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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