Advice on Fees, Charges and Deposits for Landlords, Letting Agents, Property Management Companies and Tenants
This page is to provide advice on the legal requirements around what rent, deposits and fees can be charged for and how monies must be handled and protected. There are several laws in place that affect landlords, letting agents and property management companies. We have set out some of them below and there are links to more detailed advice.
Display of Tenants and Clients Fees
Letting agents and property management companies must display their fees and charges to clients in each of their premises where they deal with clients or potential clients face-to-face and also on their website, where applicable. This is a requirement of the Consumer Rights Act 2015.
Potential tenants and client should have all the information they need in the first instance to help them make an informed choice and to avoid being drawn into contracts they haven’t budgeted for. They will be happier clients in the long run. Failure to comply can result in a penalty of up to £5,000 per offence.
Limits on what Landlords, Letting Agents and Property Management Companies can charge.
The Tenant Fees Act 2019 states that all fees charged by letting agents and landlords to tenants are banned , except for holding deposits, rent, deposits and charges for defaulting on the contract. Also, all of these allowable fees are subject to additional restrictions under the Act.
You cannot require a tenant (or anyone acting on their behalf or guaranteeing the rent) to make certain payments in connection with a tenancy, such as requiring them to enter a contract with a third party or make a loan in connection with a tenancy. The only payments you can charge in connection with a tenancy are:
- the rent
- a refundable tenancy deposit capped at no more than five weeks’ rent where the annual rent is less than £50,000, or six 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 one week’s rent.
- payments to change the tenancy when requested by the tenant, capped at £50, or reasonable costs incurred if higher.
- payments associated with early termination of the tenancy, when requested by the tenant.
- 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, where required under a tenancy agreement.
If the fee you are charging is not on this list, it is a prohibited payment, and you cannot charge it. A prohibited payment is a payment outlawed under the ban.
Additionally, if you give misleading information about fees or omit to tell a client everything, you may be in breach of the Consumer Protection from Unfair Trading Regulations 2008, for which you could be prosecuted.
For more information regarding fees and charges visit the Business Companion website.
Please Note: A landlord cannot evict a tenant using the ‘section 21’ eviction procedure until they have repaid any unlawfully charged fees or returned an unlawfully retained holding deposit.
Protecting Tenants / Clients Money
These schemes make sure landlords and tenants are compensated if letting agents or property management companies cannot repay their money, for example if they go into administration. This is different to tenancy deposit protection.
- Letting agents and property management companies must:
- hold their clients’ money in an account with a bank or building society authorised by the Financial Conduct Authority
- get a certificate confirming membership of the scheme they join, and provide it to anyone who asks, free of charge. They will need to display the certificate:
- in any office where you deal with the public
- on your website
The following organisations have been approved to run client money protection schemes,
- Client Money Protect
- Money Shield
- Propertymark
- RICS
- Safeagent (previously NALS)
- UKALA Client Money Protection
Failure to join a scheme can lead to a fine of up to £30,000.
Protecting Tenants Deposits
Landlords, letting agents and Property management companies must place their tenants’ deposit in a tenancy deposit protection (TDP) scheme if they rent out a property on an assured shorthold tenancy that started after 6 April 2007. Landlords, letting agents and Property management companies must use one of the following TDP schemes,
At the end of the tenancy the deposit must be returned to the tenants within 10 days of agreeing how much they’ll get back. If there is a dispute, the deposit is protected in the scheme until the issue is settled. If you’re in an ‘insured’ scheme, you or the agent must give the deposit to the TDP scheme. They will hold it until the issue is settled.
These government-backed schemes ensure that tenants will get their deposit back if they:
- meet the terms of your tenancy agreement.
- do not damage the property.
- pay the rent and bills.
You (or your letting agent) must put your tenants’ deposit in the scheme within 30 days of getting it.
If a tenants' deposit is not placed in a TDP scheme then they can’t be evicted using the ‘section 21’ eviction procedure. Tenants can also claim a penalty from the Court of up to three times the value on your deposit and if the deposit is not refunded then you can claim this also.
Legal requirement for Estate Agents, Letting Agents and Property Managers in dealing with complaints about their service (Redress Schemes)
Legislation introduced on 1 October 2014, made it a legal requirement for lettings agents and property managers in England to join a Government approved ‘redress scheme’. A redress scheme is designed to help resolve disputes and complaints about lettings agents and property managers, when their own complaints procedures has not resolved the issue/s.
Failure to belong to a Government approved ‘redress scheme’ can lead to a fine of up to £5,000.
The list of Government approved redress schemes listed below.
