The Tenants Fee Bill: Government action ending Letting Agent fees

The private rented sector is made up of 4.5 million households in England.  Both landlords and tenants frequently pay Letting Agents to provide a valuable service in ensuring properties are managed; assisting landlords in complying with their legal responsibilities and helping tenants secure a home, being their first port of call for any maintenance and repair issues.

Helen Porter, Property Specialist, often advises landlords and tenants on both commercial and residential issues and liaises regularly with Letting and Managing Agents who have extensive knowledge of their client matters due to their involvement from the outset of a tenancy. 

The draft Tenants Fee Bill

The draft Tenant Fees Bill was introduced to Parliament on 1 November 2017 after a period of consultation earlier this year which received over 4,700 responses.   The Bill applies to assured shorthold tenancies;   company lets or other non-Housing act tenancies will be exempt.

The Secretary of State for Communities and Local Government, Sajid Javid states that “the ban will make renting fairer and easier for tenants by allowing them to see upfront what a given property will cost them”.  The Government argues that the private rented sector requires greater transparency and regulation to tackle notoriously ‘unfair fees’ that tenants are charged.  However, critics argue that the ban on Letting Agent fees may lead to a lower service level for tenants and may end up with them bearing the cost of higher rents. 

Helen explains, “Letting Agents provide a variety of services that ensure properties are safe, compliant and professionally managed.  As such, the Bill leaves some uncertainty as to the role Letting Agents will have in managing properties on behalf of a large proportion of landlords who pay for such services to deal with the multitude of issues that can arise during a tenancy.”

Permitted and Prohibited payments

The Draft Bill provides that tenancy deposits (increased to a maximum six week’s rent), a holding deposit which cannot exceed one weeks’ rent and rental default payments will fall within the scope of ‘permitted payments’.  However, most holding tenancies will be repayable to the tenant within 15 days or form part of the first month’s rent or the tenancy deposit.   

At present, Letting Agents are known to charge administration fees which can include charges for the drawing up of a tenancy agreement, undertaking reference checks, conducting an inventory, pet deposit fees and fees for renewal or early-termination of a tenancy.  Such fees will become ‘prohibited payments’ if the bill is enforced as currently drafted.

Impact on Letting Agents, Landlords and Tenants

The ban will not be retrospective; tenant fees payable before the ban comes into force, will remain payable.

The Bill will create a civil offence with a fine of £5,000 for an initial breach of the ban and a criminal offence where a person has been fined or convicted of the same offence within the previous 5 years.  Civil penalties up to £30,000 may be issued as an alternative to prosecution for repeat offenders.

The Consumer Rights Act 2015 will be amended to reflect the new and limited fees structure.

The proposed new measures are now subject to Parliamentary scrutiny and the Draft Bill is unlikely to be implemented before late 2018.  Helen concludes, “Letting Agents and landlords will need to prepare for the upcoming changes and the effect the proposals will have on the private rented sector when implemented.”

For advice on Landlord and Tenant matters you can contact Helen Porter on 023 8071 7717 or email helenporter@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.