Especially since the Tenant Fees Act 2019, landlords frequently ask which charges are legal and which are prohibited. In the following article, our Director of Legal and Compliance breaks down the law so you can keep your tenancy on the right side of it.
In June 2019 legal changes were enacted regulating the amounts landlords and letting agents can charge tenants at the start, during, and at the end of an assured shorthold tenancy.
The Tenant Fees Act 2019 works by defining a list of ‘permitted payments’ and quite simply anything that it not within this list is classed as a ‘prohibited payment’ and is unlawful to charge. So what are the charges that can be levied and what happens if you charge a prohibited payment?
Schedule 1 of the Tenant Fees Act contains the list of permitted payments. These are:
• Rent
• A tenancy deposit
• A holding deposit (to secure the property against competing applications before the tenancy is actually granted)
• Payment in the event of a default
• Payment to cover the costs of varying or novating a tenancy (mid-term)
• Payment on termination of a tenancy
• Payment in respect of council tax
• Payment in respect of utilities/television licence or communication services (broadband, sky, etc)
• There is also a cap in interest charges for late rent
Anything outside this list is prohibited, even if the tenant agrees to the payment.
Q: Can I claim from the deposit for end-of-tenancy cleaning?
A: This depends on the standard of cleanliness outlined in the check-in and check-out reports.
Get the full explanation in: How much can landlords charge for professional end-of-tenancy cleaning?
Straight away then, we see that landlords and agents need to tread very carefully when imposing charges. Imposing a prohibited payment on a tenant will not be binding on them. Enforcement is strict and will take the form of a Trading Standards fine - the first step towards which is the local authority serving a ‘notice of intent’ on the wrongdoer.
It is possible to appeal against a proposed fine, but this is only really going to be possible where the basis for the fine is wrong in law (i.e. the landlord or the agent have not actually breached the Act) or the local authority have not complied with proper procedure. Landlords or agents who want to dispute a proposed fine must do so by appealing against the proposed fine to the First Tier Tribunal, whose panel will decide after having heard each side's arguments.
Underpinning the Act is a set of government guidance documents, that help interpret the Act. Collectively they illustrate what can and cannot be charged under the Act (though not in much detail) in a more practical fashion that the statute itself.
The Act is getting on a bit now, and there isn’t that much caselaw to guide anyone, but what remains surprising is the number of self-managing landlords whose tenancy agreements still impose charges on tenants that are unlawful under the Act, and which expose them to the risk of being fined if they impose those payments on their tenants. At the very least, such landlords should revise their approach by using an agent-approved agreement or get their documents health-checked by an independent legal advisor.
Landlord Essentials is a series of articles where our experts delve into the big questions for London landlords. If you have a question on letting your property in London, ask a Foxtons expert. If you want help making your property a success, get in touch with Foxtons lettings team.
