Government to stop tenants being charged letting fees

Parliament has begun work on the Draft Tenant Fees Bill that will make it illegal for agents to charge tenants letting fees.

Ministers say the level of fees charged are often not clearly or consistently explained, leaving many tenants unaware of the true costs of renting a property.

This latest action is designed to help improve transparency, affordability and competition in the private rental market. It will also prevent agents from double charging both tenants and landlords for the same services.

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.”

As part of wider plans to improve the rental market, the government has already introduced measures that crack down on the small minority of rogue landlords that shirk their responsibilities. Earlier this year, the law was changed to allow councils to impose fines of up to £30,000 as an alternative to prosecution for a range of housing offences.

The draft Tenant Fees Bill, which reflects responses from a public consultation, will:

• Cap holding deposits at no more than one week’s rent and security deposits at no more than 6 weeks’ rent. The draft bill also sets out the proposed requirements on landlords and agents to return a holding deposit to a tenant.
• Create a civil offence with a fine of £5,000 for an initial breach of the ban on letting agent fees and creating a criminal offence where a person has been fined or convicted of the same offence within the last 5 years. Civil penalties of up to £30,000 can be issued as an alternative to prosecution.
• Require Trading Standards to enforce the ban and to make provision for tenants to be able to recover unlawfully charged fees.
• 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.

More than 9 out of 10 tenants who responded to the government consultation backed the action to ban letting agent fees, with 7 out of 10 of them saying these fees affected their ability to move into a new rented property.

In a separate move, the government has also launched a consultation on making membership of client money protection schemes mandatory for letting and managing agents that handle client money.

These schemes ensure greater financial protection for landlords and tenants, giving them confidence that their money is safe when it is with their agent and they can be compensated if all or part of their money is not repaid.

We shall keep clients informed of developments.

Please contact Santokh Singh if you would like more information about the issues raised in this article or any aspect of commercial property law.