Shocks ahead for letting agents

On 1 November 2017, the Government introduced the draft Tenant Fees Bill, providing, amongst other things, for a ban on the charging of letting agency fees to tenants in the private rented sector.

The draft Bill, if it becomes law, will bring about a seismic change in how letting agents can operate in the private rented sector. One of its stated aims is to increase the competiveness of letting agents’ fees and services, on the basis that agents will need to compete for business when landlords become liable to pay their fees.

The overarching aim of the proposed legislation, as the foreword to the draft Bill makes clear, is that this is an attempt by the Government to “make renting fairer and easier for tenants by allowing them to see upfront what a given property will cost them – the rent that is advertised will be what [the tenant] is expected to pay, nothing more”.  

The main crux of the Bill is that all payments from tenants to landlords or letting agents that are required as a condition of granting, renewing or continuing a tenancy will be banned, except for rent, a refundable tenancy deposit, a refundable holding deposit and tenant default fees (examples given in the explanatory notes to the Bill being the replacement of a lost key or a late rent payment charge).

In addition, it will be prohibited to require payment of a tenancy deposit with a value of more than six weeks’ rent, or a holding deposit of more than one week’s rent.

Any term of a tenancy agreement that breaches these provisions will not be binding on the tenant. Local trading standards teams will be able to require the repayment to the tenant of any prohibited payment (with interest) and the tenant may be able to apply to court for the return of the payment. The relevant authority will also be able to impose a financial penalty on the landlord or agent of up to £5,000 for any breach, and in certain cases of repeat breaches, this will be a criminal offence punishable by an unlimited fine on summary conviction (or up to £30,000 as an alternative to prosecution).

At this stage the Bill is only in draft form and amendments are likely to be made to its provisions before it becomes law.  However, it is clear that the Government is keen to protect tenants from the payment of what it sees to be complicated and opaque lettings fees, so we shall watch developments with great interest.