In November 2017 the government published its draft Tenant Fee Bill reflecting responses received from the Public Consultation which was published on the same day. The Secretary of State for Communities and Local Government, Sajid Javid, said: “The Government is committed to ensuring a private rented sector that provides security and stability for both tenants and landlords.”
Tenants, represent 4.5 million households (one fifth of households) in England, and a quarter of London’s population.
The government is attempting to tackle the unfairness of the lettings market by banning unfair letting fees. The aim is to incentivise letting agents to compete for landlords’ business, resulting in a more transparent and competitive private rented market offering a higher quality of service.
Tenants in the private rented sector currently have little control over letting fees because the letting agent is appointed by the landlord. Fees can run into several hundreds of pounds and there is significant variation in the way agents charge for their services. Some agents double charge fees by charging both the landlord and the tenant, further increasing the risk of unfair practice.
Proposals in the draft Tenant Fee Bill
- Letting fees must be displayed to enable tenants in the private rented sector to see upfront what a property will cost, with no additional costs to the advertised rent level.
- Security deposits will be capped at six weeks’ rent and no further fees or charges may be enforced other than a capped, refundable holding deposit of one week’s rent, or tenant default fees (i.e, to replace lost keys).
- Agents and landlords can charge a holding deposit to ensure financial commitment from a prospective tenant. Unless the tenant changes their mind, does not have the right to rent under the Immigration Act, or they provide false or misleading information, this deposit must be refunded within 15 days.
- Agents and landlords will be banned from requiring tenants to make payments to third parties, or to make a loan, which might be used to circumvent the new rules.
- Letting agents must be registered with an appropriate organisation, and will be required to satisfy minimum training standards and abide by an industry code of conduct.
- Letting agents must demonstrate compliance with existing legal requirements.
Who will be affected by the Bill?
The proposed ban on tenant fees will not be applied retrospectively, but only to those tenancy agreements and licenses entered into, renewed or continued, after the new legislation comes into force. This means that tenant fees for ‘check outs’ relating to tenancies which existed before the ban comes into force will still be payable.
A new oversight body or ‘lead enforcement authority’ will provide guidance, and support the enforcement of requirements on lettings agents.
The Bill will amend the Consumer Rights Act 2015 as it applies to housing in England to:
- Ensure adherence to fee transparency requirements.
- Apply the same rules to property portals, such as Rightmove and Zoopla.
Under the Enterprise and Regulatory Reform Act 2013, letting agents will be required to belong to a redress scheme and display the name of the scheme to which they belong.
Under the Housing and Planning Act 2016, letting agents will be required to display the name of the client money protection scheme to which they belong (if they are required to belong to such a scheme).
Company lets or other non-Housing Act tenancies are likely to be exempt.
Local authorities will be required to enforce the ban, which contains a provision for tenants to recover any unlawfully charged fees.
It will be a civil offence with a fine of £5,000 for an initial breach of the ban and become a criminal offence if an individual has been fined or convicted of the same offence within the last five years. As an alternative to prosecution, a civil penalty of up to £30,000 can be issued.
So – is this enough?
Labour’s London Assembly housing spokesman, Tom Copley AM, doesn’t think so. He says there are flaws in the draft bill: “The cap on security deposits at six weeks is far too high and should be lowered to further reduce the exorbitant cost of renting for private tenants. More fundamentally, ministers need to drop their ideological opposition to any form of rent control and bring Britain’s private rented sector into line with European countries like France and Germany. We need longer tenancies and caps on rent increases to give tenants more security and affordability.”