ on the landlord/agent.[20]

The notice must set out the:

  • date on which it is served

  • amount of the proposed penalty (ie the civil penalty and/or the amount to be repaid to the relevant person)

  • reasons for imposing the penalty

  • information about the right to make representations

The notice must be served within six months of the authority having sufficient evidence that the landlord/agent has required a prohibited payment or breached the requirements relating to holding deposits.

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/agent has 28 days from the day after the date of service of the notice to make written representations to the authority.[21]

Final notice

After the end of the period for representations, the enforcement authority must decide whether or not to impose a civil penalty and, if so, the amount.[22]

If the authority decides to impose a penalty or require the repayment of a prohibited payment or holding deposit, it must serve a final notice on the landlord/agent.

The notice must set out the:

  • date on which it is served

  • amount of the penalty (ie the civil penalty and/or the amount to be repaid to the relevant person)

  • reasons for imposing it

  • details of how and when the penalty must be paid

  • information about rights of appeal

  • consequences of failing to comply with the notice

The final notice must require payment of any civil penalty within 28 days, or repayment of a prohibited payment or holding deposit within 7 to14 days from the date of service.

Landlord or agent appeals

A landlord/agent can appeal to the First-tier Tribunal against a final notice.[23]

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.

Action by tenant or licensee

Any term of a tenancy/licence agreement (or agreement between a letting agent and relevant person) which requires making a prohibited payment is not binding.[24] The remainder of the agreement continues to apply, so far as practicable.

Where tenant/licensee has paid a prohibited fee that was demanded by the landlord, they can take direct action to recover that money in the First-tier Tribunal. An enforcement authority can assist, for example by providing advice or by conducting proceedings.[25]

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

Last updated: 12 March 2021

Footnotes

  • [1]

    ss.9,10 and 28 Tenant Fees Act 2019.

  • [2]

    s.1(10) Tenant Fees Act 2019; para. 2.5, Tenant Fees Act 2019: statutory guidance for enforcement authorities, MHCLG, April 2019; p. 9, Tenant. Fees Act 2019: Guidance for landlords and agents, MHCLG, April 2019.

  • [3]

    Ch.3, Tenant Fees Act 2019: statutory guidance for enforcement authorities, MHCLG, April 2019.

  • [4]

    s.28 Tenant Fees Act 2019; para.8, Sch.1, Housing Act 1988; Ch.3, Tenant Fees Act 2019: statutory guidance for enforcement authorities, MHCLG, April 2019.

  • [5]

    s.3 Tenant Fees Act 2019.

  • [6]

    Sch.1 Tenant Fees Act 2019.

  • [7]

    Tenant Fees Act 2019 (Commencement No. 3) Regulations 2019 SI 2019/857.

  • [8]

    s.30 Tenant Fees Act 2019.

  • [9]

    ss.1 and 2 Tenant Fees Act 2019.

  • [10]

    s.6(4) Tenant Fees Act 2019.

  • [11]

    s.17 Tenant Fees Act 2019.

  • [12]

    Assured Tenancies and Agricultural Occupancies (Forms) (England) (Amendment) Regulations 2019 SI 2019/915.

  • [13]

    ss.6 to 8 Tenant Fees Act 2019.

  • [14]

    ss.8(2) and (3) Tenant Fees Act 2019.

  • [15]

    s.12 Tenant Fees Act 2019.

  • [16]

    s.8(4) Tenant Fees Act 2019.

  • [17]

    s.12(4) Tenant Fees Act 2019.

  • [18]

    s.8(5) Tenant Fees Act 2019.

  • [19]

    s.10 Tenant Fees Act 2019.

  • [20]

    para 2, Sch.3 Tenant Fees Act 2019.

  • [21]

    para 3, Sch.3 Tenant Fees Act 2019.

  • [22]

    para 4, Sch.3 Tenant Fees Act 2019.

  • [23]

    para 6, Sch.3Tenant Fees Act 2019.

  • [24]

    s.4 Tenant Fees Act 2019.

  • [25]

    ss.15 and 16 Tenant Fees Act 2019; rule 5, Tribunal Procedure (Amendment) Rules 2019 SI 2019/925.