Tenant Fees Ban Update – What will it Mean to You?
This time last year (December 2016) we reported that in the Autumn Statement the Government advised that they are intending to ban tenant fees. A year on and a Draft Bill has been introduced to Parliament (published on 1st November 2017) which is now being considered and is open to the public until 13th December 2017.
I’d be surprised if there weren’t people out there who are still a little confused as to what the proposed Tenant Fees Ban means to them. So, let’s try and provide some more clarity on the subject.
As we said a year ago, it’s all about transparency and as a letting agent, we’re not against this in any way. We believe in transparency as much as anyone else and it has been long overdue. But the proposed Tenants Fee Ban Bill goes further than that in calling for more clarity and consistency in the level of charges submitted by letting agents in the UK. There’s no doubt that there are agents operating in the rental marketplace that have, for one reason or another, abused the system and charged tenants far too much for certain services, including double-charging.
With the Citizen’s Advice Bureau (COB) estimating that more than £13 million is spent on letting agents’ fees per month in the UK, here are the main points of the Draft Bill:
- To abolish up-front payments charged by letting agents to tenants.
- To make it mandatory for letting agents to sign up to a money protection scheme in the UK to protect tenants’ rent, repair and maintenance payments. This could cost the agent between £300 and £500 per year.
- To block agents from making any additional charges over and above the rent, with the exception of deposits (to be capped at 6 weeks’ rent), holding deposits (to be capped at one week’s rent), and any tenant default charges.
- Make it mandatory for letting agents to return holding deposits to the tenant.
- To abolish double-charging for some services.
- To block letting agents from requiring tenants’ to pay a third party company, i.e. an inventory clerk, a fee.
The Government is also proposing to make changes to the rules of transparency by requiring letting agents to post details of regulatory oversight(s) and fee structures on online property portals, such as Rightmove and Zoopla.
Currently a tenant pays a reference fee to establish that they are financially solvent and able to pay the rent, confirmation that they have the Right to Reside in the UK, plus a half share of the cost of a legally binding tenancy agreement. They are also expected by letting agents to pay the inventory clerk’s time to come and check them out of the property, thus ensuring that they have a record of the condition that they leave the property in at the end of a tenancy.
Under the Draft Bill, letting agents that break the fee ban will be fined £5,000. Any agents that continue to break the fee ban (twice in 5 years) could be fined up to £30,000 says Trading Standards, who will be the body that will be enforcing the Tenants Fee Ban should it become legal in the future.
For landlords, who have already been significantly hit by recent legislation from the Government, it is another case of potentially having to absorb more costs, and could result in higher rents. For letting agents, it also means absorbing certain costs that they will potentially no longer be able to pass on to the tenant. Some may increase their fee to landlords; some may not – it’s a competitive world out there.
For the moment, it’s a case of sitting tight and seeing what comes out of Parliament once it has been examined and amended (if required), and the feedback from the public, before it is formally introduced to Parliament as an actual Bill.
At Elizabeth Hunt & Associates, we operate a policy of ensuring that all costs are transparent and we advise you every step of the way towards your tenancy by providing regular monthly updates. We actively encourage feedback from our clients and welcome the Government’s initiative with respect to tenant’s fees. We look forward to 2018 which will bring more clarity from the Government and we will all have a clearer picture of what the proposed ban will entail.