The long-awaited letting fees ban

Last Wednesday, the government published the draft Tenant Fees Bill, setting out its approach to banning letting fees in England. Having campaigned for a ban on letting fees since 2013, this draft legislation is a welcome step towards finally bringing an end to these unjust fees.

Here’s an overview of the key things you need to know about the bill – and our initial reaction to the proposals. There’s also an explanation of the next steps and how we’ll work to ensure this long-overdue ban comes into force as soon as possible.

The key changes 

The government proposes two main changes in the Tenant Fees bill, designed to make renting fairer and more affordable.

Firstly, the bill introduces a ban on all upfront fees. Landlords and letting agents would be banned from charging any fees other than:

  • the rent
  • a refundable security deposit
  • a refundable holding deposit
  • ‘default fees’ if a tenant breaches a clause in their tenancy agreement (e.g. losing a key or missing a rent payment)

In practice, this would mean that tenants can no longer be charged fees for setting up or renewing a tenancy. So, we can hopefully say goodbye to fees such as referencing fees, credit check fees and the ever-mysterious administration fees.

Secondly, the bill introduces a cap on deposits. Landlords and letting agents will only be allowed to charge a maximum of six weeks’ rent for security deposits, and one week’s rent for holding deposits. The bill also sets out guidance on when landlords and letting agents should return holding deposits to tenants.

Local authorities will be responsible for ensuring landlords and letting agents comply with the legislation. Anyone who breaches these laws could be fined up to £5,000 for a first offence – and there are more severe penalties, like the threat of criminal prosecution, for those who commit multiple offences.

What we think

It’s been a long time coming but we’re pleased that the government has held firm on its commitment to ban letting agent fees. The proposal would see an end to upfront fees – and with the average letting fee at over £200, this should be welcomed by tenants across the country.

One cause for concern is that the bill would allow landlords or letting agents to charge fees if a tenant defaults on an aspect of their tenancy agreement. The examples included in the draft bill may seem reasonable; for example, many would argue it is fair that a tenant is asked to pay to replace a lost key.

However, there must be strong safeguards in place to ensure that this clause cannot be used as a loophole for agents to charge disproportionate fees, or fees for defaulting on unreasonable clauses in tenancy agreements. It will be important to have clear guidance on what defaults can be included, and for local authorities to be sufficiently resourced to be able to enforce against those who try to use this clause to exploit tenants.

Turning to the cap on deposits – while a cap is welcome, it feels like the government has missed an opportunity to make a real difference for private renters by scaling back the size of the cap from its original proposal.

We were not alone in calling on the government to cap security deposits at three weeks’ rent and holding deposits at a maximum of two days’ rent. Our Shut Out Report highlighted how upfront costs like deposits put significant financial pressure on tenants –  and many are forced to dip into their savings or borrow in order to pay these costs. For low-income households without access to savings or the ability to borrow, deposits can be an even bigger barrier, often making it impossible to secure a new property. With average weekly rents at £184 in England[1] and therefore average six-weekly rents of over £1100, the government’s proposed caps will still result in many tenants being placed under huge financial pressure when moving.

There is still lots of work to do beyond this bill to tackle the barriers created by upfront deposits and after rowing back on the cap, the government should redouble its efforts to explore alternative initiatives such as deposit passporting.

The next steps

The draft bill will now be scrutinised, most likely by the Communities and Local Government Select Committee. We’ll provide evidence to the scrutiny committee and may call on our supporters to submit evidence, too. This process is likely to take three/four months – and once the committee has agreed the bill, it will be introduced to Parliament.

Throughout this process, we’ll call on the government to commit to implementing the ban as soon as possible. We know that some opportunistic agents have been increasing their fees in anticipation of the ban. Only two weeks ago, our Legal Team came across an example of private renter in London being charged a £700 administration fee, without even being given a proper tenancy agreement. This highlights how these fees cannot be scrapped soon enough.

Look out for our updates on how the bill is progressing and thank you to all those supporters who have helped with this campaign so far.

[1] English Housing Survey, Private Rented Sector 2015 – 2016