Tenancy fees & deposits – what you need to know
Tenancy fees
The current Tenant Fees Act came into force in England on 1 June 2019. This legislation makes it illegal for landlords and letting agents to charge certain fees and sets limits on others that are permitted.
As your mortgage lender, we want you to be aware of relevant regulation as this may affect your buy-to-let property investment plans. Landlords are responsible for understanding and complying with the applicable legislation and we’ve explained below where you can find government guidance.
The Tenant Fees Act only applies to English tenancies. However the Welsh government introduced separate similar – but not identical – legislation for Welsh tenancies in September 2019.
Scotland also has separate legislation which places restrictions on Landlords and Letting Agents charging fees.
You can charge tenants or potential tenants the following payments in connection with a tenancy:
- rent
- a refundable tenancy deposit – see below for details of the maximum amounts allowed
- a refundable holding deposit (to reserve a property) not exceeding one week’s rent
- a payment to change the tenancy agreement when requested by the tenant, capped at £50, unless you can provide evidence to the tenant that a higher fee is reasonable
- a payment when the tenant does not give the correct amount of notice
- a payment in respect of utilities, communication services, TV licence and council tax
- a default fee for late payment of rent or for the replacement of a lost key or security device, where the default fee is included in the tenancy agreement.
If a fee is not on the above list of payments allowed, it’s a prohibited payment and should not be charged. Examples of prohibited payments include charges for carrying out reference checks, fees for check-ins, check-outs or for inventories.
Tenancy deposits
You must place your tenants’ deposit in a tenancy deposit protection scheme if you rent out your property under an assured tenancy that started after 6 April 2007. You (or your letting agent) must put your tenants’ deposit in the scheme within 30 days of getting it.
Tenancy security deposits are capped at the equivalent of five-weeks’ rent for assured tenancies with an annual rent of up to £50,000, or six-weeks’ rent for tenancies with an annual rent of £50,000 or more.
These government-backed schemes ensure your tenants will get their deposit back if they:
- meet the terms of your tenancy agreement
- do not damage the property
- pay the rent and bills
Your tenants can apply to a county court if you do not use a tenancy deposit protection (TDP) scheme. They can do this at any time during the tenancy. If the court finds you have not protected the deposit, it can order you too either:
- repay it to your tenants
- pay it into a custodial TDP scheme’s bank account within 14 days
The court may also order you to repay your tenants up to three times their original deposit within 14 days of making the order.
Breaches of the Act can also 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.
You can use any of the following schemes if your property is in England or Wales:
There are separate tenancy deposit schemes in Scotland and Northern Ireland.
The Government has published guidance explaining the fees that landlords may charge when letting a property, which we encourage you to read. Landlords are responsible for understanding and complying with the relevant legislation. The guidance is available at Fees you can charge as part of a tenancy
The deposit must be returned to your tenants within 10 days of you both agreeing how much they’ll get back.
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