A ban on unfair lettings fees: draft Tenant Fees Bill 2017

The government has introduced a draft Tenant Fees Bill, with the aim of making residential letting more fair and affordable for tenants by reducing costs at the outset of a tenancy.

The Bill will introduce a ban on unfair letting fees paid by tenants for agents selected and appointed by landlords. The government says it will incentivise letting agents to compete for landlords' business, resulting in a better and more transparent service for everyone.

The main provisions

The Bill will apply to housing in England only.

The key provisions of the Bill are as follows:

• 'Tenancy' means an assured shorthold tenancy or licence to occupy other than a long lease, tenancy of social housing or licence to occupy holiday accommodation;
• Landlords and letting agents must not require tenants to make any payment or loan as a condition of the grant, renewal or continuance of a tenancy. This includes fees for securing references or inventories and frontloading the rent to recover costs, by charging a higher initial rent;
• The only payments permitted to be charged to tenants are:
  • The rent;
  • A refundable tenancy deposit of no more than six weeks' rent (a tenancy deposit is one held by the landlord as security for any damage/default caused by the tenant);
  • A refundable holding deposit of no more than one week's rent (a holding deposit is a payment made by the tenant to reserve a property) and;
  • Payment due by the tenant in the event of their default, such as a late payment or breach of the tenancy agreement (an example, payment for a lost key);
  • Everything else is a prohibited payment.
• New rules will apply to holding deposits:
  • These must be refunded to tenants within seven days of the tenancy agreement being completed, or within 15 days of taking the deposit if the agreement is not completed for reasons within the landlord's control.
• The landlord does not have to refund the deposit if:
  • the tenant does not have the right to rent property under the Immigration Act 2014, provided that the landlord did not know and could not have been expected to know this before accepting the deposit;
  • the tenant provides false or misleading information that materially affects its suitability to rent the property, or if the tenant fails to enter the tenancy agreement.
• The Bill will be enforceable by Trading Standards - Schedule 5 of the Consumer Rights Act 2015 will be amended to provide for this. Trading Standards may impose a fine of up to £5,000 if a landlord or letting agent has charged a prohibited payment, or they may require the prohibited payment to be repaid with interest;
• Trading Standards can prosecute or impose a fine of up to £30,000 if an offence under the Bill has been committed, being where a landlord or letting agent has been fined or convicted for a breach within the last five years and commits a further different breach. If prosecuted, an unlimited fine can be imposed by the court;
• If the entity committing the offence is a corporate body, the officers/members of that body can be liable for it if the offence was committed with the consent or connivance of them, or was attributable to any neglect by them;
• Trading Standards must notify the landlord/letting agent of the intention to impose a fine within six months of becoming aware of a potential breach. The landlord/agent has 28 days to respond to the notification, after which Trading Standards will decide whether to impose the fine. If imposed, a final notice will be issued giving 28 days for payment. There will be a right to appeal to the First Tier Tribunal against a final notice;
• The Housing and Planning Act 2016 will be amended to say that an offence committed under the Bill is a banning order offence. This means that a local housing authority can apply to court to ban the landlord/letting agent from letting housing and/or acting as a letting agent and/or property manager in England for at least a year. If so, an entry will be made in the database of rogue landlords and property agents under that Act;
• Enforcement will be carried out locally - provision is made for different enforcement teams across different areas checking with each other to see what, if any, enforcement action has already been taken for a breach;
• Tenants can apply to the county court to recover prohibited payments and payments that should have been refunded;
• Section 83 of the Consumer Rights Act 2015 will be amended to require letting agents to publish details of their fees and client money and redress scheme memberships, both on their own websites and on third party websites where they advertise.

Comment

This Bill will impact on anyone involved in the private rented sector in England.

Its attempt to make renting a fairer and less expensive matter for tenants is to be welcomed, especially against the backdrop of the current housing shortage.

The inclusion of licences to occupy is a sensible measure, as it means that the Bill's provisions cannot be avoided by a tenancy being issued in the form of a licence.

The fact that monies taken in fines can be used to fund enforcement action means there is a financial incentive to enforce the Bill.