Tenant Fees Bill introduced to Parliament

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Letting Fees Ban:

The Bill that will introduce a lettings fee ban was introduced to Parliament last week by the new Secretary of State for Housing, Communities & Local Government, James Brokenshire. He published the Bill, saying that the ban will save tenants in England around £240m a year.

The Bill will also seek to cap deposits at the equivalent of six weeks’ rent, not the five weeks that had been mooted in some quarters. This is likely to become law next year.

In an impact statement published alongside the Bill, the Government estimates that the ban will cost English letting agents £157.1m in the first year of operation.

Mr Brokenshire said:

“This government is determined to build a housing market fit for the future. Tenants across the country should not be stung by unexpected costs. That’s why we’re delivering our promise to ban letting fees.�

In a statement put out by MHCLG Mr Brokenshire says:

The Tenant Fees Bill will stop letting agents from exploiting their position as intermediaries between landlords and tenants, and prevent unfair practices such as double charging for the same services.

It will also help to increase competition between agents and landlords, which could help drive lower costs overall and a higher quality of service for tenants.

Other key measures in the Bill, which reflects feedback from a recent public consultation and pre-legislative scrutiny from the Housing, Communities and Local Government Select Committee, include:

• capping holding deposits at no more than one week’s rent. The Bill also sets out the proposed requirements on landlords and agents to return a holding deposit to a tenant
• capping the amount that can be charged for a change to tenancy at £50 unless the landlord demonstrates that greater costs were incurred
• creating a financial penalty with a fine of £5,000 for an initial breach of the ban with a criminal offence where a person has been fined or convicted of the same offence within the last 5 years. Financial penalties of up to £30,000 can be issued as an alternative to prosecution
• requiring Trading Standards to enforce the ban and to make provision for tenants to be able to recover unlawfully charged fees via the First-tier Tribunal
• prevents landlords from recovering possession of their property via the section 21 Housing Act 1988 procedure until they have repaid any unlawfully charged fees
• enabling the appointment of a lead enforcement authority in the lettings sector
• amending the Consumer Rights Act 2015 to specify that the letting agent transparency requirements should apply to property portals such as Rightmove and Zoopla
• local authorities will be able to retain the money raised through financial penalties with this money reserved for future local housing enforcement

Alongside rent and deposits, agents and landlords will only be permitted to charge tenants fees associated with:

• a change or early termination of a tenancy when requested by the tenant
• utilities, communication services and Council Tax
• payments arising from a default by the tenant such as replacing lost key

The new measures are subject to Parliamentary timetables and will be introduced in law next year.

The Tenant Fees Bill builds on government’s work this year to protect tenants and landlords through the introduction of new rogue landlord database, banning orders for rogue landlords and property agents as well as a new code of practice to regulate the letting and managing agents sector.

All of these proposals relate to England only. The ban on letting fees will apply to assured shorthold tenancies and licences to occupy (lodgers) in the private rented sector.

A ban on letting fees was announced at Autumn Statement 2016, it was also a commitment in the 2017 Conservative Manifesto.

The Tenant Fees Bill reflects feedback from a recent public consultation, which ran from April to June 2017 and received over 4,700 responses. 58% of respondents (93% of tenants) agreed with government’s proposed approach to ban letting fees to tenants with the exception of a holding deposit, refundable tenancy deposit and tenant default fees.

A draft Tenant Fees Bill was published by government on 1 November 2017 and underwent pre-legislative scrutiny by the Housing, Communities and Local Government Select Committee who published their report on 29 March 2018.

The Committee agreed that the Bill has the potential to save tenants in the private rented sector hundreds of pounds as well as making the market more transparent. Government has carefully considered the Select Committee’s report and accepted the majority of their recommendations. You can read the government response to the Select Committee report.

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Tenant Fees Ban – Measures affecting Landlords and Agents

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Government press release on the action to end letting fees.

New Housing Secretary Rt Hon James Brokenshire MP said: “This government is determined to build a housing market fit for the future. Tenants across the country should not be stung by unexpected costs.

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Tenant Fee Bill – a missed opportunity to improve transparency

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Tenant Fees Ban:

THE Government’s plans to ban fees paid by tenants entering into new rented housing is a missed opportunity to make quicker and more lasting improvements in the rental market.

The Tenant Fee Bill, published today, will take months to become law and then a considerable time to implement.

