The government intends to introduce a Tenants’ Fees Bill before the end of the year. The Bill will ban landlords and letting agents from requiring tenants to make any payments as a condition of their tenancy, with the exception of:
- – Rent;
- – A capped refundable security deposit (currently proposed to be no more than one month’s rent);
- – A capped refundable holding deposit (currently proposed to be no more than one week’s rent); and
- – Fees for management services carried out as a result of a tenant’s default (such as repairs arising from deliberate damage to the property or a breach of the tenant’s obligations).
What is the Current Position on Letting Agents’ Fees?
Currently many agents charge prospective tenants a fee for carrying out work associated with the grant of a tenancy such as:
- – Preparing a tenancy agreement;
- – Conducting reference checks;
- – Ensuring a tenant has the ‘Right to Rent’;
- – Preparing an inventory and agreeing the inventory with the tenant; and
- – Handling a renewal of a tenancy.
The average amount paid in fees is currently £223, according to government figures. However, housing charity Shelter reports that one in seven renters pays more than £500. Some tenants in London have been charged fees of up to £2,000.
The Government’s Aim
Lettings agents in England and Wales have been required since May 2015 to publicise a list of the fees they charge to landlords and tenants. The fee tariff must be displayed prominently at the agent’s premises and must be published on the agent’s website, if they have one. But the government feels that more needs to be done to tackle the ‘unfair’ fees charged to tenants. It hopes that the ban on fees for tenants will improve competition in the rental market and drive up standards by encouraging landlords (who will now bear the agents’ fees) to shop around for more competitive fees.
Are Landlords and Agents Concerned?
Within the property industry concerns have been raised that the fees ban will:
- – Cause job losses for lettings agents;
- – Lead to a lower service level for tenants;
- – Make buy-to-let investments less attractive for landlords who will have to pay the agents’ fees instead of the tenants; and
- – Lead to increases in rent as landlords pass the cost of the fees onto their tenants.
There are also concerns that the proposed cap on the security deposit of one month’s rent is too low. The current average deposit is equal to six weeks’ rent but sometimes a higher deposit is sought from higher-risk tenants. If this option is not available to landlords, they may simply decline to offer their properties to such tenants.
While the Bill is expected to be published before the end of 2017, the new rules are not likely to come into force before late 2018. Lettings agents and landlords need to keep up-to-date with developments and ensure they are ready for the new regime.
How Does This Affect You?
Are you a landlord or letting agent who will be affected by the fees ban? Will the ban achieve the government’s aim of improving service provision for landlords and tenants or does it just add to the burden on landlords and agents and make investment in the private rented sector increasingly unattractive? Let us know what you think by commenting below.