The Tenant Fees Bill will abolish most upfront fees for tenants in England and cap security deposits at the equivalent of five weeks’ rent where the annual rent is less than £50,000. This paper provides background to the Bill, including information on current practice in Scotland, Wales and Northern Ireland. It explains the Bill's provisions and summarises reactions from tenants, landlords and letting agents. This paper has been updated to include issues raised during Public Bill Committee and subsequent Parliamentary stages. Consideration of Lords amendments is scheduled to take place on 23 January 2019.Jump to full report >>
There is currently no cap on the level of fees that letting agents can charge in England although consumer protection legislation might apply in certain circumstances. Since 27 May 2015 agents have been required to display a tariff of fees.
As part of the Autumn Statement 2016 the Conservative Government announced an intention to abolish letting agent fees. Consultation on this proposal opened on 7 April and closed on 2 June 2017. The Conservative Party’s 2017 Manifesto said “we… will shortly ban letting agent fees”.
During the Queen’s Speech 2017, the Government announced an intention to bring forward a Draft Tenants’ Fees Bill to tackle “unfair fees on tenants” and “make the private rental market more affordable and competitive”.
November 2017 saw publication of Banning letting fees paid by tenants: government response and the Draft Tenant Fees Bill and explanatory notes. The draft Bill was subject to pre-legislative scrutiny by the Housing, Communities and Local Government Select Committee. The Committee took written evidence and held five public evidence sessions in January and February 2018. The written and oral evidence submitted to the Committee can be found on the Committee’s webpages.
The Committee’s findings were published on 29 March 2018. Overall, the Committee expressed support for the draft Bill:
With increasing numbers of people living in the private rented sector, we support the aims of the draft Bill and broadly support the proposed legislation. We believe it has the potential to save tenants in the private rented sector hundreds of pounds as well as making the market more transparent.
The Government’s response to the Committee was published on 2 May 2018; on the same day, the Tenant Fees Bill 2017-19 received its First Reading in the House of Commons. The debate on Second Reading took place on 21 May 2018.
The Bill was considered in Public Bill Committee during five sittings between 5 and 12 June 2018. The first two sittings were taken up with the examination of witnesses on 5 and 7 June (morning). Although Opposition amendments were tabled, the Bill completed its Committee Stage without amendment. Report Stage in the House of Commons took place on 5 September 2018; several Government amendments were added to the Bill without division. The briefing paper produced by the House of Lords Library summarises the Commons Report Stage. Second Reading in the Lords took place on 10 October 2018. The Committee Stage took place over two sittings on 5 and 20 November 2018; the Bill was reported on 11 December 2018 and further Government amendments were agreed. Third Reading in the House of Lords took place on 15 January 2019; consideration of Lords amendments is scheduled to take place on 23 January 2019.
During Third Reading of the Bill in the House of Lords, Lord Bourne of Aberystwyth said that, subject to the parliamentary timetable, the intention is for the Bill to “come into force on 1 June 2019. This would mean that the ban on letting fees would apply to all new tenancies signed on or after this date.”
The private rented sector in England is home to 4.7 million households. Letting fees and high deposits are seen as adding to the affordability challenge for tenants seeking to access rented accommodation. The Bill’s provisions sit within the Government’s wider aim of “rebalancing the relationship between tenants and landlords to deliver a fairer, good quality and more affordable private rented sector.”
Other action the Government is taking in this area includes:
The announcement of the fees ban and the capping of security deposits has been welcomed by organisations such as Shelter, Which? and Citizens Advice. These bodies have actively lobbied for the regulation/abolition of letting agent fees.
Bodies such as the Association of Residential Letting Agents (ARLA), the Residential Landlords Association (RLA) and the National Landlords Association (NLA), while expressing support for wider regulation of letting/managing agents to drive up standards, do not support the abolition of letting agent fees. They argue that fees cover essential costs which must be met and that tenants’ rents will increase because of the ban. There is also concern that the removal of this revenue stream will result in agency closures, job losses and less competition. There is doubt within the sector that landlords will accept significant fee increases and that service levels might decline.
It is argued that capping security deposits at six weeks’ rent could result in landlords/agents being less willing to accept ‘riskier’ tenants but this is preferred to the Select Committee’s recommendation for a cap at five weeks’ rent. The Bill was amended in the House of Lords to provide for a maximum cap of five weeks’ rent where the annual rent is less than £50,000, as opposed to the six weeks’ cap the Bill originally provided for. The cap is still six weeks where the annual rent exceeds £50,000.
On 2 November 2018, the Government published three pieces of draft guidance in relation to the Bill:
Note that the Bill was further amended after the publication of these documents.
In 2012 the Scottish Government clarified the law so that since 30 November 2012 all tenant charges, other than rent and a refundable deposit, have been illegal. In Northern Ireland the Department for Communities has said that a ban on letting agent fees will be introduced. The Renting Homes (Fees etc.) (Wales) Bill, which will introduce a ban on tenants' fees, was introduced into the National Assembly on 11 June 2018.
The Explanatory Notes to the Bill provide information on its territorial extent:
The territorial extent of this Bill is England and Wales only apart from Clauses 6(6), 7(4), 24(10), 28(12), and 29, 31 to 33 which extend to the whole of the United Kingdom. Clauses 6(6), 7(4) and 24(10) amend Schedule 5 to the Consumer Rights Act 2015 which extends to the whole of the United Kingdom and the supplementary provisions in Clauses 28(12) and 29, 31 to 33 require the same extent as a result. The extent of a Bill can be different from its application. Application is about where a Bill produces a practical effect. The Bill will apply in relation to housing in England only.
Note that these Explanatory Notes relate to the Tenant Fees Bill as brought from the House of Commons on 6 September 2018 (HL Bill 129). Amendments made to the Bill thereafter have changed the clause numbers after clause 21.
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