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The Tenant Fees Bill – What's Changed?

Thursday 20 December 2018

The Government announced some significant amendments to the Tenant Fees Bill on 4 December, peers have since voted to make changes during Report Stage.

What is Report Stage?

Report Stage is the final opportunity for Parliamentarians to bring forward and vote on amendments to a Bill. In the House of Lords, where the Tenant Fees Bill is currently in its legislative stages, any member can take part and vote on any changes to the legislation. Report Stage for the Tenant Fees Bill in the House of Lords took place on 11 December.

Security deposits

Before Report Stage, the Government announced its intention to change the security deposit cap in the Bill from six weeks’ rent to five. This was passed on vote, and will apply to all tenancies except where the rent exceeds £50,000 a year – which will still be subject to a six weeks’ rent cap.

Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office, said: “On the point that we have moved significantly from six weeks to five weeks, yes, it is a movement, but it is scarcely, as the noble Lord suggests, a fundamental shift. It is not as if we are moving from 10 weeks to one week. Perhaps I may provide some reassurance. All the evidence is that most people currently take deposits of between four or five weeks. It is not therefore massively inconsistent with current practice.

“At the top end of the market we are retaining the six-week limit for the most expensive properties where the fittings and fixtures may be more costly. It will remain at six weeks where the annual rental is more than £50,000. I hope that provides some reassurance to those noble Lords who have raised the concern.”

Holding deposits

Lords voted to limit holding deposits to one per property, and if any further holding deposit is charged it will be classed as a prohibited payment. It will now be a formal requirement for an agent or landlord to notify in writing why they have not returned the holding deposit to the potential tenant.

Commenting, Lord Bourne of Aberystwyth said,   

“Amendment 65 introduces a formal requirement for landlords and agents to give written notice to the tenant, setting out why they are retaining the deposit. This notice must be provided within seven days of the landlord or agent deciding not to enter into a tenancy agreement or where the landlord and agent fail to enter into a tenancy agreement within seven days of the deadline for the agreement passing. Introducing a proactive requirement for landlords or agents to demonstrate that they have legitimate grounds to retain the deposit will make it easier for tenants to challenge decisions which they believe to be unfair. Where landlords and agents do not provide reasons for retaining the holding deposit, they will be required to repay the holding deposit to the tenant.”

CMP

The Bill made further amendment to the incoming of mandatory Client Money Protection Regulations due in April next year. The Government has clarified that Client Money Protection (CMP) providers will not need to cover money already protected in an approved deposit protection scheme.

Speaking to the House, Lord Bourne of Aberystwyth said,

“Certain elements of the Regulations do not work as originally intended”.

Further amendments made clear what will be required of CMP scheme administrators. This included individual limits of cover and clarified that the level of insurance held by schemes should reflect the proportionate risk of client money loss, rather than accounting for all money held in an agent’s client account.

Baroness Hayter of Kentish Town commented that the amendments, “will prevent arbitrage between different schemes”.

Default fees

Default fees will be limited to charges for replacement keys or a respective security device, and late rent payments only.

A late rent payment cannot be charged unless 14 days have passed since the full rent was due and has still not been paid. Taking into consideration each day that the rent remains unpaid, late rent charges will be capped at 3% above the Bank of England base rate (currently at 0.75%); and any charge above this will be classed as a prohibited payment.

When questioned on the matter Lord Bourne of Aberystwyth said,  

“I maintain that we should not seek to remove default fees provision from the Bill entirely and that landlords and agents should be able to recover certain costs sustained during the tenancy where the tenant is at fault.

“I believe that there are two main instances where tenants may be required to pay a default fee: if they lose their key or other security device giving access to the housing or if they fail to pay their rent on time. With that in mind, our amendments specify that these are the only circumstances under which a landlord or agent can charge a default fee. Amendment 54 will ensure that landlords and agents cannot write arbitrary default fees into tenancy agreements and makes very clear to tenants, landlords and agents where a default fee can be charged.

“With respect to the charging of a default fee to cover the costs associated with replacing a lost key or other security device, any such charge must not exceed the landlord’s or agent’s reasonable costs incurred and must be evidenced in writing to the person who is liable for the payment. The amount of any payment ​which exceeds the reasonable costs to the landlord or agent in respect of the default will be a prohibited payment. I believe that the risk of such a list being incomplete is mitigated by the provision in Clause 3 to bring forward amendments to the list of permitted payments through affirmative regulations, should this prove necessary.”

Damages

‘Payment of damages’ is now included as a permitted payment. This refers to where the tenant has breached the terms of their tenancy agreement, or any agreement that they may have with their letting agent.

What’s next?

Whilst the date for the Third Reading in the House of Lords is yet to be announced, we will continue to support our members and provide additional resources as the legislation receives Royal Assent and comes into force.

A full transcript of the debate can be read here.

Follow the remaining stages of the Bill here.