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Agent’s fee ban- the Draft Bill

The draft bill on banning fees paid by tenants was published last week. The Draft Tenant Fees Bill has not been put before parliament yet and is likely to see changes prior to coming into force which will not be for a while given the stages of the parliamentary process it has to pass through.

However, for now we summarise the main provisions with the caveat that the bill is likely to change. Our last post on this subject can be read here.

Section 1 and 2 of the bill prohibit landlords and lettings agents requiring any payment from a tenant for the ‘grant, renewal and continuation’ of any tenancy or license. In Schedule 1 of the bill there are payments which are permitted and they include the obvious ones such rent and deposit but also holding deposits (to a degree, see below) and a payment in the event that the tenant breaches any term of the tenancy/license where the agreement permits.  If there is a term or provision in the agreement which permits the landlord or letting agent to seek payments beyond those permitted that term or provision is not binding on the tenant. It is important to note that only that term or provision is not binding, the remaining terms and provisions of the agreement are not affected.

Enforcement will be through local trading standards officers. The initial civil penalty is up to £5,000. However, repeated breaches are treated as criminal offences but with the ability to levy a civil penalty of up to £30,000 instead of prosecution. Further, where trading standards officers find that fees have been paid in breach of this bill they will require landlords or agents to pay it back. Furthermore, while the bill permits holding deposits to be paid landlords or agents cannot simply retain this money. The holding deposit must be returned to the tenant unless it is applied towards a payment of rent or deposit. It will also need to be returned if the parties fail to enter into a tenancy or license.

Further matters to note are that:

– Landlords and lettings agents cannot attempt to avoid the ban by insisting that tenants pay, enter into contracts or grant loans to any third party for the grant, renewal or continuation of any tenancy or license;

– Directors can be personally liable for these fines and penalties where a company commits the offence;

– Trading standards officers can apply interest to any repayment of prohibited fees or holding deposits; and

– Under section 12 of the bill, trading standards officers can assist and advise tenants that are due any repayments.

Other matters covered in this bill

The deposit payable under any tenancy or license will be limited to 6 weeks. Where a deposit is taken for a period in excess of 6 weeks that excess period is prohibited and can see agents or landlords facing prosecution under this bill.

This bill also places a positive obligation on lettings agents to publicise their fees or provide a link to their fees on any third-party website, such as Rightmove and Zoopla. A breach of this obligation can see agents face more than one penalty subject to certain conditions.

Lettings agents will also need to become members of a client money protection scheme and provide the name of the scheme. 

Comment

We are aware that many are concerned about their businesses and the risk of fees increasing in other respects. However, one aim of this bill is to increase competition and that will certainly be the case if agents seek to recover some of their lost income from landlords. One other matter to consider is that this bill only bans fees for the grant, renewal and continuation of fees. No doubt many out there will note that there are situations which do not fall into one of these categories for which a payment could be sought.

 

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