The purpose of this draft bill is to set out the Government’s approach to banning letting agents’ fees paid by tenants. As the bill is currently in draft form there is still some way to go before its contents become law. In terms of process it is worth noting;
- The proposal to ban fees was in the manifesto of all major political parties, so there is broad political support for the proposals
- The bill is in draft form, so there is still an opportunity to influence various aspects of it, particularly those elements that the government is still formally consulting on
£13 million per month
Philip Hammond announced the intention to introduce a ban on Letting agents’ fees which are paid by tenants back in November 2016. This follows concerns from some about the amount renters were required to pay in such fees – currently estimated at £13 million per month. It is fair to say that the aim of the Government here is to dramatically reduce costs to tenants.
The draft bill is the result of a period of consulting over the summer and it is important to note that it relates to England only.
What the government says that this bill will do
The bill is aimed at banning landlords or their agents from requiring any payment from tenants for granting, renewing or continuing their tenancy, with three exceptions;
- Rent
- Refundable tenancy and holding deposits
- Tenant default fees, for lost keys, late payments etc.
In its current form the ban also covers landlords or their agents requiring a tenant to pay for a service from a third party, such as for a reference check or similar service.
Deposit Capped
The intention set out in the draft bill is to cap tenancy deposits at no more than 6 weeks rent and holding deposits at no more than 1 week’s rent.
In this proposal, any holding deposit must be refundable. Furthermore it must be returned within 15 days if the landlord or agent decides not to take forward the tenancy. However, it can be retained if the tenant;
- Fails right to rent checks
- Provides false or misleading information
- Does not take forward the tenancy or do so in a timely manner
Once the tenancy is confirmed it is possible for the holding deposit to form part of the first month’s rent or be put towards the tenancy deposit.
Penalties and enforcement, with fines up to £30,000
In its current draft form, the bill includes
- The creation of a civil offence with a fine of up to £5,000, if it is found beyond reasonable doubt that the agent has charged a prohibited payment or if a holding deposit is not returned
- The creation of a criminal offence where a person has been fined or convicted of the same offence within a 5 year period, with civil penalties of up to £30,000 to be issued as an alternative to prosecution
- The requirement for Trading Standards to enforce the ban and make provision for tenants to be able to recover unlawfully charged fees
Also included in this month’s draft is the proposal to amend the consumer rights act so that the letting agent transparency requirements will also apply to property advertising portals, such as Right Move and Zoopla.
Should all aspects of the bill move forward as currently positioned, this would mean such websites would need to display the following on relevant property ads
- Any permitted Letting Agent fees
- Which property redress scheme the agent was part of
- The relevant client money protection scheme
Forward facing
Finally it is important to note that if and when the bill is introduced, it will not be retrospective so at present it is not envisaged that these changes will apply to existing tenancies.
The Student Perspective
The implications of the draft bill are very significant for the sector. However, our research has indicated that most student specialist agents and landlords have started to plan for it some time ago.
Currently opinion is still split between those who feel it will not have too much impact and those that do feel the impact will result in increased rents being passed onto students. Only time will tell how this plays out, however, the student accommodation sector has traditionally been very innovative in the way that it responds. We have already seen some of the hall providers remove the requirement for students to pay any form of deposit or booking fee, to make the online booking experience as simple as possible.
We will be collecting further feedback and comment from our landlords, agents and halls partners in our December survey, but in the meantime please do get in touch if you have any questions or comments.
