Queen's Speech announcement
The announcement of the draft Tenants’ Fees Bill today was disappointing. It’s unlikely the Government had enough time to analyse all of the responses from the consultation, as it only closed 12 working days ago, on the 2nd June. It appears they had already made their decision and therefore the consultation was no more than a ‘tick box’ exercise and they haven’t appropriately taken the industry’s views into account.
A ban on letting agent fees will cost the sector jobs, make buy-to-let investment even less attractive, and ultimately result in the costs being passed on to tenants. Research conducted by Capital Economics for ARLA Propertymark earlier this year shows that referencing checks undertaken by agents take, on average, eight hours to complete. It is therefore right and proportionate that the industry is recompensed for this work, which benefits tenants. The research also showed that letting agents stand to lose around £200 million in turnover, costing the sector 4,000 jobs. Landlords themselves would lose £300 million, meaning they may seek to cover their losses by increasing rents to tenants.
Rising costs for tenants
On average, rent costs will go up by £103 per tenant, per year, ultimately meaning tenants who move more frequently will reap savings on their overall costs but longer term tenants, who are usually lower income families, will see a loss as their rents rise year-on-year. The ban contradicts the Government’s stated aim to encourage longer term tenancies, as tenants who stay in their homes for the long-term will end up shouldering the costs of those who move more frequently.
The fees that you charge to tenants still remain completely lawful as long as they are clearly displayed in branches and online.
While we wait for the Bill to be published we expect any provision for tenants to recover unlawfully charged fees to relate to agents who charge fees beyond the date that the legislation passes into law.It would be totally unprecedented if fees that were charged prior to the passing of the law could be recovered.
The Queen's Speech states:
Tackling unfair fees on tenants will make the private rental market more affordable and competitive. The draft Bill will bring forward proposals to:
- ban landlords and agents from requiring tenants to make any payments as a condition of their tenancy with the exception of the rent, a capped refundable security deposit, a capped refundable holding deposit and tenant default fees
- cap holding deposits at no more than one week’s rent and security deposits at no more than one month’s rent
Security deposits
In our response to the consultation document we made it clear that security deposits should be set at a level that ensures that tenants have a meaningful stake in paying the rent and maintaining the condition of the property. In setting the figure at no more than one month's rent Government are failing to take into account any damage that can be incurred while a tenant is simultaneously defaulting on the rent. Landlords and letting agents will inevitably have to work out how to manage the risks involved and recover the difference in costs.