The Residential Landlords Association (RLA) argues that much quicker changes could and should be made to better enforce existing regulations designed to improve transparency around letting agent fees.

Since May 2015 the law has compelled letting agents to publish details of the fees they charge. Agents breaking this law can be fined up to £5,000.

Figures published last year by the National Approved Letting Scheme found that after two years of the law coming into effect, 93 per cent of councils had failed to issue a single financial penalty to a letting agent for breaching the law. Only three penalty notices had been served across England for failure to display all relevant landlord and tenant fees.

59 per cent of councils admitted that they do not consider the displaying of fees to be a high property for the allocation of resources within Trading Standards and 45 per cent said they only undertake reactive enforcement activity.

Instead of banning letting agent fees paid to tenants, the RLA is calling for immediate action to better enforce the law as it currently stands. This includes the Government using powers it has so far failed to use to force agents to display the fees they charge in more prominent positions and specify them in much greater detail.

The Bill comes after the Office for Budget Responsibility warned that plans to ban letting fees paid by tenants could lead to rent rises as a result of fees being passed on. In 2013 Shelter concluded that if letting agents did not absorb the cost of ban fees paid by tenants, “landlords may be justified in increasing rents to reflect their additional costs�.

The RLA’s Policy Director, David Smith, commented:

“Laws without proper enforcement serve only to let tenants and good landlords down.

“Rather than pressing ahead with plans for more legislation in the sector that will take time to be considered by Parliament and enacted, Ministers could achieve a greater and earlier impact by using the powers they already have to improve the transparency of fees charged by agents.

“With warnings that the policy could lead to rent rises, there is a very real danger that whilst the cutting the upfront cost of renting, tenants will find themselves paying them through higher rents on a permanent basis.

“Instead of using scarce Parliamentary time to make changes to letting fees much of which could be done by regulation and better enforcement, the Government could do more to reform the deposit system to deal with the need for most tenants to fund two deposits, one for the property they are leaving and one for the property they are going too. This cost is much higher and a much more substantial barrier to tenant mobility than agency fees.�

The Freedom of Information data from the National Approved Letting Scheme is available here

The Office for Budget Responsibility’s Economic and Fiscal Outlook for March 2018 can be accessed here Page 94 notes, “it is possible that a ban on fees would be passed through to higher private rents. If this was the case, it could affect our housing benefit spending forecast.�

In June 2013, Shelter published a report “Letting Agencies: the price you pay�. This can be accessed here Page 17 says of the proposal: “If letting agencies do not absorb the costs they currently charge to tenants, landlords may be justified in increasing rents to reflect their additional costs.�

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BLOG: Renting to family members: Councils still denying legitimate claims

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A few years ago, the RLA published an article, relating to a tribunal case I had represented in, where the landlord was a concerned aunt, who provided a tenancy to her young pregnant niece, who didn’t have the means to secure a tenancy for herself. The case highlighted the sometimes difficult task of convincing councils […]

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Client Money Protection compulsory from April 2019

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The good news is the government have finally announced that it will be a requirement for all property agents to belong to an approved Client Money Protection (CMP) scheme as of the 1st April 2019.

CMP is an insurance product that protects the rental money tenants pay their letting agents to pass onto their landlords and safeguards this if an agent attempts to use client funds fraudulently.

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My own landlord’s GDPR policy

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GDPR is something that WILL affect almost every landlord in the UK. The new legislation comes into effect on 25th May 2018, by which time all landlords (and other businesses) will have to have registered with the ICO and have a GDPR Data Protection Policy.

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TSB customers unable to pay rent after standing order defaults

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Rent Payments:

The ongoing TSB IT banking crisis is causing anxiety for both tenants and those landlord affected by this. Some tenant customers of the TSB bank have had their standing orders returned, leaving them unable to pay their rent and other bills.

Tenant customers are furious with TSB because not paying their rent puts them in breach of their tenancy agreements and potentially puts them at risk of being served notice.

Of course, given these exceptional circumstances, landlords should be expected to be understanding and make allowances for this, but tenants should nevertheless be prepared to warn their landlords at the earliest opportunity. However, some landlords will find themselves in difficulties because of this as many rely on regular rent payments to make their mortgage payments.

Some tenancy agreements have default payment fines, meaning that in theory a tenant can be fined for payment delays. But regardless of whether the landlords is understanding or not, responsible tenants will be anxious because the incident may impact badly on their relationship with their landlord.

