Draft bill on tenant fees ban released
by Patrick Garratt - 1st November 2017
Government announces plans on tenant fees ban
The Secretary of State for Communities and Local Government, Sajid Javid, has today published the Draft Tenant Fees Bill.
The bill covers the fees, holding deposit and deposits that landlords and agents can charge to tenants or prospective tenants.
There is no further update on the intended implementation date of the legislation but it is not anticipated to begin until at least October 2018.
When Purple Frog first started, we did not charge admin fees to tenants, our competitors however did charge such fees. This made it very difficult for us to compete, as other agents would offer services to landlords for free or for drastically reduced amounts.
Since we started charging admin fees we’ve tried to keep them as low as possible and include benefits like contents insurance for our tenants. We welcome this draft bill as it will give potential tenants a much clearer understanding of what they will need to pay to secure a property and will level the playing field for property agents.
The bill will ban landlords and their agents from requiring tenants and licensees in the private rented sector to make any payments, as a condition of granting, renewing, or continuing a tenancy (or as a conditions of making arrangements for those things), with the exception of:
Deposits
The initial consultation had suggested limiting Tenancy Deposits to one month’s rent. The draft bill has seen this revised up to six weeks’ rent, which will be a relief to many landlords.
Holding Deposits
To enable landlords to be sure of a potential tenants’ commitment to progress to engaging in a tenancy agreement, landlords and their agents will be allowed to take a holding deposit from the tenant, with a limit of one week’s rent.
The bill details the circumstances under which landlords or their agents must return holding deposits to tenants. Broadly speaking, if the landlord or agent makes reasonable efforts to complete the application and the tenants does not provide the information required, or does not provide truthful information, the landlord or agent may withhold the holding deposit if a tenancy agreement is not set up. The landlord may use the holding fee against the deposit or first rent payment, instead of returning it to the tenant if a tenancy goes ahead.
The default time for a tenancy to be completed from the date that the holding deposit is collected will be 15 days. That said, this time frame can be adjusted by agreement by the landlord/agent and tenant.
Once the tenancy is completed, the landlord/agent has 7 days to return the holding deposit to the tenant.
Tenant default fees
Landlords or their agents will be allowed to charge tenants default fees, which are detailed in the tenancy agreement. These include late payment fees or charges for the replacement of keys or any other breach by the tenant of a covenant or condition of the tenancy.
Financial penalties
If the landlord or agent breach the regulations, they may be fined £5,000. If they breach the regulations again within a five-year period they may be fined £30,000.
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