The government aims to make lettings fees fairer and more transparent, and to give greater protection to tenants.
The bill is not yet law. However, it gives a good indication to letting agents/landlords of the likely detail, and the likely extent of the restrictions on fees, so that landlords and agents may better plan for the changes.
What Does The Bill Contain?
With a few exceptions, it applies to landlords and letting agents in connection with assured shorthold tenancies.
- A list of Permitted Payments which letting agents/landlords may require from tenants. If it’s not on the list, it’s a prohibited payment. An offer of a tenancy may not be conditional upon a prohibited payment being made. Permitted payments include:
- Rent (subject to provisions which stop fees being disguised as additional first month’s rent)
- Tenancy deposits (up to six weeks’ rent)
- Holding deposits (not more than one week’s rent and subject to restrictions regarding repayment)
- Charges for non-payment of rent or other breach (subject to those charges being in the tenancy agreement).
- Schedule 2, which states when holding deposits may be retained or repaid to tenants, and applicable timescales. Holding deposits may not exceed a weeks’ rent. Examples of when a holding deposit may be retained are where the tenant does not pass Right to Rent checks, where the tenant has provided false or misleading information, or where the tenant pulls out from entering the tenancy agreement/fails to take the required steps to enter the tenancy agreement. If the tenancy proceeds, the holding deposit can be put towards the first rent or the tenancy deposit. .
- Where properties are advertised on third party websites the agent’s fees (or a link to them) must also be published on the website. .
- Enforcement will be by Trading Standards Departments. .
- Tenancy deposits limited to no more than the equivalent of six weeks’ rent. .
- All letting agents must have tenant money-protection in place. .
- Financial penalties: not more than £5,000 for breaches of Section 1 or 2 or Schedule 2 (prohibited payments and holding deposits) and not more than £30,000 for a Section 9 offence (repeat offenders).
The bill will not have retrospective effect and will not apply to long leases, social housing, or common law tenancies such as company lets and high value tenancies.
Watch this space for further developments on the bill’s progress. In the meantime landlords/agents should consider what fees for tenant default are included in their tenancy agreements. If landlords/agents charge fees for items which are not permitted payments, such as for preparation of the tenancy agreement or for credit checks and references, they should consider who will meet the costs of those when the bill becomes the Tenant Fees Act 2017.