The Tenant Fees Act has been in force for several years, but banned charges still remain a source of confusion for landlords and letting agents.
The basic principle is straightforward: if a payment is not specifically permitted, it should not be charged to the tenant.
The difficulty is that older tenancy practices, agent paperwork and informal arrangements can still contain fees that are no longer lawful.
For landlords, that means it is worth reviewing every charge connected with the tenancy.
What payments are normally permitted?
In England, permitted payments can include:
- rent;
- a refundable tenancy deposit, subject to the legal cap;
- a refundable holding deposit, subject to the legal cap;
- certain payments connected with changes requested by the tenant;
- certain payments for early termination requested by the tenant;
- payments for utilities, communication services, television licences and council tax where the tenant is responsible; and
- certain charges arising from tenant default, where the legal conditions are met.
Anything outside the permitted categories should be treated with caution.
Referencing fees are banned
Landlords and agents cannot charge tenants for normal referencing.
That means fees for:
- credit checks;
- employment references;
- previous landlord references;
- identity checks; or
- affordability checks
should not simply be passed on to the tenant.
These are part of the cost of letting the property.
Administration fees are also a problem
Older tenancy arrangements sometimes included vague charges described as:
- administration fees;
- application fees;
- processing fees;
- tenancy set-up fees;
- check-in fees; or
- renewal fees.
Descriptions do not change the underlying rule.
If the charge is not a permitted payment, changing its name does not make it lawful.
What about inventories?
A landlord may reasonably want a detailed inventory before the tenancy begins.
However, the tenant should not simply be charged for the landlord’s inventory or check-in service.
The same principle applies to routine check-out administration where the payment is not otherwise permitted.
Landlords should build legitimate business costs into their own operating model rather than creating prohibited tenant charges.
Holding deposits are allowed, but there are rules
A holding deposit can still be taken to reserve a property while pre-tenancy checks are completed.
However, there are legal limits and conditions.
Landlords and agents should keep accurate records showing:
- how much was received;
- when it was received;
- what happened to it; and
- whether it was returned, applied towards the tenancy or lawfully retained.
A holding deposit should not become an additional application fee.
Can landlords charge for changing a tenancy?
Sometimes.
Where a tenant requests a change to the tenancy, such as replacing one tenant with another, a permitted payment may be possible.
However, landlords and agents should not assume they can charge any amount they choose.
The charge should reflect the permitted framework and should be capable of being justified.
Excessive or automatic charges can create problems.
Early termination requested by the tenant
If a tenant asks to leave before they would otherwise be entitled to end the tenancy, there may be circumstances where the landlord can recover certain reasonable losses or costs.
But again, this should not become an opportunity to impose a penalty.
Any amount claimed should be linked to genuine loss or reasonable expenditure rather than an arbitrary fee.
Default charges need particular care
Landlords sometimes assume that any breach of tenancy can trigger a financial charge.
That is not the case.
Only certain default payments are permitted and they must satisfy the legal requirements.
For example, there can be limited circumstances involving:
- late payment of rent; or
- replacement of lost keys or security devices.
Landlords should be cautious about adding broad penalty clauses to tenancy agreements.
Check your agent’s fee structure
A landlord can still face reputational and practical problems if an agent acting on their behalf charges tenants incorrectly.
Ask the agent for a full breakdown of every payment a tenant may be asked to make.
Check:
- application forms;
- reservation paperwork;
- tenancy agreements;
- websites;
- email templates; and
- staff scripts.
Do not assume that old wording has automatically been updated.
What if a prohibited payment has been taken?
If a banned fee has been charged, landlords and agents should not ignore it.
The safest course is usually to identify the payment, correct the situation and make sure the same error is not repeated.
Prohibited payments can create enforcement risk and may also affect certain possession proceedings.
That makes fee compliance more than a simple customer-service issue.
How does the position differ elsewhere in the UK?
The rules described above apply to England.
Wales operates under a separate fees regime linked to the Renting Homes system.
Scotland has its own long-standing rules restricting premiums and other charges in connection with private tenancies.
Northern Ireland operates under separate private-tenancy legislation and should not be assumed to follow the English system.
Landlords operating across more than one nation should therefore use jurisdiction-specific procedures.
Carry out a fee audit
Landlords and agents should be able to list every payment a tenant might be asked to make from first enquiry to the end of the tenancy.
For each one, ask:
- Is this payment legally permitted?
- Is the amount within any applicable limit?
- Is the reason for the charge clear?
- Can the amount be justified?
- Is it described accurately in the paperwork?
If the answer to any of those questions is uncertain, the charge should be reviewed.
NetRent’s Landlord Legal Updates will continue to explain important changes affecting landlords, letting agents and tenants across the UK.
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Important information
NetRent does not provide legal advice. The articles represent our understanding of rental property law and are for general information only.