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Letting Agent Fee Ban Bill Published

David Smith Legal Update Private Rented Sector
David Smith
Written by David Smith

The government has today published its response to the consultation on banning letting agent fees to tenants along with a draft bill.

Consultation Response

There was a disparity between the views of agents and tenants in terms of the response to the consultation. Most agents felt that the new requirement to publish fees had increased transparency. Most tenants felt the opposite. Landlords were fairly neutral. Tenants were strongly anti-fees and said that fees charged had limited their ability to move house. Around half of tenants claimed to be unaware of fees. There was a surprising disparity in the fee levels with agents responses suggesting an average fee of £238 per tenant with tenant responses suggesting an average fee per tenant of £327. This is likely to be due to confusion over how agents charge fees and the different fee models in use were a point of comment for the government with it stating that unless there was more standardisation there would remain a lack of transparency.

Most landlords charge little or no fees at all and the difference is remarked on by the government. Landlords also said that agent fees had affected their agency decision in the past and that increased agent fees would motivate them to move agents in the future.

A hugely persuasive part of the consultation responses was the fact that tenants felt that it did not matter whether they knew about agency fees or not as they had no power to affect the fees charged. This aligned closely with the government initial thinking that it was landlords who truly had the power to choose agents and therefore to drive fees down.

Most tenants were keen to see the ban extended to landlords and for it to include all other premiums and other fees. Most tenants accepted the idea of holding deposits but 7% of tenants did not agree with those either.

The consultation also showed a very high level of support for a cap on tenancy deposits more generally although the exact level of cap was disputed. There was also a surprising amount of support for caps on holding deposits, even from landlords and agents.

The Bill

The draft bill creates a blanket ban on all fees charged by a landlord or agent for the grant, renewal, or continuation of an assured shorthold tenancy or a licence. Any tenancy that falls outside the Housing Act 1988 regime will not be covered. Strangely the draft bill also does not mention lease assignments. In practice, this means that ASTs and licences cannot have fees charged in respect of them but other tenancies such as company let agreements and the like can. There appears to be no particularly good reason for ignoring other types of tenancy although that has been the case before and the reality is probably that the government only had a weak understanding of such tenancies.

There is then a list of permissible fees set out in the schedule which includes fees for breaches of the tenancy and holding deposit fees. This schedule can be amended by the Secretary of State by order.

There are some anti-avoidance provisions such as disallowing a rent for a higher sum initially which then drops later on. There is also a provision which states that any clause in a tenancy which purports to charge a banned fee is void although this does not make the entire agreement void and tenants can seek repayment of their money through the county court as well.

Enforcement will be through trading standards officers. However, they are under a duty to enforce the legislation unlike the current regime where they are not so obliged and so agents will be able to complain about other agents who are not obeying the provisions properly. The initial penalty is up to £5,000 payable as a civil penalty. A repeated breach is a criminal offence but can also be dealt with by a civil penalty of up to £30,000. If the sum taken unlawfully has not been repaid already and no claim has been made for it through the civil courts then this can be added to the fixed penalty and recovered for the tenant in this way. As usual, if the offence is being committed by a company the directors can be made individually liable as well.

There are also amendments made relating to Client Money protection on which a consultation has also opened up.

Finally, there are amendments requiring all fees being charged to be shown on any third-party website (eg. Rightmove etc) that the agent is advertising on.

Deposit Limits

There is a limitation in the bill over tenancy deposits too. These are capped at 6 weeks rent equivalent. This has increased from the month originally proposed which is a positive step. However, this will mean that some tenancy deposits will need to be reduced in certain cases.

Next Steps

This bill is still in draft and has not yet been formally laid before Parliament, so there is still some way to go before this all comes into force. However, the writing is clearly on the wall for agency fees.

Given that the consultation responses make fairly clear that landlords will vote with their feet if they are asked to pay more agents will need to start considering their business models carefully now. Reviewing fees charged for tenancy breaches and also fees charged in tenancy types that fall outside the legislation will be important. Considering how best to implement a holding deposit regime will also be useful. Agents should also give some thought as to how this will work with their clients. For example, if a tenant has breached the agreement giving rise to breach fees then these will need to be in the tenancy agreement but the agent terms of business will need to make clear that they will be passed to the agent by the landlord if they are paid. Likewise, if there are deductions from the tenancy deposit due because of rent arrears and there are also breach fees due then the agent will need to consider if they are going to demand their fees first before any residue is paid to the landlord.

David Smith is a Partner at Anthony Gold Solicitors and Policy Director for the Residential Landlords Association. This post was originally posted on here.

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About the author

David Smith

David Smith

David Smith is the Policy Director for the RLA and a Partner at Anthony Gold Solicitors. David obtained his degree and doctorate from the University of Wales, Aberystwyth in International relations before re-qualifying as a lawyer. He is known for his expertise in residential landlord and tenant law and has advised the Welsh Assembly, local government, and numerous landlords and tenants of all sizes.

6 Comments

  • With the forthcoming nationwide roll out of Universal Credits, this legislation should also include controls to stop Landlords discriminating against tenancy applications from recipients of government benefits and Landlord Insurance Companies that including clauses in their policies which invalidate cover, if Landlords rent to tenants who get benefits.

  • What a load of political nonsense. A few abuse the system, so everyone gets punished. It’s like a teacher holding the entire class in detention because of one of two unruly children. I am ashamed by this sweeping rule change mentality and a government who either cannot understand the process or chooses not to bother to understand it. The fix is simple – cap fees. in 17 years of trading, our reasonable fees have not once been questioned by tenants. It is the greedy and abusive agents that are complained about, so punish them, not everyone. It’s a complete disgrace!

  • Limiting deposits at a maximum of 6 weeks will do one thing only. It will remove the ability to work with a tenant who has cannot pass referencing but taking a higher deposit to provide more security for the landlord. It will also mean ALL tenants with pets will be turned away, as the inability to take a higher deposit to protect the property against pet damage will no longer be available.
    In the entirety of this nonsense about tenant fee ban and all the stupid knee-jerk policies, the government is failing to consider a couple of important things. There are plenty of decent landlords and agents out there – not every landlord or agent is a deceitful abuser of their position, and more importantly, there are also plenty of awkward tenants. Contrary to governments belief, not every tenant is a saint! This government and the politicians making up the ridiculous rules as usual seem capable of only looking at things from one side, the populist side!! Disgraceful.

  • Great news to hear that finally the government is to act on what can only be described as the most blatant form of financial exploitation in this country. Agents have managed to exploit this totally unregulated market for far too long, making huge profits out of vulnerable people who have no choice but to pay their exorbitant fees without any choice or say. The whole process is beyond belief. My only hope is that this bill comes to be passed as soon as possible, so that the ripoff merchants are forced to move on, and descent citizens of this country can find a place to live without being taken to the cleaners and forced to pay ridiculous fees any longer.

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