Landlord and tenant round-up: June 2019

The Tenant Fees Act 2019

The much talked about Tenant Fees Act 2019 came into force on 1 June 2019; it applies to any new tenancies and renewals of existing tenancies entered into after that date.

From June 2020, it will apply to all tenancies (including those predating the Act). In essence, the Act limits the payments that a landlord can charge in connection with a residential tenancy and is part of a wider drive to deliver a fairer and more affordable private rental sector.

The Act applies to assured shorthold tenancies, tenancies of student accommodation and licences to occupy.

Permitted payments

All payments are prohibited unless the payment is expressly "permitted" under the Act.

The permitted payments are as follows:

• The rent.
• A refundable tenancy deposit which is capped at 5 weeks' rent where the annual rent is less than £50,000. If the rent is over £50,000, a deposit the equivalent of up to six weeks' rent is permitted.
• A refundable holding deposit – capped at one week's rent.
• Payments to change the tenancy – capped at £50.
• Payments associated with early termination of the tenancy.
• Payments in respect of utilities, telephone, broadband, TV and council tax as far as the landlord pays any of these costs and then charges then back to the tenant.
• A default fee for late payment of rent (subject to an interest cap) or replacement of a lost key.

Some examples of prohibited payments

• Referencing or credit checks.
• If the tenancy requires the tenant to have a professional cleaning company clean the flat at the end of the term rather than just clean the property to a professional standard– this would be a prohibited payment.
• Viewing fees.
• Inventory fees.
• Set up fees for the tenancy.

Penalties for non-compliance

Enforcement will be by Trading Standards officers. The financial penalties for a first offence are up to £5,000. If a person commits a second offence within five years a penalty of £30,000 is payable. In addition a second offence is a criminal offence and could lead to a banning order.

If a landlord has required a tenant to make a prohibited payment, a Section 21 Notice to recover possession may not be given for so long as the prohibited payment has not been repaid.

Action for landlords

The provisions of the Act have been widely publicised so landlords and tenants alike are expected to be familiar with their respective rights and responsibilities at this stage. Landlords will want to review their standard tenancy agreements to ensure they do not inadvertently impose prohibited payments.

Landlords also need to act quickly if a prohibited payment is collected in error. The Act requires repayment within 28 days. The government has produced a guidance note on the Act for landlords, letting agents and tenants.

Cladding on high rise residential buildings: new fund set up

The government has announced that approximately £200M is to be set aside for the removal and replacement of unsafe cladding from approximately 170 privately owned high rise buildings where those building owners have failed to adequately address the problem to date.

The fund has been established after reports that private building owners have been trying to pass the cost of the replacement process on to individual leaseholders.

The fund will facilitate the replacement of unsafe aluminium composite material (ACM) from all remaining high rise residential buildings, being those in excess of 18 metres in height. Building owners must register for eligibility by early July and will then have a period of three months within which to access the fund.

This comes after the latest figures show that in relation to 156 private buildings, work has yet to start on removing and replacing cladding to bring it into compliance with the new building regulations that ban the use of combustible materials in high rise buildings.

SDLT on rent under a tenancy: a reminder

SDLT is payable on rent under a tenancy agreement where the annual rent exceeds £120,000; this is often overlooked by tenants renting high value properties. SDLT is calculated on the "net present value" of the cumulative rent payable over the term of the tenancy that exceeds £125,000, at the rate of 1%.

Tenants should also bear in mind that it is not possible to get a refund of SDLT if a break clause is triggered. These are ignored for the purposes of SDLT so if SDLT is paid at the outset of the grant of a two year tenancy on the basis of the total rent over that period, activating the break clause will not bring about an entitlement to any refund of SDLT on the transaction.