As the TSB’s computer meltdown entered its second week some frustrated customers are still unable to access their online banking accounts or make payments. Some businesses banking with TSB are facing problems paying wages, and employees not getting paid are therefore unable to pay their bills.

The crisis arose after a switch over to a new computer system following the bank’s split from the Lloyds Banking Group. Although TSB management said that systems would be “up and running” soon, last week, the problems have persisted into a second week and TSB have had to call in experts from IBM after the Spanish company tasked with the changeover have so far failed to find a solution.

In addition to the issues with standing orders, TSB has also said that some mortgage customers were unable to access their accounts online or via the TSB app, and some credit card holders had problems viewing information.

The bank has promised to compensate those affected.

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Training course of the month: GDPR

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GDPR is one of our most popular E-learning  courses at the moment, and with the new regulations coming into force on 25th May, it is clear to see why. GDPR – or, to give it its full title, General Data Protection Regulation, will affect all landlords as they all handle personal data. Data Protection legislation […]

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RLA raises concerns over Nottingham Selective Licensing Scheme

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The RLA has written to Nottingham Council outlining concerns over both the Council’s draft application requirements and the draft licensing conditions for its Selective Licensing Scheme. In the letter, which can be read here the RLA outlines why it believes the scheme, announced for parts of the city last year, is not the best way forward. Selective […]

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Tenant hoarder leaves landlord in a financial mess

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Bad Tenants:

Ex-social worker and professional landlord of 30 years, Leslie-Ann Franklin, is facing having to sell the rental property she lives next door to in March, Cambridgeshire, after a complex case involving an extreme hoarder has left her in financial ruin.

With her story due to be aired on this week’s ‘Bad Tenants Rogue Landlords’ (Thursday 3rd May, 8pm, Channel 5), Leslie feels the authorities and legal system let both her and her tenant down, and now she is fighting for a judicial review of her case to avoid paying £25,000 in legal fees, on top of the £30,000 she has already spent.

Leslie-Ann purchased the 18th century two-bedroom cottage she lives next door to in 2014. Her elderly tenant and neighbour, who was rent-protected and already in situ, had lived in the property for over 30 years. Although Leslie knew that the property was untidy and needed some work, she felt that becoming landlord to her neighbour would give her an opportunity to help the tenant get the property back in good order.

Unfortunately, problems were apparent from the start with Leslie-Ann receiving rent payments intermittently and struggling to gain access to the house even to carry out her basic landlord obligations.  The situation continued to deteriorate, with rubbish piling up and vermin visible around the property.

She reported the situation to Fenland District Council to investigate, who carried out a report which highlighted serious health and safety hazards. They issued an advisory notice for the landlord to gain access so she could carry out necessary works, and offered the tenant alternative accommodation, but this was refused. Concerned about her tenant’s mental health, Leslie-Ann also contacted Social Services, to no avail. The only alternative was to seek a possession order.

Although Landlord Action eventually managed to gain access to the property, the tenant filed a defence saying the landlord was harassing her, and the property was in a state of disrepair because Leslie-Ann had not maintained it.

Tragically, the tenant has since passed away and now Leslie-Ann is embroiled in a complicated legal battle which, if she loses, will see her having to pay more than £25,000 in legal fees, as well as an additional £5,000 to remove the tenant’s belongings from her property.

Leslie-Anne says:

“This whole situation has been a complete nightmare and now after years of battling the system, I may have to sell the property. I didn’t realise, until it was much too late, the severity of my tenant’s issues. 

“I tried time and time again to explain to the council and social services but they all failed to act quickly enough.  Somehow this has now come back on me. I’ve been a landlord for 30 years and never had a problem, and now I’m being vilified as a ‘rogue’ landlord.â€�

Paul Shamplina, Founder of Landlord Action, said:

“In 27 years, I have never seen a worse case. Entering the property with the film-crew was a stomach-churning experience, it was a real-life house of horrors.  From the moment we stepped foot inside, the stench hit you even though we had masks on. 

“We couldn’t move more than a couple of feet for overflowing mounds of rubbish, piles of belongings and black sacks full of human faeces – the bathroom had not been used in the proper capacity in over two years! The floorboards had given way and the ceilings were hanging down. I think viewers will be shocked when they see this case.â€�

Watch “Bad Tenants Rogue Landlords� on Thursday 3rd May, at 8pm on Channel 5.

www.landlordaction.co.uk

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