Private renting in England is at its highest rate for over thirty years. It houses 4.7 million households and is the second largest tenure after owner-occupation. Against this backdrop, the Government has come under increasing pressure to make renting a property as affordable as possible. In particular, upfront payments required of prospective tenants in the form of fees and security deposits have been viewed as a particular barrier to households seeking accommodation.
The Tenant Fees Bill 2017-19 (“Bill”) will today, 21 May 2018 have its second reading in the House of Commons. The Bill, amongst other things, will ensure that tenants are only required to pay their rent and deposit when securing a property in the private rented sector. The Bill will also cap security deposits at the equivalent of six weeks’ rent.
In November 2017, the Department of Communities & Local Government (now Department for Housing, Communities and Local Government) published the draft Bill. In the foreword to the Bill, Rt.Hon. Sajid Javid MP stated that the Government would be introducing a ban on unfair lettings fees paid by tenants. Javid explained that “the ban will 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 what you are expected to pay, nothing more.”.
Prohibited and permitted payments
The Bill sets out and defines prohibited and permitted payments that can be required by landlords and/or letting agents . Broadly, permitted payments would include:
- Security deposit of no more than six weeks’ rent (refundable).
- Holding deposit of no more than one week’s rent (paid to reserve a property).
- Payments in the event of a default, i.e. a failure by a tenant to perform an obligation or discharge a liability, provided this is no more than the landlord’s loss.
- Payments for variation, assignment or novation of a tenancy capped at £50 or the reasonable costs incurred if higher.
- Payments on termination of a tenancy at the tenant’s request, capped at the landlord’s loss.
- Council Tax payments.
- Payments for the provision of utilities, e.g. gas, electricity, water as long as the tenancy agreement provides for these payments.
- Payments towards energy efficiency measures under a green deal plan if the tenancy agreement provides for this.
- Payments for a television licence.
- Payments for communication services, e.g. telephone, internet, cable/satellite television.
All other payments required by a landlord and/or letting will be prohibited.
Effects of a breach
Any clause in either the tenancy agreement or the agreement between the letting agent and the tenant which required the tenant to make a prohibited payment will not be binding on the tenant. It is important to note that the remainder of the agreement will still be valid.
The Bill will allow an enforcement authority to impose a financial penalty on either the landlord or letting agent where it is satisfied beyond reasonable doubt that a breach has occurred. The maximum penalty would be £5,000 which also applies to a breach of the holding deposit requirements. Repeat offenders could potentially have criminal proceedings brought against them and be fined up to £30,000.
What this means for tenants
The Bill marks the end of upfront fees which have often been required by landlords and letting agents and provides some much needed protection for tenants from unscrupulous landlords and letting agents. Not only does the Bill punish landlords and letting agents but more importantly it requires Trading Standards to enforce the ban and to make provisions for tenants to be able to recover unlawfully charged fees via the First-tier Tribunal.