The Tenant Fees Act 2019 ("the Act") was introduced to restrict the amount and type of payments that can be paid by a tenant to a landlord or an agent acting for a landlord under an assured shorthold tenancy ("AST") agreement. One major restriction introduced by the Act is the cap placed on a deposit that can be taken from a tenant.
The Act came into force on 1 June 2019. There was a grace period until 1 June 2020, however from 1 June 2020 the Act applied to all ASTs regardless of when they were entered into.
For ASTs which demand a total annual rent less than £50,000.00, the deposit is capped at the equivalent of 5 weeks' rent. For ASTs which demand a total annual income of £50,000.00 or more, the deposit is capped at the equivalent of 6 weeks' rent.
To calculate 5 or 6 weeks' rent, the monthly rent should be multiplied by 12. This figure should then be divided by 52 to get 1 week's rent. This figure should then be multiplied by 5 or 6 respectively. When completing this calculation, it is very important not to round up. For example:
- The monthly rent of a property is £500.00.
- 500 multiplied by 12 is 6,000.
- 6,000 divided by 52 is 115.384615.
- 384615 multiplied by 5 is 576.923077.
In this example, the maximum deposit that can be taken is £576.92.
If a deposit is taken in a sum that exceeds the permitted amount, the excess will constitute a prohibited payment. It is not possible to serve a valid Section 21 notice where a prohibited payment is taken and not returned to the tenant before service of the notice. In the example above, were a deposit taken in the sum of £576.93 and a Section 21 notice served, the notice would be invalid and £0.01 would have to be returned before the notice can be re-served – even though the cap has only been exceeded ever so slightly.
Whilst the Act is not new, it can be difficult to understand how to comply with it. If you require our assistance in relation to the Tenant Fees Act 2019, please get in touch via possession@ellisonssolicitors.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.