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Tenant fees ban: warning issued about deposits and first month’s rent

Tenant Fees Act prohibits agents waiting until funds have cleared from a tenant's bank account before they issue a contract, ARLA has warned.

Nigel Lewis

tenant fees ban

ARLA Propertymark says it has found a significant legislative gap in the Tenant Fees Act that, if agents are not careful, could see them fined for breaching the regulations without realising it.

The act limits holding deposits to the value of a week’s rent and stipulates that unless tenants pull out after making an offer for a property without good reason, they must be refunded to the tenant.

To enforce this, the act prohibits any payment to be made prior to the signing of a tenancy agreement.

This, says ARLA, means agents can no longer require tenants to pay their tenancy deposit and rent before signing their contract, as is often the case, as this would then break the law.

tenant fees ban“It’s all about the way the Tenant Fees Act is drafted,” says David Cox, Chief Executive of ARLA Propertymark (left).

“It means that anything you take before an agreement, any money taken in advance, is treated as a holding deposit.

“In the past some agents would wait for the funds to clear but that won’t be possible now.”

Cox also says that, despite it only being a few weeks after the ban was introduced, many agents are now putting up their management fees for landlords, as was predicted, and that he expects ARLA’s latest letting index to show rising rents as a result.

Tenant fees ban

Paul Shamplina imagePaul Shamplina (left) of Landlord Action agrees, saying he’s had landlords email him about higher management fees, but goes further.

He predicts that more agents will also ask for their management fees upfront rather than charging monthly, in order to help their cashflow.

“I think many agents will also begin to charge landlords renewal fees and also charge admin fees for additional services, rather than including in these in their overall management agreement.”

Read more about the tenant fees ban.

June 13, 2019


  1. It is an overreaction.
    The legislation defines a Holding deposit as:
    money paid ‘with the intention that it should be dealt with by the landlord or letting the agent in accordance with Schedule 2 (treatment of holding deposit)’
    Rent in advance is not taken on that basis, it is intended to be rent.

    Furthermore, rent & 5 weeks deposit are permitted payment – clearly, this is rent in advance and not a holding deposit.
    According to David Smith, Policy Director for the RLA and Partner at Anthony Gold Solicitors, “if a fee falls into one of the permitted categories then it is permitted even if it is excluded from another category specifically. It is easy to fall into the trap of thinking that because a category excludes a specific class of fees that these are excluded altogether, even though they are permitted elsewhere”

  2. I only have agreement with the original article as I highlighted this issue with the NLA helpline, they said don’t worry – as any money taken as a bonafide deposit and if registered with MyDeposits could only be considered a tenancy deposit and not a holding deposit. I have my doubts . . .

  3. Over 30 years ago my solicitor told me you can’t “foist terms” on anyone after taking a payment, ever since then we’ve obtained prospective tenants completed documents inclusive of their signed agreement and terms prior to accepting any money. We don’t counter sign their agreement until the day they move in because without full payment and prior to reference checks we can’t guarantee the tenancy.
    As Jeremy Clarke rightly called it, “trip wires” could now catch even the best of agents out, with the complexity of ever-changing tenancy law or through simple mis-interpretation.
    Giving an AST and other prescribed info especially Gas certs and EPC before they move in has meant our paperwork has been fraudulently used in the past by prospective tenants to “prove their address” which they never had any intention of actually taking up.

  4. What an absolute shambles!! Why can’t they (the so called Government) just leave us to do our jobs and concentrate their efforts on targeting the minority of rogue Agents and Landlords, who have given us all a bad name. As is always the case, ‘the few have spoilt it for the many’.

    What about when the tenancy start date changes, which it often does – it will mean having to re-print contracts (wasting paper and ink) and then re-inviting the tenants down to the office to re-sign the contract. It’s hard enough to find a date and time when they’re available to sign the paperwork (as most are working). It’s just going to create a cottage industry!

  5. Surely this is not correct as the rent and bond cannot be deemed paid until cleared in the letting agents account.
    What is causing a problem is this nonsense about having to refund the holding deposit after 15 days. Many tenants have to give a month’s notice before they can move in to their new property. What do we have to do? Take a deposit for 15 days then give it back? Meanwhile the tenant decides to pull out on day 30 leaving the landlord in the lurch as we no longer have a deposit. This has clearly not been thought through!

    • Let’s be honest, is anything drafted by government “thought through”?
      There are so many trip wires within this Act that it is inevitable that landlords and agents will get it wrong.
      We are using an agreement to lease at a future date which tenant signs once references are done and we are ready to offer an agreement; the 15 day period is the period for the landlord to agree to offer a tenancy.
      Even if a tenancy is signed by tenants in advance, it doesn’t come into effect until the start date of the tenancy so yes, tenants could sign and then pull out prior to start date. if the idea is that tenant must sign a contract and then pay over monies then so be it but they must understand that if the deposit is paid over to the DPS, their system does not allow it to be refunded until 30 days have elapsed! Who will be in the wrong then?

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