The Tenant Fees Bill, banning landlord and agents from charging fees to tenants has now been given Royal Assent and will apply to all tenancies signed after June 1.
The bill – which has now officially become an Act of Parliament – prevent landlords and agents from charging: ‘Anything not exempted, that the tenant is required to pay as a condition of the ‘of the grant, renewal, continuance, variation, assignment, novation or termination of’ an assured shorthold tenancy, or licence agreement.
This includes payments to third parties, either for services throughout the tenancy or for specific performance of a job and loans from third parties.
Once the ban comes into force landlords will mostly be limited to taking payments for rent and deposits from tenants – with rules around the size of the deposits and how they are dealt with significantly tightened.
Deposits will be limited to five weeks, where annual rent is below £50,000 with new, stricter rules on holding deposits.
Damages caused by the tenant’s breach of tenancy, such as the costs of cleaning the property after the tenancy ends, will still be deductible from the deposit. In addition there are two other ‘default fees’ you will be able to charge, if either:
- the tenant loses their keys or
- is late paying the rent.
These fees will also be limited.
Landlords can still charge for a change to the tenancy requested by the tenant, or if a tenant wants to leave early. A full guide to the Tenant Fees Bill is available on the RLA website.
Plans to ban tenants’ fees were first mooted in the Autumn statement in 2016, despite the, then housing minister, Gavin Barwell tweeting just a week earlier that such a plan was a ‘bad idea’.
RLA chairman Alan Ward said at the time: “Agent fees have to be paid by somebody. If any additional fees are passed on to landlords, tenants will end up paying them forever as market rents will increase.”
The government began its consultation into the plans in April 2017, despite the previous four housing ministers saying such a move would raise rents. It included plans to cap deposits – that had not previously been mentioned.
In June the RLA submitted a consultation response saying landlords should not be expected to shoulder the full cost of agents’ services that benefit tenants and should still be expected to pay for the check in inventory and checks and referencing.
It also objected to the introduction of a deposit cap and the extra financial burden the changes would put on landlords – already shouldering the burden of a number of recent tax changes.
Later that month, The Queen’s Speech revealed the plans would be published as a Draft Bill for further scrutiny.
The RLA asked the government to look at better enforcing existing rules over letting agent fees before looking to ban them outright.
In December research from the RLA found one in five landlords were considering ditching their agent as a result of the ban – with 57% planning to increase rents to cover increased agent charges.
In January last year RLA policy director David Smith told the Communities and Local Government Select Committee that landlords would be left counting the cost of the Bill, and in March the association warned plans to cap deposits would be a charter for rent cheats.
David Smith’s evidence to the Select Committee was backed up in May when the government’s official response to the HCLG Select Committee’s report on the draft Tenant Fees’ Bill estimated the ban would cost landlords £82.9million in the first year with letting agents paying £157.1m.
The bill also had its second reading in May – where it received all party support.
RLA policy director David Smith gave evidence to the Tenant Fees Bill Select Committee in June warning , once again, about the impact on landlords and tenants alike.
The RLA had major concerns about amendments to the bill, announced in December last year – including the reduction of the deposit cap from six to five weeks and changes to Client Money Protection arrangements, that could leave landlords vulnerable.
These issues were subsequently raised by Peers in the Lords.
However, the amendments were accepted, and this week the Bill went back to the Commons where Lords’ amendments – with the exception of a Labour amendment to reduce the deposit cap to three weeks – were approved.
The Act will now be implemented on June 1 this year.
The Act applies in England, with plans for a similar ban on tenants’ fees in Wales still being debated.