Guide to prohibited and permitted payments

Guide to prohibited and permitted payments

Overview

Sections 1 and 2 of the Tenant Fees Act 2019 (TFA 2019) prohibit landlords and letting agents from requiring certain payments (fees) to be made by a tenant, or someone acting on the tenant's behalf.

The TFA 2019 doesn’t prohibit all fees. A landlord or letting agent can only require fees that are included in the permitted payments schedule of the TFA 2019.

Permitted payments

Permitted payments include:

  • rent
  • tenancy deposit
  • holding deposit
  • default fees (lost key or other security device, or unpaid rent)
  • contract variation (tenant’s request)
  • early termination (tenant’s request)
  • council tax and utility bills
  • television licence
  • communication services

You can find a full explanation of the permitted payments in Schedule 1 of the TFA 2019.

Prohibited payments

If the fee you want to charge in connection with a tenancy is not on the permitted payments list, it’s a prohibited payment.  

Prohibited payments include, but are not limited to:

  • administration fees 
  • application fees
  • credit check fees
  • inventory charges
  • referencing fees
  • check-in and check-out fees (unless by mutual agreement, for example for an out-of-hours checkout given as an alternative to a checkout without a charge)
  • cleaning fees
  • guarantor fees
     

Rent

Rent must be regular payments, calculated in equal instalments, over the duration of the tenancy.
  
Additional charges to rent are not permitted, unless the tenant agrees to them after the tenancy agreement is in place and existing rules are complied with. 

Any extra charge to the rent amount would be a prohibited payment. For example, charging extra for pets, or charging a student less rent to hold an empty property over a holiday period, are prohibited payments.
 

Tenancy deposit

If the annual rent is less than £50,000, a tenancy deposit is capped at no more than 5 weeks’ rent.  

If the annual rent is £50,000 or more, the tenancy deposit is capped at 6 weeks’ rent. 

Any amount above these thresholds paid as a tenancy deposit is a prohibited payment.

The weekly rent is calculated as the amount of monthly rent multiplied by 12, and the sum divided by 52.

So, for example, if the monthly rent was £624, the weekly rent would be (£624 X 12)/52 = £144

Tenancy deposits must be protected in an approved tenancy deposit scheme. Information about the scheme must be provided to the tenants within 30 days of the deposit payment.

See our section on tenancy deposit protection
 

Holding deposit

You can ask a tenant to pay a holding deposit before signing a tenancy agreement, to show they’re serious about renting the property.  

A holding deposit is capped at no more than 1 week’s rent. Any amount higher than this is a prohibited payment.  
 
Schedule 2 of the TFA 2019 sets out the rules on how the holding deposit should be treated.  

The holding deposit must be refunded to the tenant:

  • within 7 days of the tenancy starting  
  • within 7 days of when the landlord decides not to enter into the tenancy, as long as this decision is made at least 15 calendar days before the tenancy is supposed to start
  • within 7 days from the date the tenancy was supposed to start, if the landlord and tenant fail to enter into a tenancy agreement

Tenants can agree to put the holding deposit towards: 

  • the first payment of rent 
  • the tenancy deposit

You must make sure that doing this, combined with other sums paid, does not exceed the imposed caps. 

You cannot take multiple holding deposits for the same property at the same time. If you do, these would be prohibited payments. 

Under very specific circumstances, defined in Schedule 1, paragraph 3(5) of the TFA 2019, you may be allowed to keep an earlier holding deposit. In that case, multiple holding deposits wouldn’t be prohibited payments.
 

Default fees

The landlord or letting agent is entitled to claim the below default fees, if they’re included in the tenancy agreement.

The Act imposes caps on default fees.

Lost keys or other security device

The landlord or letting agent can claim the reasonable cost incurred for a replacement key or other security device.  

You must give the tenant written evidence, for example a receipt, for the amount charged. Any amount considered to be in excess of what is reasonable is a prohibited payment.  

Unpaid rent

A landlord or letting agent can require an additional payment if rent remains unpaid.

If rent is more than 14 days overdue, a landlord or letting agent can add interest to the unpaid rent amount. The interest must be no more than 3% above the Bank of England’s base rate, for each day the rent is outstanding.  

The Bank of England base rate of interest is currently 0.1%. 

Any amount in excess of this amount is a prohibited payment.

For example, if the Bank of England base rate is 0.1%, any amount of interest in excess of 3.1% of the unpaid rent amount is a prohibited payment.

The tenancy agreement must clearly state that rent arrears and interest will be payable. 

A landlord or letting agent has the right to seek damages for a breach of the tenancy agreement, for example if the tenant causes damage or breaks anything. The tenancy agreement must clearly state the landlord or letting agent can seek damages in this situation. 

