What do landlords need to know about the new Draft Tenant Fees Bill?

The Government’s draft Tenants Fees Bill has now been presented to Parliament. Coodes’ Personal Disputes team explain what it means for landlords.

The draft Tenants Fees Bill has now been presented in Parliament, setting out the Government’s plans to ban all lettings fees charged to tenants. It follows an announcement by the Chancellor Philip Hammond in his 2016 Autumn Statement.

Once the Bill comes into force, landlords will only be able to charge tenants their rent, a tenancy deposit, a holding deposit and a payment in the event of default. Many lettings agents currently charge additional fees, including a mandatory inventory fee, tenancy reference fee, renewal fee and administration fee. The average tenant pays £233 in fees, but some pay much more with one in seven allegedly paying more than £500.

While landlords were poised for letting agents’ administration fees being curbed, the draft Bill goes much further than expected by putting forward an outright ban on fees. The Bill also sets out a plan to cap holding deposits at no more than one week’s rent.

The Bill also sets out plans for enforcing the new rules. Landlords could face a £5,000 fine for the first breach, if it is beyond reasonable doubt that a tenant has been required to make a prohibited payment, or for failing to return a holding deposit. Repeat offenders could face fines of up to £30,000 and possible imprisonment.

While a number of organisations have publicly supported the draft Tenants Fees Bill, claiming it will make renting fairer, many landlords are worried about the impact on their business. This is understandable. Key figures in the industry have raised the issue that the fees enable landlords to carry out important checks on properties.

Questions are now being raised about how lettings agents will cover the lost revenue. The Association of Residential Letting Agents (ARLA) has said that 87 per cent of its members think that rent prices will increase as a result.

It is important to note that the changes are not proposed to be retrospective, so landlords will not be penalised for tenants fees already paid. However, they will be another hit for landlords who will need to be very careful not to breach the new rules when they come into force. While lettings companies are likely to be abreast of the changes, the rules will also apply to those landlords with just one or two properties.

A date has not yet been announced for introducing the new legislation. Industry experts are speculating that, due to the complex nature of the legislation, a ban is unlikely to be put into effect before the end of 2018. At Coodes we will be keeping a close eye as things develop.

For advice on any of these issues, contact the Personal Disputes Team at Coodes Solicitors on 01726 874 700 or info@coodes.co.uk