Lords send ministers away to fix fees ban

Nov 06, 2018 6:55 PM

The letting fees ban has inched closer to being law. Yesterday a Grand Committee of the House of Lords went through most of the Tenant Fees Bill, line by line. There are still potential loopholes that could leave tenants vulnerable to exploitation.

Following lobbying by ourselves, Shelter and Citizens Advice, and amendments by peers including Baroness Grender and Lord Kennedy, the government has now agreed to examine them before the Report Stage.

The Bill prohibits certain payments such as fees for administration, renewal, and check out. Of the permitted payments, default fees are the most controversial. A tenant is liable to make a payment if they breach a term of the tenancy agreement. The government says this is to allow landlords to recover the costs of cutting replacements for lost keys, and charges incurred if a rent payment is late. The Bill has already been amended to require a landlord to provide evidence of the costs they have incurred*.

But it would still be possible for landlords to include “catch-all” terms that make it hard for tenants to understand what is expected of them and to challenge a default fee. Indeed, the security deposit is there to allow landlords to recover costs, and the protection schemes provide an adjudication process to ensure deductions are fair (whether it succeeds in doing so is the subject of another blog post). Peers called for regulations to define default fees so that landlords can’t invent them – rather than rely on guidance, which is less legally certain. The Minister agreed to look at tightening it up.  

Even if default fees are restricted properly, dodgy agents and landlords will still try their luck, so there need to be consequences for charging illegal fees. Currently, the Bill relies on local councils’ trading standards teams to enforce the law: investigate breaches and levy fines. But as trading standards officers themselves have warned, recent cuts mean “this additional duty will simply not be prioritised universally”.

The Bill, rightly, creates a separate process for tenants to recover illegally charged fees through court (the First Tier Tribunal) where their council doesn’t take action. But it offers nothing extra to reflect the time and effort involved. We want tenants to have the right to compensation so they have an incentive to take on rip-off agents.

The government has refused to offer this because it would create a double penalty on landlords in breach of the law. Yet other industries, such as rail and aviation, make companies in breach of regulations liable for compensating customers as well as being fined. Even if the government doesn’t accept this, it only takes another tweak to the Bill to make the offending operator liable for either a fine or compensation depending on whether the council takes action or the tenant does. (If the council takes action it can recover illegal fees for the tenant as part of their process.)

Given the “strength of feeling” among peers, the Minister agreed to look at this, albeit without committing to anything.

Labour housing spokesperson Lord Kennedy had less luck trying to get the cap on security deposits reduced from six weeks’ rent to four. He said he would press it again at the Report Stage. Peers also discussed passporting of deposits between tenancies, which we proposed back in March. This is already the subject of a Ministry of Housing working group, which we are part of along with others in the industry – and was the Minister’s excuse for not amending the Bill.

One problem, identified by Generation Rent supporters and raised by us in our lobbying, is that of letting agents taking holding deposits from more than one prospective tenant. Only one of them will get the property, and while the others ought to get theirs back, that’s no consolation for having wasted a week or more of house-hunting time. It’s particularly galling because the government has set out to discourage tenants from putting down holding deposits on several properties – as if tenants typically have the cash needed to do that. So it was good to hear the Minister say that he viewed this as unfair and that his colleagues were looking at the issue further.

There are more issues with holding deposits – in particular, the act of paying one makes it difficult for tenants to negotiate terms of their tenancy agreement. Landlords could include unfair terms knowing that the tenant has a choice of either signing what they’re given or walking away and forfeiting their holding deposit. Amendments addressing this have been tabled, but they ran out of time yesterday to consider them.

Also postponed were amendments to make moving out during the fixed term of a tenancy less costly for the tenant. If a tenant moves out of a shared home, and a new tenant takes their place, the Bill gives landlords a choice of charging £50, or their reasonable costs of changing the contract. One of these is pointless, and, given that it’s typically the remaining tenants that do the marketing of the spare bedroom, not the landlord or agent, the cost should be minimal.

To end the tenancy during the fixed term, the Bill makes the tenant liable for all the remaining rent plus the costs of re-letting the property. So if a new tenant is found shortly after the old one moves out, the landlord could get several months of double rent. We’d rather see the landlord given a duty to take reasonable steps to find a new tenant, and for the tenant moving out to only be liable for rent until a new tenant is in place.

After yesterday’s session the Bill is still unchanged, so there is still more work for us to do to push the government further and hold ministers to their promises.


*The press release announcing this cited the example of a tenant being charged £60 to replace a smoke alarm when local authorities replace them for free. This was a couple of weeks after our #ventyourrent campaign, to which one of the contributions was: