Summary
The Government’s draft Tenant Fees Bill, as published on 1 November 2017, is intended to make renting in the private rented sector fairer and easier for tenants by introducing a ban on “tenant fees”, fees chargeable to tenants by landlords and letting agents. With increasing numbers of people living in the private rented sector, we support the aims of the draft Bill and broadly support the proposed legislation. We believe it has the potential to save tenants in the private rented sector hundreds of pounds as well as making the market more transparent.
However, it is clear that some improvements could be made in order to better deliver the Bill’s aims. Our key recommendations are as follows:
- Security deposits should be capped at the equivalent of five weeks’ rent in recognition that finding six weeks’ worth of rent can cause financial difficulties for tenants.
Tenants are required to find large sums of money at the start of a tenancy which can pose a significant financial challenge. By reducing the cap on security deposits, the private rented sector will become more affordable while also protecting landlords from rogue tenants.
- Landlords should only be permitted to retain the full holding deposit if the tenant knowingly provides false or misleading information. If the tenant provides information in good faith and subsequently fails a reference check, the landlord should only be permitted to retain the cost of a reference check.
If a tenant fails a reference check despite providing accurate information, it is unfair for the tenant to lose their entire holding deposit. Simply encouraging landlords to do the right thing and return all but the cost of a reference check is unsatisfactory. But there should be some disincentive for tenants knowingly to lie. We think “reasonableness” an unsatisfactory threshold for dividing the cases.
- Clear guidance needs to be provided on what type of fee, and how much, constitutes a reasonable default fee, and a role for trading standards in enforcing the reasonableness of such fees should be considered.
While default fees can represent actual costs for landlords and letting agents, they are open to abuse. The definition of a reasonable default fee must be clarified and the limiting of fees to what is reasonable more easily enforced.
- Tenants should be allowed to recover any prohibited fees through the First-tier Tribunal and landlords should be prevented from recovering possession of their property until they have repaid any prohibited fees.
It is unrealistic to expect tenants to recover any prohibited fees through the County Court process. The First-tier Tribunal is more user-friendly. By preventing landlords from recovering possession of their property, it would encourage swift repayment in the event of a breach of the ban on tenant fees.
- Additional funding should be made available to local authorities to enforce the legislation if the Bill is to fulfil its potential.
Funding enforcement of the legislation solely through civil penalties will not sufficiently resource local authorities and may even encourage less effective enforcement practices.
- All draft Bills should be published alongside an Impact Assessment in line with existing Government guidance.
It is highly concerning that the Ministry did not publish an Impact Assessment at the same time as publishing the draft Bill despite guidance from the Cabinet Office and the Department for Business, Energy and Industrial Strategy that they should do so. Effective Parliamentary scrutiny can benefit from ensuring key stakeholders and others are able to fully assess the Government’s anticipated impact of a draft Bill.
Published: 29 March 2018