Letting fees ban moves closer – but loophole remains

Good news for hard-pressed private renters facing rip off fees from letting agents.

The Government has introduced the Tenant Fees Bill into Parliament, which aims to ban the fees commonly charged by letting agents for new tenancy agreements. This is part of the Government's promise to make private renting cheaper and fairer and it's a much-needed piece of legislation, especially as a quarter of us in the UK will rent privately by 2021.

The bad news is that the Bill contains a loophole that could be exploited by unscrupulous landlords by enabling them to charge excessive and unfair charges to tenants in the form of vaguely worded “default fees”.

Default fees remain in the Bill despite warnings from Generation Rent, Shelter, and Citizens Advice that these fees are open to abuse, and potentially incompatible with consumer contract law. The Commons Housing Committee report on the Draft Bill recommended that clear guidance needs to be provided on what default fees can be charged for, how much is reasonable, and how this will be enforced.

The Tenant Fees Bill also allows for tenants to be charged a change of sharer fee, which is supposedly capped at £50. But it then permits landlords to ignore this if the “reasonable” costs of changing a contract are higher.

The problem with creating exemptions is that unscrupulous landlords and agents will keep finding ways of charging tenants extra fees on the spurious grounds that they’re exempt. It must be easy for tenants to challenge unfair fees – with clear penalties for attempts to abuse the system. If the process is long-winded then many won’t bother taking on their landlord or agent, and rip-offs will continue unchecked. We won’t be happy with the Bill until this loophole is removed.

We’d like to see Government commit to making additional funding available to local authorities to ensure that the ban on illegal fees is effectively enforced and that tenants receive redress if charged illegal fees. We will continue to make the case for more resources for councils to ensure that the Bill can achieve its aims.

We raised concerns previously that the proposed cap on deposits at six weeks’ rent is too high for many private renters, two thirds of whom have no savings. Recognising this, the Housing Committee’s report called for a cap to be set at five weeks’ rent, yet the Bill retains the six week deposit cap. Similarly, the Bill did not incorporate the Committee’s recommendation to only permit landlords to retain a full holding deposit if the tenant knowingly provides false or misleading information. We will work with MPs to raise these issues and continue our work on rethinking deposits to explore how deposits can be made to work better for renters.

This Bill is welcome news for private renters, for whom the cost of moving house and a month’s rent up-front in addition to a large deposit is expensive enough without being stung by opaque and excessive fees often charged by letting agents. Unfortunately the provision for landlords to charge ambiguous “default fees” opens up a loophole which could undermine the Government’s good intentions. But with some amendments this Bill could make a real difference to millions of private renters.

UPDATE, 15 May:

On Monday 21 May, MPs will debate the Bill for the first time. Email your MP now to ask them to raise these concerns.


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