Government issues draft Tenant Fees Bill banning residential letting fees

Posted by Oliver Waxman on
In the Chancellor's 2016 Autumn Statement, the Government announced its proposal to ban agents from charging letting fees to tenants on residential lettings. The consultation period has now concluded and on 1 November 2017, the Government published a draft bill. The draft Tenant Fees Bill sets out the Government’s approach to banning letting fees paid by tenants.

Summary of the consultation

The Government consulted with tenants, agents, landlords and representative bodies. There was overwhelming support from tenants to curtail an agent's ability to spring hidden and very often disproportionate agency fees on a tenant. 93% of tenants questioned agreed that all agency fees and charges to tenants such fees on granting a tenancy or renewal should be prohibited. 96% of tenants agreed that this ban should apply to both landlords and agents to prevent landlords from self-managing and charging equivalent fees.

A potential cap on deposits also formed an important part of the consultation. 91% of tenants agreed that a cap of 6 weeks' rent on refundable deposits be put in place. The Government agreed. The Government also agreed that holding deposits, whilst necessary to ensure that tenants are financially committed, should be capped at 1 week's rent. This was supported by 95% of tenants.  

Draft Tenant Fees Bill

The bill in its current draft form delivers the above. Landlords and agents will be banned from charging fees that are not permitted. Sensibly, permitted fees include rent, refundable deposits capped at 6 weeks' rent, refundable holding deposits capped at 1 week's rent and payments required in the event of a tenant default. Landlords and agents will be policed by Trading Standards supported by a new authority. Letting agents will also be regulated to ensure compliance with the new law. The proposal is that a breach of the above will result in an initial fine of £5000 with further fines of £30,000 or criminal prosecution for further breaches within 5 years.

How could this impact the market?

Tenants

Following on from the transparency measures contained within the Consumer Rights Act 2015, the bill encourages further transparency in the market, effectively removing hidden fees against which tenants have very little say. Tenants do fear that agents will simply pass on the fees to landlords who will in turn increase rents. However, tenants recognise the benefit in knowing from the outset all costs involved in renting and will be able to plan their finances better.

Landlords and agents

Relationships with tenants should improve and Landlords can demand a better service from their agents. Agents should also be encouraged as rogue agents will either leave the market or clean up their acts and only good, professional agents will prosper in a more competitive market that will better reflect other markets in which the consumer and the service provider directly or indirectly negotiate the price.  

What happens next?

The bill will have to pass through Parliament so there is still a long way to go until agency fees are a thing of the past. What is clear though is the Government is following through with its promise to make a growing rental market better for all parties. 

About the Authors

Photograph of Oliver Waxman

Oliver is a Trainee Solicitor in the Real Estate team in London.

Oliver Waxman
Email Oliver
0207 8145 458

View profile
Photograph of Sophie Shaladi

Sophie is an Associate in the Real Estate team, based in London. She advises on wide range of real estate matters including acquisitions, disposals, property investment and commercial leases.

Sophie Shaladi
Email Sophie
020 7814 5478

View profile