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:
“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.