We have produced many blogs on the Tenant Fees Act 2019 and the various restrictions it introduced for new tenancies from 01 June 2019. From 01 June 2020, the Act will apply to all applicable tenancies and licences to occupy housing in the private rented sector. Our previous blogs deal with the requirements in respect of new tenancy agreements being completed.
In terms of ongoing tenancies:
From 01 June 2020 Landlords and Agents will not be able to charge any fees on any applicable tenancy or licence, apart from those fees which are expressly permitted under the ban – see our blog on permitted fees. Any term requiring a tenant to pay a prohibited fee will no longer be binding and if paid, and not returned within 28 days, landlords and agents will be in breach of the Act. We have produced a previous blog on the implications of taking prohibited payments.
Up to and including 31 May 2020, reasonable fees can continue to be charged when written into an agreement that has been in place since before 01 June 2019 (and has not subsequently been renewed).
The Tenant Fees Act 2019 sets a limit for deposits on applicable tenancies. This is five weeks’ rent for tenancies with an annual rent of less than £50,000; or six weeks’ rent for tenancies where the annual rent is £50,000 or higher.
For tenancies where a deposit has been in place since before 01 June 2019, it is common that the amount will exceed the cap. For these tenancies, the government guidance is clear: landlords do not need to take any action to reduce the deposit to below the applicable capped amount unless/until the tenancy is renewed. At the point of renewal, landlords will need to reduce the deposit to that permitted by the cap, refunding the balance to the tenant.
To clearly demonstrate this, we have set out each of the possible scenarios below:
Tenancy during an existing fixed term on 01 June 2019 – Fees allowed as set out in the tenancy agreement until 31 May 2020- No deposit cap unless/until tenancy renewed
Tenancy already periodic on 01 June 2019, whether contractual periodic or statutory periodic – Fees allowed as set out in the tenancy agreement until 31 May 2020 – No deposit cap unless/until tenancy renewed
Tenancy first becomes periodic (whether contractual or statutory periodic) at any time after 01 June 2019 – Fees allowed as set out in the tenancy agreement until 31 May 2020 – No deposit cap unless/until tenancy renewed
Tenancy renewed at any time after 01 June 2019 – No fees allowed (other than the renewal fee if contained in the previous tenancy agreement up to 31 May 2020 only) – Deposit cap applies
Once deposit balance monies are returned to the tenant, new prescribed information will need to be served on the tenant detailing the revised deposit amount within 30 days. We recommend that landlords keep clear evidence of the balance of the deposit being returned (preferably a signed receipt from the tenant) as well as the evidence of service of the updated deposit certificate and prescribed information.
As all “new tenancies” from 01 June 2019 are be caught by the deposit cap, we advise the that the deposit cap provisions are reviewed and complied with if a tenancy is assigned or if the terms of the agreement are varied.
It is worth noting that the permitted deposit amount is calculated at the new renewed tenancy rent level, dividing this new annual rent by 52.