On 1 November the government published its response to the Department for Communities and Local Government’s consultation on banning letting agency fees paid by tenants. The draft Tenant Fees Bill 2017 was introduced in Parliament the same day.
The Tenant Fees Bill aims to ban landlords and their agents from levying fees against occupants of private rented properties in England for the grant, renewal or continuance of a tenancy.
Additional changes proposed by the Bill include:
The government has also said it intends to extend the ban to cover fees charged by landlords (but excluding tenant default fees such as charges for replacing a lost key).
Critically, the ban will only apply to new tenancies and licences; i.e. those entered into after the legislation has come into force. The ban will also not apply to long leasehold tenants, council housed tenants, those living in housing association properties and holiday lets.
Trading Standards will enforce the ban. In the first instance, the penalty for breaching the rules will be a fine of up to £5,000. Subsequent breaches could result in criminal prosecution or a fine of up to £30,000.
A tenancy agreement which requires a tenant to make prohibited payments is not binding on the tenant although the rest of the tenancy agreement will continue to apply. If the tenant pays a prohibited payment then they will be entitled to a refund, plus interest.
The Bill is expected to undergo some amendment before it becomes law but lettings agents would be well-advised to review their tenancy and licence agreements sooner rather than later to ensure they have a clear plan for adjusting business practices to accommodate the new rules.
The changes will have a huge impact to letting agents, particularly those who rely on tenants fees as a large proportion of their profits. It is expected that agents may wish to recover equivalent fees directly from landlords. This presents a sensible opportunity to review agency agreements in full to ensure that the terms are still up to date, relevant and (perhaps most critically for agents) enforceable.
Landlords may wish to consider signing up to a fixed term agreement with agents now in order to avoid incurring fees for drafting tenancy agreements. We are aware of local agents in Southampton offering 2-5 year fixed management agreements during which time fees will not be passed on to the Landlords.
Who to contact
If you would like further advice on the proposed ban, including advice on reviewing your tenancy agreements, then please email Nicola Davies or call her on 023 8048 2212.
If you are considering reviewing your lettings agency agreement (as a lettings agent or landlord) then please email me or call me on 023 8048 2316 for further advice and support.