How will the Tenant Fees Act be enforced?

The Tenant Fees Act 2019 is now in force, and the new rules already apply to assured shorthold tenancies entered into from 1 June 2019 onwards.

The Act will be enforced by local authorities, the lead enforcement authority (Bristol City Council) and by tenants directly.

Enforcement Authorities

At a local level, the Act places a duty on Trading Standards teams to enforce the Act. In practice, while some Trading Standards teams may devote significant resources to investigating whether letting agents are operating lawfully, enforcement is largely going to be reactive. This is a matter of resources – Trading Standards teams are already very busy – but it also reflects the fact that landlords, and many smaller agents, do not have any high street presence. This means that unlawful fees will usually only come to light when tenants make a complaint.

Where a district council does not have responsibility for Trading Standards it may also enforce the Act, but it is not under a duty to do so. Environmental health officers can therefore take action to deal with prohibited fees if they encounter these while carrying out their other duties in the private rented sector.

The role of the lead enforcement authority is primarily to give guidance to other enforcement authorities and to monitor the effects and operation of the legislation, but it may also carry out other enforcement actions.

Enforcement Authorities can impose a financial penalty on landlords and agents who breach the ban. To impose a penalty they must be satisfied to the criminal standard of proof (beyond reasonable doubt) that a landlord or agent has received a prohibited payment. A financial penalty of up to £5,000 can be imposed for first offences. Repeat offenders can have criminal proceedings brought against them or a fine of up to £30,000 imposed by the enforcement authority. These penalties may be appealed to the First-tier Tribunal Property Chamber.

Landlords and agents may also find that the interaction of the Tenant Fees Act and the Consumer Protection from Unfair Trading Regulations 2008 (“CRPs”) means that the penalties they face both from tenants and from enforcement authorities go beyond that powers provided directly in the Tenant Fees Act. Demanding a prohibited fee might constitute a ‘misleading action’ for the purposes of the CPRs, which means the landlord or agent might be committing further offences, and the tenant could benefit from additional rights: the right to a discount or damages and the right to unwind a contract.

Unlawful fees might be considered to be benefit arising from criminal conduct for the purposes of the Proceeds of Crime Act 2002, although it is far from clear whether prohibited tenant fees would fall into this category. However, if the courts were to treat unlawful tenant fees as the proceeds to crime, this would open up the possibility of very large confiscation orders being made against agents by the Crown Court.

Enforcement by Tenants

If Tenants believe they have paid a prohibited fee they can apply to the First-tier Tribunal for an order that the money must be returned. If the Tribunal makes an order and the landlord or agent does not comply, the Tribunal decision may be enforced through the County Court.

If the landlord takes a prohibited payment or fails to follow the rules relating to holding deposits, an additional sanction applies: the landlord is prevented from serving a section 21 under the Housing Act 1988 until the money has been repaid. This works in a similar way to deposit protection, and since legal aid is available for defending possession claim (at least, in parts of the country where there are any housing specialists with legal aid contracts) this is serious threat to landlords who flout the law while section 21 notice continue to be available.

Tenants will have a choice between demanding money back from their landlords, or waiting and using the prohibited fee as defence to section 21 claims to resist eviction.

Tenants may also be able to complain to a redress scheme about charges imposed by agents. Redress schemes can make awards which are for practical purposes binding – letting agents must be a member of a redress scheme, and failing to pay an award will see agents thrown out of the scheme. Tenants might find this route easier than making an application to the Tribunal, but this would not be appropriate where there is a dispute over whether a particular fee is lawful or not.

Tenant unions and campaigners will also play a leading role in enforcing the Act. These groups are keeping a close eye on agents, and in some parts of the country the resources available to activists will far exceed those of the local authorities. Although these bodies cannot impose fines, they can help their members to recover fees through the Tribunal, and they will not be reluctant to name and shame agents and landlords on social media.

*Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*