A ban on letting fees charged by landlords and letting agents has been enforced in Wales. The new legislation aims to make the renting process fairer and simpler for tenants, and will save tenants approximately £200 for each tenancy, according to the Welsh Government. The ban came into effect on 1st September 2019.
Tenants will now pay significantly less at the beginning and throughout their tenancies when renting a home in Wales, with the previous rules allowing letting agents and landlords to charge upfront fees for a range of services.
The new law was successfully passed by the Welsh Assembly, and not only prohibits fees being charged to tenants, but also places caps on the amounts that letting agents can charge for holding and security deposits. Under the new legislation, holding deposits are capped at one week’s worth of rent, and regulators will now have the power to set a limit for the amount of security deposits required.
Tenants can now no longer be charged for rental services, such as renewing a tenancy, signing a contract, receiving an inventory or booking an accompanied viewing. When it comes to checking inventory property management firms or letting agents will now charge landlords for these services, rather than tenants.
Research conducted by the Welsh Government discovered that 51 per cent of the fees which were reported by property letting agents ranged between £150 to £300.
Landlords and letting agents are now permitted to only charge fees which relate to rent, and they can still require a payment of holding deposits, security deposits, rent, and payments in default, which is an event where the tenant breaches their contract. Payments related to communication services, television licences, utilities and council tax will also remain the responsibility of the tenant.
For any landlord or letting agent who seeks a prohibited payment from a tenant, the punishment is severe. A fixed penalty notice of £1,000 could be issued, and landlords could even lose their licence if successfully prosecuted.
However, some representatives in the private rental industry have argued that the restrictions will fail to ensure renting is cheaper for residents, and could make them worse off. The RLA (Residential Landlords Association) has warned that a ban on letting fees could result in an increase of rent charges, with the organisation also warning that letting agents could opt for favourable tenants who may not require as much assistance in their application.
Director for Wales, Douglas Haig, explained that letting agents take a lot of time to help potential tenants who find it challenging to pass through the standard referencing process, where these potential tenants could be from outside the UK and not acquainted with the system, or currently on low incomes. With agents being banned from charging fees to tenants, it is more likely that agents will choose potential tenants who already understand the system, or have a well paying job, rather than a tenant who could be within the universal credit system, which has proved to be a very complex scheme.
One of the biggest concerns for the longer-term is that a competitive rental market with an abundance of tenants does not have enough of a supply of rental properties to meet the demand. This means that letting agents and landlords have the power to pick and choose which tenant can view and apply for the property before they are even able to get to the position of supplying a reference for the tenancy.
Julie James, the minister for Housing and Local Government also stated that a significant number of residents in Wales are currently living in privately rented accommodation, so it is crucial that they are confident that they are receiving a fair deal for their housing. She further stated that she wants renting privately to become a positive choice, and an option which is available and accessible to all.
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