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August 25, 2022

The Tenant Fees Ban Explained For Landlords

August 23, 2021
Written by
Steve Sims

Are you a landlord? Find out more about the tenant fees ban, refundable deposits and more information on relevant charges and fines.

Security Deposit being cashed in through a machine

Table of contents

The ban on tenant fees stops landlords from charging to cover the cost of setting up or renewing a tenancy. The ban applies to asking a tenant, a guarantor or anyone acting for them. So far, the government reckons the ban has saved tenants more than £500 million in upfront fees. The ban does allow landlords to make some charges. This guide explains which payments a landlord can ask for and those forbidden under the ban.

What fees can I ask a tenant to pay?

The tenant fees ban allows landlords to ask for payments in limited circumstances:

rental agreement being viewed and signed

The tenant fees ban allows landlords to ask for payments in limited circumstances:

Rent

Landlords must split the rent into equal instalments. The ban does not allow 'frontloading', which charges more in the early months of a tenancy to cover the extra costs of referencing and administration when a tenant moves in. You can charge more than a single month's rent to start the tenancy. For example, if the rent is £500 a month, you can ask for three months' rent (£1,500) upfront, but you can't ask for £1,500 in the first month and then 11 instalments of £500 that follow. Landlords can still increase the rent during a tenancy as long as the amount is reasonable. Therefore, you should insert a review clause in the tenancy agreement as well.

Charging interest on rent arrears

You can charge interest on rent that is more than 14 days late at the Bank of England base rate plus 3 per cent. The current base rate is 0.1 per cent, which makes the annual interest charge 3.1 per cent. For example, a tenant is 50 days late for a single rent payment of £650.

  • The annual interest is 3.1 per cent x £650 = ¬£20.15
  • Convert this to interest charged for 50 days by multiplying the annual interest by the number of days late over 365: ie £20.15 x 50/365 = £2.78

Although landlords can charge interest in rent arrears, they cannot add a fee for sending letters.

A refundable security deposit

Security Deposit being cashed in through a machine

The security deposit is capped at no more than five weeks' rent when the yearly rent is less than £50,000 or limited to six weeks' rent when the annual rent is £50,000 or more. Landlords must place the security deposit on protection with an approved organisation. Some landlords ask for a higher deposit if the tenant has a pet, but these fees are not allowed under the ban.

A refundable holding deposit

A refundable holding deposit limited to one week's rent to reserve a property pending the signing of a tenancy agreement. If two or more renters are jointly paying the rent, the holding deposit cap is a weeks' rent split equally between them. For example, the weekly rent is £240, so each renter pays £120 each, while three renters pay £80 each. If you take a holding deposit, you must remove the property from the market and complete the tenancy agreement within 14 days unless you have a written agreement with the tenant to extend the holding period, this is called the deadline day.

You must return the deposit within seven days of signing a tenancy agreement or if the deadline day passes without signing a contract or the date you or the tenant decide not to go ahead with the letting. Landlords can keep the holding deposit if the tenant is unreasonable or fails a Right to Rent check.

Charges to update a tenancy agreement

You can charge the tenant for the cost of changing the terms of the tenancy agreement. The fee is capped at £50 or the actual cost if higher. You should provide a bill or receipt of payment to evidence the charge.

Charges related to ending a tenancy early

Landlords can charge if the tenant asks to end a tenancy agreement early. The new rule is the bill sent to the tenant cannot be more than £50 or any cost the landlord has paid. Landlords can still ask for rent to cover the time spent finding a replacement tenant.

  • If a new tenant moves in before the former tenant's agreement ended, you can only charge the former tenant rent until the new tenant moves in
  • If the new tenant moves in after the former tenant's agreement ended, you can only charge the former tenant rent due until the end of their contract

Payments for utilities and Council Tax

coin being placed into a piggy bank

The tenant fees ban does not cover payments that are generally the tenant's responsibility, but the rent must not cover the charges. These include:

  • Council Tax
  • The TV Licence and satellite TV
  • Utilities, such as gas, electricity and water
  • Telephone and broadband

Legislation stops landlords from overcharging. Bills are limited to the cost charged by the provider, and tenants are entitled to see any statements.

Replacing lost keys

Landlords can charge a reasonable amount for replacing lost keys or other hi-tech security devices. The rule is that you can charge the replacement cost and should show the tenant the bill to confirm the amount.

Fees for tenancies starting before the ban

contract being signed between two parties on a wooden table next to keys and a calculator

The Tenant Fees Ban started on June 1, 2019, and only applies to new or renewed tenancies from that date.

  • If a fixed tenancy continues as a rolling periodic tenancy on or after June 1, 2019, the new rules do not apply to the deposit
  • If the tenancy renews on or after June 1, 2019, then the tenant fees ban and rules over handling deposits apply. Landlords should return the balance of any deposit exceeding the five or six week cap.
  • If the tenancy begins on or after June 1, 2019, the fee ban applies.

Penalties for breaking the Tenant Fees Ban

Charging an illegal fee could lead to a considerable fine. Expect to pay a civil penalty of up to £5,000 for a first offence. Repeat offenders, landlords offending again within five years of the first offence, go before a criminal court where the fine is up to £30,000. Tenants can also take legal action to force the landlord to refund any wrongly-paid fees.

Find out more about the Tenant Fees Ban

The latest official guidance about the Tenant Fees Ban is published online by the Ministry of Housing, Communities and Local Government.Find out more about how Oasis Living can help you find the perfect tenants and improve your property management experience. Head to our website now or contact with one of our property experts. See our guide on renting for tenants here!

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