A Guide to Permitted Payments

If you are a landlord or have decided to rent a property, you may already know that the way in which tenants can be charged has changed. The Tenants Fees Act 2019 came into force in June this year and applies to rental properties in England.

The Act prohibits a landlord or letting agent from charging tenants unless payment is allowed under what are called permitted payments. These include, for example, the rent and the deposit for the property.

The Act refers to shorthold tenancies, licences such as lodger lettings, and student lets. It prohibits payments outside the permitted ones whether it’s to a landlord, a letting agent, or a third party in connection with the tenancy.

What Are The Permitted Payments?

Refundable Tenancy Deposit:

This is charged by most landlords and is designed to ensure that the tenancy is conducted in the right manner and makes a fund to compensate if, for example, fixtures and fittings are damaged. Under the Act, the terms of the refundable tenancy deposit has been capped.

  • If the annual rent is less than £50,000, you can only charge a deposit equivalent to 5 weeks rent.
  • If the annual rent is over £50,000, you can only charge up to the equivalent of 6 weeks rent.

Refundable Holding Deposit:

A holding deposit can be asked for prior to the granting of a tenancy and is used while the landlord or the letting agent take the steps to organise the tenancy. This has now been capped at the equivalent of one week’s rent. Asking for a refundable holding deposit above this means that it will be classed as a prohibited payment.

Other permitted payments include:

  • If the tenant asks for a change to the tenancy agreement, the landlord or letting agent can add a charge. This is, however, capped at £50.
  • If the tenant loses their keys or entry security device, the landlord or letting agent can charge for a replacement.

Prohibited Payments

Various payments that were routinely used by landlords have been abolished for new tenancies as of 1st June 2019. These include any charges for setting up a tenancy, charges for checking out of the property, and charges for renewing a tenancy.

Fines for Charging Prohibited Fees

If landlords or letting agents are found to be charging anything other than permitted fees they could be liable for a £5,000 fine for a first offence, rising to £30,000 for any subsequent offence in the next five years, including a ban on being able to let properties.

If you need more advice on the above, or wish to ask us anything regarding renting your property, get in touch with us and we will be happy to help.