A new Tenants’ Fees Bill was one of the key proposals announced in the Queen’s Speech to Parliament which took place on the 21st June. If it becomes law landlords and agents will be banned from requiring tenants to pay letting agents fees as a condition of their tenancy. There will also be limits for tenants deposits.
The idea of banning letting agent fees across England & Wales was originally proposed by the Conservative government in the 2016 Autumn Statement. Scotland’s ban on letting agents’ fees has been in place since 2012, so the drafted Bill for England has been long awaited.
Currently, agents’ fees are commonly charged for obtaining references, carrying out credit checks, inventory checks and other administration costs. These fees are not always transparent and can vary considerably between agents.
According to government figures, the average letting fees charged for each tenancy is currently £223. However, the housing charity Shelter has found that one in seven tenants pays over £500 in fees; and that some tenants in London have even paid fees of up to £2000.
As drafted the Tenant’s Fees Bill will mean that the tenant will only be expected to pay the rent, a refundable security deposit, and late payment default fees. The draft Bill also proposes that the tenants’ deposit will be a maximum of one week’s rent holding deposit and one month’s rent security deposit.
The Bill delivers on the Conservative manifesto pledge, and it is highly likely we will see it become law. This is due to the cross party support that saw Labour pledge to “legislate to ban letting agency fees for tenants”, as well as the Liberal Democrats who proposed to “improve renting by banning lettings fees for tenants.” The rationale for the ban is to provide greater protection to tenants who may be forced to pay high unregulated fees.
However, the bill has received objection from landlords and lettings agents alike. ARLA Propertymark’s chief executive David Cox has expressed concerns that once the bill becomes law, the decrease in agents turnover could cost the letting agent sector as many as 4,000 jobs. It will also be down to the landlords to pay for such fees themselves, which then may be passed on to the tenants by way of higher rents. This will in turn make buy-to-let investments less attractive, resulting in a decrease of available rental properties.
Tony Sutton from Howell Jones Solicitors says “Although the government’s proposal may be viewed as a pro tenant initiative it is thought that this may also result in an increase in rents and agents fees , which in turn may make buy-to –let an unattractive investment. The National Landlords Association believes that the government is bringing in this Bill in order to encourage the votes of tenants. It is a growing concern that tenants will therefore consider the deposit to be the last month’s rent, leaving landlords at risk of additional expense if the property is damaged.
If you are considering letting out your property, or renting in the future, it is advisable to seek professional guidance from a solicitor.
