Tenant Fees Ban Update: Sign the contract before you ask for the deposit and rent!

Tenant Fees Ban Update: Sign the contract before you ask for the deposit and rent!

ARLA Propertymark has found a significant legislative gap in the Tenant Fees Act 2019.

Under the Act, holding deposits of up to one week’s rent are permitted payments. Any further payments received prior to the signing of the tenancy agreement would be prohibited.

According to ARLA, this means that agents and landlords can not ask a tenant to pay their tenancy deposit and/or first month’s rent before the contract has been signed. To do so would be to ask for a prohibited payment. The Tenant Fees Act is drafted in such a way that any money taken prior to the signing of an agreement is treated as a holding deposit. As this is limited to one week’s rent, any further payments received would be prohibited.

This revelation will cause problems for so many landlords and agents. It’s very common to meet with a tenant on the tenancy start date, sign the contract and hand over the keys. Now, either the contract will need to be signed beforehand, so that the rent and deposit can be transferred and received by the landlord as cleared funds, or the tenant will have to bring potentially very large sums of money, in cash, to the property on the tenancy start date.

To avoid a host of legislative issues, we recommend that landlords have their tenancy agreements electronically signed. The signing can be done by all parties within minutes. No need for printing/posting/scanning/meeting up to sign. The deposit and rent can be requested immediately after the signed contract is received. Furthermore, all of the required documents can be sent to the tenant at the same time, including the latest how to rent checklist, gas safety certificate and EPC, so no issues at a later date when serving a Section 21 Notice, and the tenant claiming the documents haven’t been provided. You can order yours here, or call us for more details.


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