Ban on Tenants’ Fees

Lettings agents and landlords in England will face civil and criminal charges for flouting a ban on fees, the Government has revealed when it published its Draft Tenants’ Fees Bill on 1st November 2017.It will create a civil offence with a fine of £5,000 for an initial breach of the ban, and create a criminal offence where an agent has been fined or convicted of the same offence within the past five years. Penalties of up to £30,000 can be issued.A ban on lettings fees to tenants was first announced a year ago and there was a consultation in June answered by 4,700 respondents.The Government has also launched a consultation on making membership of client money protection schemes mandatory for letting and managing agents that handle client money.The Bill will:

  • Cap holding deposits at no more than one week’s rent and security deposits at no more than six weeks’ rent. The draft Bill also sets out the proposed requirements on landlords and agents to return a holding deposit to a tenant.
  • Create a civil offence with a fine of £5,000 for an initial breach of the ban on letting agent fees and create a criminal offence where a person has been fined or convicted of the same offence within five years. Civil penalties of up to £30,000 can be issued as an alternative to prosecution.
  •  Require Trading Standards to enforce the ban and to make provision for tenants to be able to recover unlawfully charged fees.
  • Appoint a lead enforcement authority in the lettings sector.
  • Amend the Consumer Rights Act 2015 to specify that the letting agent transparency requirements should apply to property portals such as Rightmove, OTM and Zoopla.

The full draft bill can be viewed here So what does this mean for landlords, agents and tenants if the Bill passes through the House un-amended. Probably with effect from July or October 2018 (dependent upon parliamentary time available) the position will be as follows:The Permitted Payments will be:

  1. The rent
  2. The Refundable tenancy deposit max of 6 weeks (and NOT 1.5 months’ rent)
  3. The Refundable holding deposit max of one week’s rent
  4. Payment that is required in the event of a default by the tenant (ie late rent payment or breach of tenancy agreement by tenant.

And that is it. If it doesn’t appear in the above list then it is not permitted. So what will be banned are the rest of the fees which are levied at present including:

  1. Application fees including credit check, referencing and contribution towards the cost of inventory preparation.
  2. Admin fees at sign up including pet licence fee
  3. Pet deposit

What is likely to happen as a result is that landlords are going to be asked by agents to bear the bulk of the fees (which will no longer be chargeable to tenants) through a modest uplift in Full Management fees and Let Only fees (depending upon instructions received). As a result, landlords are likely to insist that rents rise to compensate for the increased costs of letting/management. The nett effect will be that tenants will therefore continue to pay for what at present are application fees through an uplift in rent.At this stage it is hard to see what is going to be gained by who with the introduction of this legislation.Hazells will continue to monitor the situation closely and provide updates as and when these become available. In the meantime if you would like to discuss the likely implications for you please call either Jane or Chris on 01284-702626. CWJO17th November 2017