MPs yesterday debated, and approved without a vote, the Tenant Fees Bill at second reading.
Opening the debate, the Housing Secretary, James Brokenshire MP, summed up the Bill, which he said takes forward ‘essential measures to promote fairness in the private lettings market’.
He said: “It is a Bill that we should all welcome.
“The Bill will make the market more transparent, yes, but it also has the potential to save tenants—especially young people and families—hundreds of pounds.
On the decision to cap deposits at six week’s rents, the Secretary of State noted that this was an “upper limit and not a recommendation.”
He added: “We expect landlords to find an appropriate level on a case-by-case basis and we will provide guidance to that effect.
“A cap of six weeks’ rent, in our judgment, offers a balance of greater protection to tenants while giving landlords the flexibility to accept higher-risk tenants.
“It will also give landlords adequate financial security, and we believe that is necessary to maintain investment and supply in the sector.”
‘Fair playing field’
He went on to say the bill was not designed to penalise those doing it right.
He added: “The Bill is not an attack on good agents and landlords. We value the important services that they provide, but it will ensure a fair playing field for reputable agents by making it harder for rogues to operate.
“Letting agents and landlords who represent good value for money will continue to thrive, while those who rely on charging unfair and unjustifiable fees will have to reconsider their business models.”
Welcoming the Bill, the Shadow Minister for the PRS, Melanie Onn MP said: “We know that the majority of landlords are good landlords, or strive to be, and understand the expectations upon them before they embark on becoming a landlord.
“However, a number of rogue landlords and letting agents give the sector a bad name, undermine the good work of quality agents and landlords, and they have squeezed tenants for cash in unfair ways, with disproportionate charges for unjustifiable reasons.”
On the issue of ‘default fees’ she told the House that these are “to be capped at the level of the landlord’s loss.”
She said: “A landlord should not be required to pay for a banking or other fine due to a tenant making a payment late or the replacement of a lost key or entry fob.
“However, the Minister must be aware of the scope for this to become a nice little earner for agents or landlords who would seek to unfairly penalise their tenants for minor errors.”
Whilst expressing his support for the Bill, Kevin Hollinrake Conservative MP for Thirsk and Malton and member of the HCLG Select Committee said that in relation to holding deposits and reference fees, it is “a reasonable concern that if we do not allow a letting agent or landlord to hold back a reasonable amount for referencing, they might be more likely to pick a better-off tenant than some of the lower-income tenants she is seeking, quite rightly, to protect.”
In his contribution, the Chair of the HCLG Select Committee, Clive Betts MP, noted: “There could in some circumstances be an increase in rents to compensate, and that would be legitimate if done properly from the beginning, but again there was evidence that if tenants were asked to pay a bit more each month, rather than a lump sum fee, that would help them in most cases.
“Organisations representing tenants generally accepted that point.”
Bob Blackman MP, Conservative, Harrow East – Member of the HCLG Committee said: “It cannot be right for an agent to work for both the landlord and the tenant, and for fees to be charged in both directions.
“The principle has to be that the letting agent acts on behalf of the landlord and that the landlord therefore pays the costs of the agent.
“Tenants should not be charged for the purposes of identifying a tenancy.”
Andrew Lewer Conservative MP for Northampton South – Member of the HCLG Select Committee said: “Although it is true that some renters pay many hundreds of pounds in fees to letting agents, I want to point out that the solution proposed by the Government may merely shift the cost of the burden, not to landlords and lettings agents, but back to tenants in a different way.
“Banning letting agency fees means that the money will have to come from somewhere else, at least as far as legitimate services from respectable letting agents are concerned.
“Landlords may well be forced to, or at least will, increase rents across the tenancy to cover the costs anyway.”
Wera Hobhouse Liberal Democrat MP for Bath and HCLG spokesperson, whilst expressing support for the legislation, added: “Many landlords are not badly intentioned, but we must do more to stop those who abuse the system.
“There must be compulsory registration for landlords. There must also be public access to the Government’s database of rogue landlords, and those landlords should not be able to obtain a licence for houses in multiple occupation.”
Richard Graham, Conservative MP for Gloucester, who said he and his wife last year become amateur landlords, told the House: “Tenants are not equal partners in the negotiations and lots of family landlords inevitably devolve decision making to agents.
“As both the current and previous Secretaries of State have said, and as the shadow Minister, the hon. Member for Great Grimsby (Melanie Onn), said today, a small—I repeat, small—number of rogue agents have spoiled the situation.
“As the supply-and-demand equation has altered, so, in turn, tenants have become more squeezed.”
Earlier this year RLA policy director David Smith warned the CLG Select Committee that landlords are likely to be left with increased bills when tenants’ fees are banned and said treating the whole of the PRS the same way is a mistake.
And earlier this month it was revealed that the ban will cost landlords £82.9million in the first year, with letting agents paying £157.1m.
The figure was included in the Government’s official response to the HCLG Select Committee’s report on the draft Tenant Fees’ Bill.
The Bill will now progress to line by line scrutiny at Committee stage which will include an opportunity to provide a written submission on the detail of the Bill and suggest any amendments to it. A date for this has yet to be set.
To read a transcript of the debate click here.