From 1 June 2020 the Act will apply retrospectively, in that all tenancy agreements will fall foul of the Act if the landlord or agent:
- Hold a deposit of more than 5 weeks’ rent on a property with a total annual rent of less than £50,000, or more than 6 weeks’ rent if the total annual rent is over £50,000;
- Charge renewal or referencing fees;
- Charge a tenant a “prohibited payment”;
- Charge the tenant in excess of £50 without reasonable proof of incurred costs for variation, assignment, or novation of a tenancy; or
- Take a holding deposit of more than one week’s rent.
For the avoidance of doubt, the landlord or agent can charge:
- A refundable tenancy deposit capped at no more than 5 weeks’ rent where the total annual rent is less than £50,000, or 6 weeks’ rent where the total annual rent is £50,000 or above
- a refundable holding deposit (to reserve a property) capped at no more than 1 week’s rent;
- Payments associated with early termination of the tenancy, when requested by the tenant;
- Payments capped at £50 (or reasonably incurred costs, if higher) for the variation, assignment, or novation of a tenancy;
- Payments in respect of utilities, communication services, TV licence and Council Tax;
- A default fee for late payment of rent and replacement of a lost key/security device giving access to the housing, where required under a tenancy agreement.
Breaching the Act will also impact the ability to serve a Section 21 notice if the landlord has either failed to repay a holding deposit or has required a tenant to make a prohibited payment and failed to refund this or apply it as rent or part of the deposit.
Most landlords and agents are well on the way to compliance with the Act, having undergone process changes to accommodate the legislation on introduction in 2019. It is very important for any landlords who are not aware of the impact that the Act has on existing tenancies as of 1 June 2020 to familiarise themselves as the risks associated with a breach can be costly.