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Tenant Fee Act: What are the implications for end of tenancy evictions?

The Tenant Fees Bill became an Act of Parliament on Tuesday after it was granted Royal Assent. The Act, which will take effect on 1 June 2019, cracks down on unexpected fees from landlords and letting agents. Some default fees set out in a rental contract will still be allowed in cases where a landlord has incurred costs, but hefty fines for breaching the Act will help deter potential fee exploitation.

Tenants will now be protected from a score of charges, including fees that relate to:

  • A guarantor form or agreement
  • Domestic or professional cleaning
  • Administrative costs in setting up the tenancy (such as drafting and signing up to the agreement)
  • Providing an inventory, or checking the inventory at the end of the tenancy
  • Credit and reference checks

This is not an exhaustive list of the banned charges under the Tenant Fees Act; rather than listing prohibited payments, the Act sets out permitted payments. This may cause some initial ambiguity in respect of some payments as the only charges specified in the Act relate to taking a deposit and rent. However, costs which genuinely arise throughout the tenancy and that are normally charged to the tenant remain unaffected, such as utility costs and television licensing.

The Act will only affect new tenancies and renewals of tenancies after 1 June 2019 (meaning statutory periodic and contractual periodic tenancies are excluded). However, from 1 June 2020 the fee ban will apply to all tenancies, including pre-existing ones.

Section 21 Notices: Ending tenancies after the fixed term

Once implemented, the Act will have direct implication on the rules surrounding the service of Section 21 Notices to bring a tenancy to an end. A section 21 is the current ‘no fault’ route to ending a tenancy on or after the expiry of the fixed term. Most assured shorthold tenancies have a fixed term of six or 12 months, meaning landlords can choose not to renew the tenancy after this time without having to give a reason.

If a landlord takes a prohibited payment, though, any Section 21 Notice served will be invalid. If the landlord had commenced possession proceedings to try and gain control of their property, there would be no basis for their claim as they acted unlawfully. The landlord would need to return the prohibited payment in full to the tenant within 28 days before they could serve a lawful Section 21 Notice.

Landlords who do act unlawfully by taking and retaining prohibited payments can be hit with a fine of up to £5,000. It would be prudent for landlords and letting agents to review their tenancy agreement prior to 1 June 2019 to ensure they are compliant with the new Act and to avoid any prohibited payments being taken.

Landlords and letting agencies wanting to review their tenancy documents and processes to ensure compliance can contact our Dispute Resolution Solicitor, Stewart Croft, on 01254 872 272.

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