The Tenant Fees Act 2019 (TFA) banned most letting fees and imposed a cap of tenancy deposits paid by tenants. The ban applies to new or renewed tenancy agreements signed on or after 1 June 2019.

From 1 June 2019, the only payments landlords and lettings agents are permitted to take from tenants are:

  • rent
  • a refundable tenancy deposit capped at no more than 5 weeks’ rent where the total annual rent is less than £50,000, or 6 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 1 week’s rent
  • payments associated with early termination of the tenancy, when requested by the tenant
  • payments capped at £50 (or reasonably incurred costs, if higher) for the variation, assignment or novation of a tenancy
  • 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 giving access to the housing, where required under a tenancy agreement

When recovering possession of a property on the basis of a section 21 notice, any prohibited payments must have been returned to the tenant or properly used towards the rent or security deposit. If you hold a prohibited payment prior to service of a section 21 notice, it will result in that notice being invalid.

In the case of Switaj v McClenaghan the Court of Appeal considered whether or not fees that are paid by a tenant before 1 June 2019 can preclude a landlord from serving a valid section 21 notice.

The Facts

Ms Switaj was a tenant under an assured shorthold tenancy agreement (AST) beginning in April 2018, for a fixed term of 12 months (“the Original AST”).

The Original AST required the tenant to pay a security deposit, rent, a £120 plus VAT administration fee for preparing any documents relating to any renewal of the tenancy, and an unspecified check out fee. These fees were paid to the landlord’s agent. At the end of the fixed term, the tenancy was not renewed immediately, but Switaj paid a further £120 administration fee.

Switaj entered into a new AST in April 2020, for a fixed term of 12 months (“the 2020 Renewal AST”). The 2020 Renewal AST did not require Switaj to pay an administration fee or a check our fee.

In April 2021, a further AST was entered into for a fixed term of 12 months (“the 2021 Renewal AST”), on the same terms of the 2020 Renewal AST. No administration or check our fees were provided for.

In 2023, McClenaghan (the landlord), served a section 21 notice and issued a claim for possession. Switaj defended the claim, alleging that the administration fee and check out fee invalidated the section 21 notice.

The County Court Decision

The defence was dismissed in the County Court, Switaj appealed the decision in the Court of Appeal.

The Court of Appeal Decision

The parties agreed that the administration fee and the check-out fee would fall foul of the TFA if they had been demanded after 1 June 2019. Switaj argued that the requirement within the Original AST to pay a deposit extending to a new periodic tenancy, meant that the terms of the Original AST continued in subsequent AST’s.

The Court of Appeal held that payments can be ‘required’ even if they are not in the AST, but in ‘requiring’ a payment, the landlord must do so by some overt act or utterance.

Switaj went on to argue that the checkout fee paid in 2018 was still held by the landlord. No checkout had been carried out at the end of any of the ASTs, Switaj had not requested a return of the fee. Thus, Switaj argued that the fee was effectively paid again on renewal. The Court of Appeal would not accept that McClenaghan ‘required’ they payment in relation to the 2020 and 2021 Renewal ASTs when the agreements were compatible with the TFA.

The Court of Appeal held that under section 17(1) of the TFA a payment must be expressly required by the landlord or their agent, and then paid as a result of that requirement.

Switaj’s appeal was dismissed.

Points to Take Away

The case confirms that payments required and thereafter paid before 1 June 2019 will not be deemed prohibited payments and therefore will not invalidate a section 21 notice.

To ‘require’ a payment, a landlord or their agent must do so expressly, whether this is a requirement within an AST, or by some other means.

The decision in this case provides clarification to landlords who still wish to rely upon a section 21 notice to recover possession of a property, whilst they are still able to do so.

If you are a landlord looking to recover possession of your privately rented property, or you are a tenant that has been served with an eviction notice, please do not hesitate to contact a member of our Residential Possession Team.