Fees ban concerns remain as Bill completes first stage

The Commons Housing Committee has published its report on the Draft Tenants' Fees Bill today, making recommendations to the government for when it formally introduces the Bill to Parliament. 

Generation Rent, along with charities, landlord groups, local councils and other industry organisations, gave evidence to the inquiry earlier in the year. There were positive outcomes on rents and deposits, but more work is needed to make sure the ban covers all fees - and that it's enforced properly.

Here's a summary of what we asked for - and what we got.

Rent 

What we wanted

The draft Bill included clauses to prevent agents simply adding fees on to the first month's rent, but another clause (Schedule 1 Paragraph 1(6)) effectively permitted this to happen if it was part of the tenancy agreement. We wanted this scrapped because few tenants are in a position to challenge unfair tenancy terms if they're not explicitly banned.

What the Committee said

Scrap or amend Schedule 1 Paragraph 1(6). 

"Default fees"

What we wanted

The draft Bill created potential for a vast loophole by permitting fees if the tenant caused additional costs for the landlord or agent. As Citizens Advice argued persuasively, agents could simply draw up a tenancy agreement that is impossible for the tenant to abide by and they would incur charges that way. There is already a process where the landlord can recoup costs: the deposit protection system - and the benefit of that is that tenants can challenge unfair deductions. So we wanted this dropped entirely.

What the Committee said

The MPs acknowledged that default fees were open to abuse but only went so far as to demand that the government regulate them. 

They got the government to clarify that exit fees would be part of the ban, to avoid tenants being charged for cleaning or check out. 

But the Committee also asked the government to include an exemption for charging tenants for a change of sharer. As lettingfees.co.uk found, fees to accommodate someone moving out and their replacement can be as high as the other costs. If fees for moving out and starting a brand new tenancy are banned, then it might be cheaper for tenants to do that rather than find a new flatmate. That will end up costing the landlord who will likely have a void period, and need to pay for remarketing and referencing costs. 

We'll keep arguing that default fees should be dropped. Even if they were regulated, it would still be possible for tenants to be unaware of an agent's fees tariff until they see the tenancy agreement, having already paid a holding deposit, making it harder to back out.

Deposits

What we wanted

The draft Bill set a cap on security deposits of six weeks' rent. We have argued for a cap of four weeks - and Citizens Advice pointed out that only 8% of tenants would benefit from the proposed cap. We have also looked at reforming the deposit protection system more widely, with an option to passport deposits between tenancies, which could cut the short-term cost to existing renters down to two weeks' rent. 

What the Committee said

The Committee recognised the "significant financial challenge to tenants" that the security deposit can pose, and recommended that the cap be reduced to five weeks. They acknowledged our wider proposals but admitted that it had not considered such reform in detail. Our work on this continues.

On the subject of "alternatives to security deposits" - namely, schemes that replace the refundable deposit with a non-refundable fee - the MPs recommended that the government permit them if they "are found to be affordable for all tenants".

Enforcement

What we wanted

While the Bill allows tenants to claim back illegal fees, there remain various hoops to jump through. And with cash-strapped local councils in charge of enforcement, some agents will continue to charge illegal fees knowing that the risk of getting caught is low. There is therefore a strong case to require agents (and landlords) to compensate tenants on top of refunding illegal fees - a similar principle operates for deposit protection. That would create a greater deterrent as well as making the faff of claiming more worthwhile.

What the Committee said

The Committee called for a simplified process of claiming back illegal fees and extra funding for councils to enforce the law - arguing that relying on fines alone to fund their work could be counterproductive.

If we assume that any extra funding for councils won't be quite enough, this will be another area we will keep arguing on as the government develops a fresh Bill.

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  • Rob Thomas
    commented 2018-04-03 13:27:30 +0100
    Tenants can avoid all letting agent fees by going direct to landlords that do not use an agent. I can’t understand why so many tenants pay hundreds of pounds to letting agents when they could look for property on popular sites like gumtree and pay nothing. Perhaps some tenants think they get a better service using a letting agent but in my experience letting agents often offer a far worse service than landlords who self-manage.