The Government has published the Draft Tenant Fees Bill. In addition to tightening the existing requirements on Letting Agents to publicise their fees under the Consumer Rights Act 2015, this draft Bill seeks to limit the fees Landlords or their Letting Agents can charge Tenants over and above their rental payments.
The only charges that can to made to Tenants are set in Schedule 1 of the draft Bill and these are:
- Refundable holding deposits (capped at one week’s rent)
- Security deposits (capped at 6 weeks rent), and
- Charges to tenants in default (e.g. late payment, key replacements)
Landlords and their agents should be aware that any charges made to the Tenants in default must be included in the tenancy agreement and these can be challenged if they cannot be justified by the Landlord or Letting Agent as a genuine pre-estimate of the costs involved. If this cannot be shown, then such fees may regarded as “penalty charges” and therefore unenforceable.
There is also a prohibition on initially charging a higher rent which is then reduced as a mechanism for bypassing these restrictions.
The draft Bill contains conditions regarding in the prompt return of the refundable holding deposit but allows the Landlord to retain it if the Tenant fails to enter a tenancy with a willing Landlord or if it transpires that the Tenant has no right to rent (Immigration Act 2014) or if the Tenant provided false or misleading information in order to obtain the offer of a tenancy.
This legislation requires local Trading Standards Officers to enforce these rules and in addition to the return of any prohibited payment (with interest) any breach can incur a £5,000 fine and a second breach within 5 years can lead to a £30,000 fine and a criminal conviction.
The Secretary of States for Communities and Local Government has stated that the intention behind his bill is to “produce a fairer, more competitive and more affordable lettings market”. However, Landlord’s will no doubt feel that this as yet another attack on the private rental sector as fees that can no longer be passed on to Tenants will have to be met by Landlords.
For more information on Landlord and Tenant law please contact Jonathan Davis