Tenant Fees:

The government announced this week (Tuesday) that the Tenant Fees Bill will come into force in England on the 1st of June 2019. The announcement follows the Bill’s third reading in the House of Lords, and it is likely to receive Royal Assent soon.

Speaking in the House of Lords, Lord Bourne of Aberystwyth said:

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“We need to enable agents and landlords following Royal Assent to become compliant, but we intend for the provisions to come into force on June 1st 2019.

“This would mean the ban on lettings fees would apply to all tenancies signed after this date.”

Landlords and letting agents have been expecting the change for some time, so this announcement comes as no surprise, but they will need to come to terms with a change that will mean both will need to absorb some of the costs normally charged to tenants.

Whether the change will result in an increase in rents for tenants is a moot point; some arguing it will, while others are resigned to the fact that there’s a limit to how much rents can be increased given the stress on tenant’s budgets, so landlords and agents may have no choice but to absorb the extra costs.

In Scotland, where a fees ban has been in place for some time, Shona Hay of Belvoir Letting Agency has said: “We didn’t pass it on. We’re in an area where you can’t ridiculously increase rents because people just won’t rent the properties. So we’ve had to absorb it.” Arguing that the fees she was charging were legitimate and covered the cost of references and credit checks, she says: “We continue to take a loss on that. If we were a doctor, we’d be charging for the services, but as an agent, we are quite vilified to be honest.”

However, some agents in Scotland say they know of some unscrupulous landlords and agents who still charge tenants for “administration” and processing paperwork.

There are an estimated 4.8 million tenant households in England that are expected to benefit from the ban, saving anything from £200 to £700 for each move, a considerable saving for many tenants who might move every 2 years or so.

Two minor and technical amendments were tabled by the Government, both were passed, but it is not clear whether a recent issue identified by lawyers of a tenant referencing company have been fully addressed: a loophole that could affect third party contracts.

The legal experts are warning that letting agents and landlords could be caught out by using other industry services as part of their lettings processes, for example, tenant referencing companies, inventory firms and repairs reporting systems.

One clause in the Bill as it currently stands says that:

A letting agent must not require a relevant person to enter into a contract with the agent or a third party in connection with a tenancy of housing in England if the contract is –

(a) a contract for the provision of a service, or

(b) a contract of insurance.

The landlord or agent will be obliged to absorb the cost of any additional work by third parties when the ban comes in, so that there are no cost implications for a prospective tenant or guarantor. But the tenant will usually have to agree a third party’s terms and conditions, effectively creating a contract between the tenant and the third party service provider.

This, as it is understood would be in direct contravention of this clause in the Bill as it stands.

Bill documents — Tenant Fees Bill 2017-19

©LandlordZONE® – legal content applies primarily to England and is not a definitive statement of the law, always seek professional advice.

6 COMMENTS

  1. Note that the legislation states that a LL or LA must NOT require a tenant prospect to pay for referencing.
    However it is perfectly acceptable for a LL or LA to specify that UNLESS a tenant prospect has a Tenant Referencing Passport then they will not even be considered as a tenant prospect.
    There is no law that forces a LL or LA to consider a tenant applicant.
    Such an applicant is perfectly entitled not to be considered as a tenant if they refuse to purchase their own TRP.
    Tenants will soon wise up thay UNLESS they purchase their own TRP their chances of sourcing a tenancy will be very difficult if not impossible.
    Of course it is entirely up to a LL or LA if they wish to pay for referencing; but they don’t have to.
    Obviously that might mean few go to those LL and LA that refuse to pau for any referencing.
    I sugfest that tenabts will blink first and purchase their own TRP.
    Personally I will never consider any tenant applicant unless they have a TRP.
    Without one I simply won’t even consider such a tenant applicant.
    I can’t force a tenant applicant to buy their own TRP and a tenant can’t force me to pay for their referrncing.
    I simply wouldn’t do business with such a tenant applicant as is my right!!

  2. Hi Paul,
    I think this is probably the key question for a lot of landlords – me included. I don’t use LAs and do all of the paperwork myself. I don’t charge fees but I do expect the tenant to pay for their own referencing. What this does is remove the time wasters essentially and the people unlikely to pass referencing. It ensures the applicant is serious. There’s no way that I’m going to pay for a prospective tenant to be referenced checked at my expense, to then find out that they don’t pass! Usually what I do is request that the tenant pay me the £30, I take their details and submit the request. Looks like in future I’ll have to ask them to do it directly with the referencing company to avoid flouting the law and risking section 21 issues, if that was ever required.
    Anyone any thoughts?

  3. Estate Agent creates referencing business and makes them their chosen referencing provider.

    “Prospective tenant! Go and pay for referencing with this referencing company. Otherwise we won’t consider you.”

    And so the Estate Agents will continue to get their fees via this loophole.

    Solution: A law amendment that stipulates that a tenant must be allowed to choose their own referencing company. Which, in order to protect the Estate Agents from rogue/non-legit referencing, will be a government licensed referencing company that paid the government for its annual license. Tenants, being able to shop around, will create price competition.

  4. As a Landlord of 50 years standing, I will not take an Applicant unless they have passed a Credit Check & have a Guarantor.
    All you will need to do is provide the Letting Details to the Applicant who will then complete an Application Form online & Provide a Guarantor who will also complete an Application Form online & pay directly to the Firm providing this service.
    The Landlord therefore is NOT charging for this service.

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