Since the tenant fee ban was debated in Westminster last month, draft legislation was released this week to reveal the finer points for the implementation of the ban. Landlords will face a fine of up to £5000 for charging tenant fees and if they breach the ban twice in 5 years, they could face criminal prosecution or a civil penalty of up to £30,000.
Landlords and agents will be banned from charging tenants any fees or charges on top of rent, a capped refundable security or holding deposit, and tenant default fees- such as for replacement keys or breaching the tenancy agreement. The ban will also include not making tenants pay for services from a third party. It’s intended that the ban will only apply to tenancies started after the implementation date, although the date has not been confirmed. The ban will apply to all assured shorthold tenancies and licenses but will exclude long leaseholds, social housing, holiday lets, company lets and non-Housing Act tenancies.
The fee ban was first announced by the Chancellor in the Autumn Statement in 2016, based on research by charities such as Shelter who found that 1 in 7 tenants pays more than £500 in non-returnable tenancy fees. Alex Neill of Which? said:
“Navigating the rental market is stressful and expensive. It’s right for the Government to ban unfair fees, as this will help renters with the significant costs of moving home. This new law must also be enforced so letting agents don’t abuse the system.”
This Bill is a draft law, so it should be noted that it will need to go through several set stages before it’s approved by the House of Commons and House of Lords, which could take up to a year. If the Act is approved, a number of regulations will need to be drawn up, meaning the ban may not take immediate effect after the Act is passed.James Davis, CEO and Founder of Upad, has previously commented on the fees ban;
“It shouldn’t be a surprise that the Chancellor has announced that it is banning letting agent’s fees, but I think the industry is still shocked. Ultimately, market forces haven’t prevailed in all of this. Foxtons put their tenant’s fees up by £50 every couple of years and it is purely to increase their profits, whilst other high street lettings agents ludicrously charge over £300 simply to press print on an identical tenancy agreement to renew for the following year. Long suffering tenants (as the Government has coined JAMs “Just About Managing”) have no choice but to pay it as renting is a necessity; it is not like if a shop put up its prices and the amount it sold would go down. "
Whilst landlords should be wary of the tenant fees ban, there's no need to panic. Most private landlords charge a small fee to cover tenancy set-up costs, like Upad where tenants are charged just £75 for referencing. Assess your landlord finances and see where else you can make savings, rather than increasing rents.