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Tenant Fees Bill at a glance

Wednesday 01 November 2017

The Government has published a Draft Tenant Fees Bill which raises unprecedented questions for the future of the industry and brings all agencies, large and small, to a fork in the road.

The Bill seeks to reduce costs to tenants by banning landlords and their agents from requiring any payments from tenants as a condition of granting, renewing or continuing a tenancy with the exception of rent, a refundable tenancy deposit, a refundable holding deposit and tenant default fees (for things like lost keys or late rent payments). The Bill bans landlords and agents from requiring tenants to secure and pay for services from any third party.

Applicability

Of particular note, Clause 22 indicates that the ban will not be retrospective so tenant fees including those for renewals and check outs relating to tenancies which were in existence before the ban comes into force, will still be payable. 

Clause 20 indicates the ban will not apply to either company lets or other non-Housing Act tenancies.

At a glance:

Tenancy deposit

In the Queen's Speech the maximum tenancy deposit was limited to four weeks' rent. We made the case repeatedly face to face and in writing that the cap for this needed to be increased to six weeks and we are pleased that the Government has listened to us on this point. 

Holdings Deposits

In order to remove a property from the market, landlords and agents are permitted to charge a refundable holding deposit of no more than one week’s rent. The holding deposit must be returned within 15 days if the landlord or agent decides not to take forward the tenancy.

However. landlord or letting agents do not have to refund a holding deposit if:

  • a tenant does not have the right to rent property under the Immigration Act
  • or if the tenant provides false or misleading information (ie failed referencing checks)
  • or if the tenant decides not to enter into the agreement (changes their mind) or fails to take all reasonable steps to enter into a tenancy agreement (deliberately drags their feet).

The holding deposit for the successful tenant can then form part of either the first month’s rent or the tenancy deposit.

Enforcement and penalties

Trading Standards can impose fines of up to £5,000 on landlords or their letting agent if it's beyond reasonable doubt that a tenant has been required to make a prohibited payment, or if the landlord or agent has failed to return a holding deposit. However, this fine can be increased to anything up to £30,000 as an alternative to prosecution for repeat offenders. There will be a right of appeal to the First-Tier Tribunal. 

Display of fees

Amends have been made to Consumer Rights Act 2015 to extend provisions on display of fees in offices and on websites. Fees, Client Money Protection and redress scheme memberships will need to be displayed on the property portals. 

Commenting on the Bill, ARLA Chief Executive, David Cox said:

”We have discussed the proposal to ban letting agents fees with government ministers and officials many times since the announcement. Having now seen the Draft Bill, it is essential that during its passage through Parliament, this legislation is shaped to make it fair to consumers, while supporting businesses to carry out the work necessary to create and maintain successful tenancies; including legal requirements such as Right to Rent checks.

We are very pleased to see that government has listened to our call and increased maximum security deposits from four to six weeks and are encouraged that it appears those tenants who wish to break their contract will have to cover the legitimate costs of finding a new tenant.”

The legislation is still in draft form, ensure that you use the ARLA Propertymark toolkit to support your dialogue with your constituency MP. This is vital to ensure that MPs are fully aware of the arguments and evidence before they vote on the legislation. This is the time for agents to explain the necessity of fees and the consequences to tenants of a ban.