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Government publishes draft Bill on agent fee ban

letting agent fees
Victoria Barker
Written by Victoria Barker

The Government has published a draft Tenant Fees Bill, which details plans to ban letting agent fees paid by tenants.

The proposed agent fee ban will mean that tenants in England will no longer have to pay anything other than rent and a refundable deposit.

A consultation has also been launched by the government today, on making membership of client money protection schemes mandatory for letting and managing agents that handle client money.

The Bill will include:
  • Holding deposits should be capped at no more than one week’s rent, and security deposits should be no more than six week’s rent.
  • Letting agents who breach the ban for the first time could be fined up to £5000. In cases where an agent is fined and convicted of the same offence within the past 5 years, this will be regarded as a criminal offence and penalties of up to £30,000 could be issued.
  • Trading Standards will be required to enforce the letting agent fee ban
  • Appoint a lead enforcement authority in the lettings sector.
  • Amend the Consumer Rights Act 2015 to specify that the letting agent transparency requirements should apply to property portals such as Rightmove and Zoopla.

Alan Ward, RLA Chairman said: “It is welcome that greater clarity is being provided to the sector and that Ministers have clearly listened on a number of important points. Most notably, proposing to cap security deposits at six weeks rather than one month recognises concerns about the need to ensure protections against tenants’ default on rent payment and damage to property.

“Ultimately though, cutting costs for tenants means boosting the supply of homes for rent. Whilst we recognise the Government’s objectives, this would best be achieved by using the Budget to encourage good landlords to build more homes.”

Since it was announced in the Autumn Statement last year, the government held a consultation on the proposals to ban letting agent fees, which the RLA contributed to.

Communities Secretary Sajid Javid said:”Tenants should no longer be hit by surprise fees they may struggle to afford and should only be required to pay their rent alongside a refundable deposit.

We’re delivering on our promise to ban letting agent fees, alongside other measures to make renting fairer and increase protection for renters”

In our consultation response, the RLA raised concerns about the impact the ban will have on landlords and tenants, who could see their rents rise as a result.

Further details of the draft Tenant Fees Bill can be found on the government website.

For an in-depth look at this draft Bill please read the RLA Policy Director David Smiths’ blog post on the letting agent fee ban.

For more information:

About the author

Victoria Barker

Victoria Barker

Victoria is the Communications Officer for the RLA.

She is responsible for producing articles for our Campaigns and News Centre, the weekly E-News newsletter and media review, and creating social media content. She also contributes to our members magazine, Residential Property Investor.

6 Comments

  • “Holding deposits should be capped at no more than one week’s rent”. This is a joke and I hope this is amended.
    I have a small 1 bed flat which has a rent of £410 pcm. This means I can only take a holding deposit of £94. This means I could possibly lose over £494. Let me explain.
    Tenant gives notice, I advertise the same day on rightmove at a cost of £95. I usually find a new tenant within a week (they usually have to give a months notice). My void will be 2 days to make sure the flat is clean for the next tenant (it should be anyway but it usually isn’t). Once I have received the 1st installment of the holding deposit (holds it for 6 days) which is £200 we then proceed with the tenant references (£33 paid by tenant). They never fail because I go through all the questions with them first. If it is likely they will fail I do not proceed any further and no money has changed hands. Once the tenant reference has come back I ask for the balance of the holding deposit so in effect I am holding £450 for about 2.5 weeks before the start of the tenancy. On the first day of the tenancy the holding deposit is converted to the security deposit and sent to the DPS. It has only cost the tenant the reference fee of £33. They are protected and I am protected.
    With this amount of money involved I can be assured that the prospective tenant is serious.
    If I was only allowed to take a holding deposit of £94 the tenant (for the sake of that much money) could change their mind at any time even as late as the agreed tenancy start date. This would mean I would have to re-advertise at a cost of £95. As most tenants have to give a months notice I may not be able to get anyone in that flat for 1 month so I will lose a months rent of £410. I will also have to pay council tax for that month which will be £84. I will also have the hassle of changing utility bills into my name for that period of time and pay the bills although they should be small unless it is winter and I would have to heat the flat.
    If I take £94 holding deposit this is small change for my tenants as they are on high salarys and they usually earn more than me despite the fact that I have 5 flats. It is not enough money for them to fully commit.
    Imagine if it happened twice in a row?
    Will someone please look at the common sense in this. As a private landlord we do not charge fees but we also need to be protected. If the tenant was committed to the property they would not mind paying a large holding deposit as it is converted to the security deposit anyway. If a tenant can not come up with a large holding deposit it would ring alarm bells with me as it would indicate that they could not afford the rent.

    • You only take a holding deposit until you can get your paperwork sorted out, surely, and there’s nothing stopping you getting the lease signed well in advance of the actual start date of the tenancy, surely?

  • So now landlords will have to pay for credit checks for anyone who says that want to rent a property from them. Ridiculous, especially for those outside London who cannot raise rents by much more than they already charge. Landlords will have to ask tenants to provide their own verifiable checks to avoid losing all the profit before the tenancy begins!

  • The implementation of.more regulation in the housing sector will drive landlords to sell and force letting agents into administration through costs that they can’t claim back. Rent increases of 5 to 10% are now inevitable if we look at landlord taxation, increased stamp duty, higher letting agent fees and now Bank of England base rate increases. Another not very well thought out short term vote winner.

  • Victoria,

    does the letting agent fee ban apply to landlords directly aswell? I am a landlord and manage all my properties myself and so do not use a letting agent.

    At the moment it is in an applicants interest to be honest when submitting an application. If the application reveals an issue such as bad credit and this can’t be resolved using a guarantor or full payment in advance, then I refund the application fee as I have been able to find this out without having to commence the background checks. It therefore encourages the applicant to be honest, as otherwise if they do not disclose this information and I then find it out when undergoing the background checks, the fee is forfeited to pay for the checks and so not only do they not get the house, but they also lose the fee. However, if we are now prevented from charging such a fee then there will no longer be any incentive for the applicant to be honest as if they have not paid anything and withold information or even lie and it is found to be the case, the tenant is merely unable to get that particular house. They do not however lose any money! It is only the landlord that loses as they will have had to pay for background checks based on dubious information and they will then have to search for another applicant. It will also lead to less transparency, as landlords will have to include it under the guise of some other service, instead of being honest about it being a fee to cover background checks.

    A modest fee to cover background enquiries encourages both honesty and transparency. No fee just encourages applicants to be deceitful as they have nothing to lose.

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