New Tenant Fees Bill set to save renters £240m per year

It’s good news for Generation Rent but what will the new laws mean for landlords?

A bill put forward to Parliament by the new Secretary of State for Housing, Communities & Local Government, James Brokenshire, which will ban letting fees and limit deposits to six weeks’ rent, is expected to become law next year.

The government hopes it will ease the burden on tenants in England looking to move home, reducing the costs they face at the outset and making the whole process more transparent.

“This government is determined to build a housing market fit for the future. Tenants across the country should not be stung by unexpected costs," says Brokenshire. “That’s why we’re delivering our promise to ban letting fees, alongside other measures to make renting fairer and more transparent.”

The Tenant Fees Bill, which has been subject to a public consultation and pre-legislative scrutiny by the Housing, Communities and Local Government Select Committee, would put an end to rogue letting agents’ practices such as double charging for the same services.

It would also pave the way for an enforcement authority in the lettings market and it would cap holding deposits at one week’s rent – a charge that would also need to be repaid to tenants.

Will it mean landlords' losses?

However, while the bill has been welcomed by tenant advocacy group Generation Rent, who says the bill “can’t come soon enough”, it could mean landlords are out of pocket, with an impact report showing letting agents could lose £157.1m in the first year and landlords’ losses could amount to £82.9 million.

The bulk of the losses would be down to transition fees and a reduction in deposits, but letting agents are also expected to charge landlords higher fees to recoup some of their losses.

Photo: Wavebreakmedia/Shutterstock

Giving evidence to the Communities and Local Government Select Committee in January, the Residential Landlords Association’s (RLA) director David Smith warned this was a possible outcome, saying: “The RLA believes that fees are employed in different ways around the country in order to deal with different issues, and banning all fees will not change that economic structure. The money has to go from somewhere, and it will come from landlords or from loopholing in the Bill.”

Other measures proposed include limits on what fees landlords are allowed to charge in addition to rent and deposits, including a cap of £50 on a change in tenancy unless a landlord could prove more costs were incurred.

Landlords and letting agents that fail to abide by the rules would be slapped with large penalties.

In addition, via section 21 Housing Act 1988, tenants would have increased rights to remain in the property until landlords have repaid any unlawfully charged fees and an amendment to the Consumer Rights Act 2015 would mean that all letting fees would be transparent on sites such as Zoopla and Rightmove.

Be prepared when the bill comes into force

Bill, David Cox, Chief Executive of ARLA Propertymark, a professional body for letting agents, does not believe the new bill will achieve its aims. He says: “Our own research last year demonstrated that tenants will end up worse off and banning fees will not result in a more affordable private rented sector. ARLA Propertymark has worked hard over the last 18 months to explain the unintended consequences of the ban to Government, and we’re pleased they have listened and allowed Change of Sharer, Surrender of Tenancy, holding deposits, exempted the Green Deal Charge, and capped security deposits at six weeks, rather than the Committee’s proposed five-week cap. Now that we have greater clarity on what the ban will entail, agents must start preparing for when it comes into force.”

The Tenant Fees Bill only applies to England. A similar ban on fees is already in place in Scotland.

Do you think the Tenant Fees Bill is a good thing? Vote in our poll below.