Since the announcement, over a year ago, of the Government’s intention to ban fees to tenants there has been a lot of speculation about what the necessary legislation will actually look like when it arrives.
Well…. Now it has arrived – sort of – in the form of a draft bill outlining the prohibitions, enforcement actions, and amendments to other related pieces of legislation likely to be contained in the bill proper at some point in the future.
So it’s about time we discussed what the Government is actually trying to do.
Broadly, there are three areas of this draft bill, which will be of immediate interest to letting agents.
- Enforcement; and
- Consumer rights
So let’s take them one at a time.
The draft bill breaks the prohibitions it wants to introduce into those specific for landlords, letting agents, specific payments, and holding deposits.
The provisions for landlords and letting agents are essentially the same; neither party will be able to require payment as a condition of the ‘grant, renewal or continuance of a tenancy of housing in England’.
Likewise such a payment cannot be required to a third party, nor can it be required that tenants contract with another provider of services. i.e. no requiring the use of a referencing agency in lieu of charging.
Finally, loan agreements can’t be used to circumvent the prohibition on fees.
What is, and isn’t, allowed by way of payment gets a little more complicated. In fact it takes two full pages of draft legislation to outline the specifics.
- Rent is allowed (phew!); but
- Don’t think that you can front load the rent with a high initial payment, followed by 11 reduced payments to make up for any shortfall. This is prohibited.
- Tenancy deposits are allowed; but
- Don’t go charging more than the equivalent of six weeks rent. That will no longer be permitted.
- Holding deposits are allowed; but
- It can’t exceed the equivalent of one week’s rent and the way that you handle holding deposits is the subject of an additional page and a half of legalese.
- Default payments will be permitted. That is to say payments required as a result of a tenant’s breach of tenancy conditions – as long as you don’t require anything prohibited as a condition of the tenancy.
Enter Trading Standards.
The local Trading Standards authority – whether they like it or not – will have responsibility for enforcing the ban in England.
They will be able to impose a financial penalty of up to £5,000 if satisfied beyond reasonable doubt that a tenant has been required to make a prohibited payment.
The same penalty may be imposed for failure to return a holding deposit.
Repeat offenders (within a five year period) could see these penalties escalate to £30,000 and the actions may be treated as a criminal offence.
Of particular note for letting agents, company directors may be held responsible for offences committed by the company and its officers.
(3) Consumer Rights
That old letting agent favourite, consumer rights, also plays a part in this draft bill as it seeks to amend the Consumer Rights Act 2015.
Letting agents’ duties under the Act are reinforced, requiring the publication of fee tariffs, client money protection credentials, and redress scheme memberships, on third party websites when they are used (property portals etc.).
Furthermore, when publishing the details of client money protection insurance an agency will need to include the name of the relevant provider.
There will no doubt be an enormous amount of debate concerning the provisions, some of which may change for better or worse.
This draft bill will be considered by a parliamentary committee, after which the Government will (probably) publish a ‘proper’ bill to be considered and debated by both houses of parliament, before finally being enacted – most likely at some point in 2019.
For the time being – no change.