England: Tenant Fees Bill provisions to come into effect in June

New legislation to bring an end to costly fees imposed by landlords or letting agents in England is to come into force this summer.

Speaking at the third reading of the Tenant Fees Bill in the House of Lords, Lord Bourne of Aberystwyth outlined that following royal assent, the provisions of the Tenant Fees Bill will come into effect on the 1st June 2019 for all tenancies signed on or after the date.

England: Tenant Fees Bill provisions to come into effect in June

The third and final reading in the House of Lords comes after amendments in the Bills Report Stage, which lowered the cap from six weeks to five weeks for properties with an annual rent of less than £50,000. The National Landlords Association (NLA) said this will likely affect some tenants’ ability to find a home, especially if they have pets or poor credit history.

In regard to contractual damages, Lord Bourne also provided further reassurance to the house, arguing there is plenty of case law in place that already deals with damages, and this will ensure that they are not used as a back door to default fees.

A statement from the ministry of housing, communities and local government said: “We believe these amendments strike a fair balance between improving affordability for tenants whilst ensuring that landlords and agents have the financial security they need.”

Key Points of the Bill:

  • Default fees will be limited to charges for replacement keys or a respective security device, and late rent payments only;
  • Cap holding deposits at no more than one week’s rent, applying to a maximum of one property only;
  • Creates a civil offence with a fine of £5,000 for a first offence and civil penalties of up to £30,000;
  • Amend the Consumer Rights Act 2015 to specify that the letting agent transparency requirements should apply to property portals such as Rightmove and Zoopla; and
  • Local authorities will be able to retain the money raised through financial penalties with this money reserved for future local housing enforcement.

Alongside rent and deposits, agents and landlords will only be permitted to charge tenants fees associated with:

  • A change or early termination of a tenancy when requested by the tenant;
  • Utilities, communication services and Council Tax; and
  • Payments arising from a default by the tenant such as replacing lost key.

David Alexander, the managing director of D J Alexander, said: “This bill was introduced to regulate some of the problematic and controversial elements of letting. Some agents have been charging substantial fees to tenants with little explanation why these charges applied other than for ‘administration’ which has been an area of complaint for tenants. This bill will resolve many of these issues. The relatively quick implementation of the bill could pose substantial problems for some agents, but it was clear that this legislation was coming, and the sector should have been preparing for its arrival.

“Similar changes were implemented in Scotland in 2012 which ended agency fees and cleared up deposit holding by landlords and agents and in general most coped well with this. The bulk of the fee loss from the implementation of this bill is likely to be absorbed by landlords, but the long-term benefits will be in creating a more trusting and attractive environment for tenants which, in turn, results in greater demand and, ultimately, increased rental returns.”

David concluded: “Whilst nobody doubts that this is a difficult time for agents it also poses an opportunity. The market is changing and the way in which it operates is developing and the ending of tenants’ fees is a sign that it is changing for the better. Setting the highest standards for letting is something that everyone in the sector should aspire to and want to achieve.”

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