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Tenant Fees Bill introduced into Parliament

Wednesday 02 May 2018

On Wednesday 2 May 2018, the Government introduced the Tenant Fees Bill following pre-legislative scrutiny and recommendations from the Housing, Communities and Local Government Select Committee. All measures relate to England only.

A ban on letting fees was announced at Autumn Statement 2016 and was also a commitment in the 2017 Conservative Party Manifesto. The Tenant Fees Bill reflects feedback from the recent public consultation, which ran from April to June 2017 and received over 4,700 responses. A draft Tenant Fees Bill was published by the Government on 1 November 2017 and underwent pre-legislative scrutiny by the Housing, Communities and Local Government Committee. 

Under the Tenant Fees Bill, a deposit at the start of a tenancy cannot exceed six weeks’ rent and holding deposits will be capped at no more than one week’s rent. The Government has decided not to accept the Committee’s recommendation to lower the cap on tenancy deposits to five weeks’ rent. They do, however, state that a deposit of six weeks’ rent is an upper limit and not a recommendation. Landlords are expected to consider on a case by case basis the appropriate level of deposit to take.

Alongside the rent and deposits, letting agents and landlords will only be permitted to charge tenants fees associated with: a change or early termination of a tenancy when requested by the tenant; utilities, communication services and Council Tax; payments arising from a default by the tenant such as replacing lost key.

The Bill caps the amount that can be charged for a change to tenancy at £50 unless the landlord demonstrates that greater costs were incurred. Other provisions include amending the Consumer Rights Act 2015 to specify that the letting agent transparency requirements should apply to property portals such as Rightmove and Zoopla.

A focus of the Committee was enforcement action. The new legislation will require Trading Standards to enforce the ban and to make provision for tenants to be able to recover unlawfully charged fees via the First-tier Tribunal. Additionally, the Bill prevents landlords from recovering possession of their property via the section 21 Housing Act 1988 procedure until they have repaid any unlawfully charged fees.

The Bill will create a financial penalty with a fine of £5,000 for an initial breach of the ban with a criminal offence where a person has been fined or convicted of the same offence within the last five years. Financial penalties of up to £30,000 can be issued as an alternative to prosecution. Furthermore, local authorities will be able to retain the money raised through financial penalties with this money reserved for future local housing enforcement.

The Tenant Fees Bill is now subject to Parliamentary timetables and will be introduced in law next year.

Commenting after the introduction of the Bill, David Cox - Chief Executive, ARLA Propertymark, said:

“The day we have been expecting since the Chancellor announced the ban on tenant fees in the Autumn Statement 2016 has arrived, with the Tenant Fees Bill beginning its passage through Parliament this afternoon.

“We do not believe the Bill will achieve its aims, as our own research last year demonstrated that tenants will end up worse off and banning fees will not result in a more affordable private rented sector.

“ARLA Propertymark has worked hard over the last 18 months to explain the unintended consequences of the ban to Government, and we’re pleased they have listened and allowed Change of Sharer, Surrender of Tenancy, holding deposits, exempted the Green Deal Charge, and capped security deposits at six weeks, rather than the Committee’s proposed five-week cap. Now that we have greater clarity on what the ban will entail, agents must start preparing for when it comes into force.”