Get E-Guide

The Tenant Fees Act Extension

Home | Blog



The private rented sector, like all other parts of life, has been completely dominated by the coronavirus pandemic in recent months, with landlords having to contend with issues such as rent arrears, buy-to-let mortgage holidays, fallen demand and the ongoing ban on evictions.

While the market has bounced back strongly since the property market was allowed to reopen in mid-May, it’s still an unsettling and confusing time for those operating in the sector, and this has included the continued introduction of new or updated PRS legislation, even despite Covid-19.

In April, the rules regarding Capital Gains Tax were changed, while from July 1 2020 mandatory electrical checks in rental properties were enforced.

Another piece of key legislation which has been recently updated is the Tenant Fees Act, the controversial new law which came into force on June 1 2019 after many years of opposition, debates and amendments. The Act bans landlords and letting agents from charging fees to tenants, as well as capping security and holding deposits.

For the first year, the ban on fees and caps on deposits only applied to new tenancies, but the transition period for the Tenant Fees Act recently concluded (on May 31). This which means the legislation now covers all existing tenancies as well.

Consequently, some landlords may have to lower security deposits for long-standing tenancies to bring them in line with the rules stipulated by the Tenant Fees Act. You may also, as a landlord, have to lower deposits if you offered a long-term rent reduction to tenants as part of a renewal.

For Assured Shorthold Tenancies (ASTs) with an annual rent of up to £50,000, security deposits are capped at the equivalent of five weeks’ rent, rising to six weeks for tenancies with an annual rent of over £50,000.

Do you need to reduce your deposits?

Borrowing on guidance from the Deposit Protection Service (DPS), one of the three government-approved tenancy protection schemes, we have considered all the various scenarios. Below, we outline how you need to act in each situation. If a tenancy was signed on or after June 1 2019, you must ensure - if you haven’t already - that the deposit value complies with the relevant cap.

Periodic vs fixed-term tenancies – what are the different rules?

Meanwhile, if a tenancy was signed before June 2019, you must ask yourself whether the fixed-term for the tenancy ended before June 1 2020. If it did, you must consider whether you agreed a new fixed-term contract with the tenants or whether it became a periodic tenancy (which are typically managed on a rolling weekly or monthly basis). If you agreed a new fixed-term contract, you must ensure that the deposit value complies with the caps set out in the Tenant Fees Act. Alternatively, if the tenancy became periodic, there is no obligation to amend the value of the deposit you are already holding.

Existing tenancies which finish after June 1 2020

In cases where the tenancy was signed before June 2019, but the fixedterm for the tenancy ended after June 1 2020, it’s vital that you ensure that the deposit value falls in line with the relevant cap. This is the case no matter whether you agreed a new fixed-term contract with the tenants or whether the tenancy became periodic.

How can you refund a deposit?

If you think that you owe your tenants a refund based on what has been set out above, you can calculate how much you owe and request for the sum to be released by the deposit protection scheme it is being held with (ether the Tenancy Deposit Scheme, mydeposits or the DPS).

If this is not something you feel comfortable in doing, it is something your letting agent can deal with on your behalf.

It’s important to remember that the Tenant Fees Act is a hugely important piece of legislation. As a result, you must not breach the regulations or charge fees that you are no longer able to. If you break the rules of the Act, it could lead to a penalty fine of up to £5,000 and severe reputational damage, so it’s not something that you want to risk.

You can see further government guidance here.

In many ways, it’s more crucial than ever that you work closely with a reliable local letting agent as we continue to deal with the fallout from Covid-19, and the continued introduction of new legislation. A good letting agent will help you to remain compliant with all the rules and regulations, as well as protecting your investment, keeping your tenants safe at all times and giving you peace of mind that everything is in order. Here at Property State, we count ourselves as a friendly, energetic and professional letting agent. From the start, we took a new approach to landlords' problems and created solutions. With our potent mix of savvy technology and innovative ideas, we can offer an affordable, all-inclusive rental management experience that is efficient and smooth.

To find out more about what we can do for you, and how we can ensure smooth tenancies which are completely compliant, get in contact with us today.


T: 020 3026 3036


Download Our Landlord E-guide Now

Our 11 top tips on how to keep tenants paying and reducing rent arrears


2020. All Rights Reserved by Property State