A landlord or letting agent cannot require the tenant or their representative to pay:

  • a sum that is more than the actual costs to the landlord or letting agent
  • a flat-rate fee for damage in the property
     

Contract variation (tenant’s request)

If the tenant asks to change the tenancy agreement, the landlord or letting agent can charge the tenant for the work involved in making this change.

Changes to the tenancy agreement include:

  • to allow a pet to be kept at the property
  • the remaining tenants bringing in a replacement tenant, if one of the tenants has left
  • adding an extra person to the tenancy, for example a partner moving in

This payment can be no more than £50 or the reasonable costs incurred (if higher) as a result of the change.  Anything over this is a prohibited payment. 

A tenant can dispute a payment they do not consider reasonable, by taking their case to tribunal.

The landlord or letting agent should give written evidence, for example receipts or invoices, of these costs before asking for payment.
 

Early termination of a tenancy (tenant’s request)

The tenant may decide to leave the tenancy:

  • early, before the end of a fixed term of the tenancy, or
  • without giving the correct notice period, during a periodic tenancy 

If the tenant decides to leave the tenancy early:

  • the landlord is entitled to charge a fee for the actual loss they incur as a result of the early termination by the tenant (this is usually the amount of rent that would have been paid if the tenancy had continued)
  • the letting agent may charge a fee to cover reasonable costs they’ve incurred

Any fee charged by the landlord above the actual loss they’ve incurred, or by the letting agent above what is reasonable, is a prohibited payment.

The landlord or letting agent must mitigate the loss by trying to re-let the property as soon as possible. 

The DLUHC statutory guidance states that:

  • if a landlord agrees to a tenant leaving early, they can ask the tenant to pay rent as required under their tenancy agreement until a suitable replacement tenant is found
  • where a suitable replacement tenant is found and the landlord has agreed to an early termination of the tenancy, the landlord can only charge the tenant rent until the new tenancy has started

The former tenant can only be charged for rent that was lost.  Anything more than this is a prohibited payment.

Council tax, utilities, television licence and communication services

Some tenancy agreements include: 

  • council tax
  • utilities, for example water or electricity
  • television licence
  • communication services, defined by the Tenant Fees Act 2019 as: 
    • a telephone (other than a mobile telephone)
    • the internet
    • cable television
    • satellite television

If the tenancy agreement includes these items, the landlord or letting agent cannot ask the tenant to pay these sums. Any charge for these items would be a prohibited payment.  

Anything extra added on by the landlord or letting agent, for example an administration fee or collection fee, is a prohibited payment.  

The tenant is responsible for paying for such services only if:

  • the tenancy agreement states they are responsible, and
  • the items are not already included within their rent

 

Prohibited payments

If a landlord or letting agent requires a tenant to pay a fee that is not on the list of permitted payments, this is a prohibited payment.

As a letting agent, you should not include these fees in: 

  • your tenancy agreements
  • your published list of fees
  • your property adverts

Payments that are prohibited under the Tenant Fees Act 2019 include, but are not limited to: 

  • administration fees 
  • application fees
  • credit check fees
  • inventory charges
  • referencing fees
  • check-in and check-out fees (unless by mutual agreement, for example for an out-of-hours check-out given as an alternative to a checkout without a charge)
  • cleaning fees
  • guarantor fees

This is not an exhaustive list of prohibited payments. If a fee is not in the permitted payments list, then it is prohibited and you cannot require the tenant to pay it.  

If you require a tenant to make a prohibited payment, the enforcing authority can issue you with a financial penalty (a fine) of up to £5,000.  

The enforcing authority may also ask you to refund the prohibited payment to the tenant, or the tenant can apply to the First-tier Tribunal (or to the redress scheme) for a refund.

If you require a prohibited payment within 5 years of a previous breach, you could be:

  • prosecuted and fined
  • issued with a fine up to £30,000

If you’re prosecuted, the local housing authority may apply for a banning order. This can prevent you from: 

  • letting a house in England
  • engaging in letting agency work
  • engaging in property management work

The First-tier Tribunal decides whether an order should be imposed and for how long.  

See our section on what happens if you don’t comply for more information on what happens if you require tenants to make a prohibited payment.

Further guidance

The Department for Levelling Up, Housing and Communities (DLUHC) has produced a guidance document for landlords and property agents on the Tenant Fees Act 2019. The guidance has detailed explanations and examples of the fees that can and cannot be charged in relation to a tenancy.

If you’re not sure about the fees you charge your tenants or their representatives, you can get advice from: