The government is introducing a draft Bill to Parliament today to ban letting fees for tenants in England.
The Draft Tenants’ Fees Bill aims to make it easier for tenants to clearly see how much a property will cost them to rent, without being hit by extra fees that lettings agents have added in the past. It will also prevent agents from double charging both landlords and tenants for the same services.
The Bill will introduce an enforcement authority in the lettings sector and will ensure that tenancy deposits are capped at six weeks’ rent and that a holding deposit cannot be for more than one week’s rent.
It comes in the wake of a public consultation on letting fees, with more than 90% of tenants who took part in the consultation backing the move to ban letting agent fees. Seven out of 10 of them said these fees affected their ability to move into a new rented property.
Tenants will no longer have to pay fees for services including referencing or renewing a tenancy agreement, simply paying rent and a deposit. If an agent or landlord attempts to charge for other services, they could be fined between £5,000 and £30,000.
The draft Tenant Fees 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 creating a criminal offence where a person has been fined or convicted of the same offence within the past 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 and Zoopla.
The government has also launched a consultation on making letting and managing agents that handle money belong to a client money protection scheme so that landlords and tenants can be confident that their money is safe.
‘Ban will make renting fairer for tenants’
Communities Secretary Sajid Javid says: “Tenants rely on agents to find properties, yet they are selected and appointed by landlords. That disparity can lead to tenants paying hundreds of pounds in fees that are far from transparent, substantially raising the costs involved in renting, and causing nasty surprises for new tenants who think they’ve found a home that suits their needs and budget.”
He adds: “The ban will make renting fairer and easier for tenants by allowing them to see upfront what a given property will cost them – the rent that is advertised will be what you are expected to pay, nothing more.”
Rental sector ‘a minefield’
Russell Quirk, founder and chief executive of online agent eMoov.co.uk, says: "The introduction of this bill brings us a step closer to levelling the playing field between letting agent and tenant and one that is certainly a step in the right direction. The rental sector can be a minefield of unforeseen costs and a ban on letting fees should make the whole process a lot more transparent and consumer friendly.”
However, he adds agents could try to recoup their costs by passing them on to landlords.
“There is, of course, a danger that these agents will now try and recoup their losses through alternative means such charging higher fees to the landlord themselves. This would be an 'around the houses' way of bypassing the ban on letting fees, as any additional cost to the landlord is likely to be passed down the line in higher rents,” he says.