The Opportunities and Concerns Raised by the Tenant Fee Ban

Posted by: Lucy Dawe | Post date: 30.05.18

Making things easier for tenants who may find it difficult to pay tenancy fees, deposits and rent is obviously a good thing.  This is the idea behind the Tenant fees bill which just had its second reading in parliament.  The implementation of this bill would ban fees that tenants currently have to pay during an prior to a tenancy and limit the amount of money they have to pay as a deposit.  Although we think it’s a great thing that government are committing to helping tenants in this way, there are some concerns from MPs, landlords, letting agents and tenants about the implications of these changes and we believe that it could work well if some misconceptions about letting agents are addressed.

Why the bill is being proposed

Some letting agents have been hugely overcharging tenants, is the short answer.  Another reason is that even the honest letting agents have needed to impose fees on tenants in order to keep their landlord fees down and remain competitive.  The result is tenants in some areas (by unscrupulous agents) being charged up to £900 in fees alone and needing to find money for the deposit and rent too!  Clearly, this has made things very difficult for some tenants and the government wants to help them by banning these fees altogether so they can move into properties without such a large ingoing expense.

Concerns about the bill

During the second reading of the Bill in parliament on 21st May, central Brighton MP, Caroline Lucas, expressed her concerns that the bill would result in higher rents as letting agents’ costs would be passed onto landlords and, hence, back onto the tenants.  She suggested that the proposed cap on deposits was too high and that only 8% of tenants would benefit from the bill as it currently stood.  Other MPs have expressed concerns that low income families renting properties may actually suffer as a result of this bill because they are least likely to move property often so won’t benefit from the lack of fees compared to the potential increase in rent.  Although the banning of fees will directly impact us as a business, we feel it will be an opportunity to educate landlords and the general public about what letting agents actually do for their charges. Although we will have to look at our fee structure with our landlords – we will have a chance to update them in detail on what administration takes place to keep tenants and landlords safe and within regulation.  Higher rents are not ideal but they do have the bonus of allowing tenants to see exactly what they would be paying up front and avoid confusion about additional fees as tenancies progress.

Misconceptions about letting agents

A rather depressing article on the Homes and Property magazine website perfectly demonstrated this need to educate landlords on what letting agents actually do.  The landlord writing the article highlighted why she thought the fees ban was a good idea and it essentially boiled down to her impression that letting agents were charging hundreds of pounds to show potential tenants around properties.  If only that were true!  The regulations that landlords now have to adhere to are absolutely mind boggling, around 150!  Everything from general safety to energy efficiency to right to rent checks, to smoke alarms, inventories and HMO licensing has to be fully checked, reported on and fixed where needed, all taking administration time and total organisation.  Tenants have to be, not just credit checked, but identity checked thoroughly for instance, and this can be a time consuming process.  Letting agents are largely bearing the brunt of these regulations by taking care of them for their landlords.  Ensuring a property is legally ready to be let out and that tenants are legally allowed to live there while protecting the rights of both landlords and tenants requires a huge amount of work.  This is where the fees are incurred and, surely, no one expects letting agents to do all this for free?

What happens next with the bill

Changes to the law aren’t expected to come into force until after April 2019 and the Bill still has a number of stages to go through before it’s passed into law anyway.  The next stage is the Committee Stage where a small(ish) group of MPs will go through the bill word by word and suggest changes, additions, etc.  Then these changes are reported back to parliament in the report stage where further revisions and additional clauses can be suggested by MPs.  It has a third reading after that before going through the whole process again in the House of Lords.

Whatever final form this Bill will take, we’re delighted that things are going to be easier for tenants and relish the opportunity to show off the good work we undertake for landlords and tenants as part of this process.  To get a head start on this and talk to us about everything we can offer you if you’re planning to let out a property, please call 01273 917791 and we’ll be glad to answer any questions you might have.