The tenant fees ban, which prohibits letting agents and landlords from charging fees to tenants in England, will come into force, finally, on 1st June. First introduced in November 2016, when the Chancellor, Philip Hammond, revealed the plans for the new rules in his Autumn Statement, the Tenant Fees Bill is widely regarded within the property lettings industry as a severe measure.
The new regulations do not just simply ban letting fees, but they also apply to most other upfront fees which are payable by tenants when renting a property within England. For example, there will be a cap placed on the refundable security deposit amount that a tenant is required to pay, up to the equivalent of five weeks worth of rent. In addition to this, there will be a cap on the holding deposit amount a tenant is required to pay in order to secure a property, which will be reduced to a value equivalent to one weeks’ worth of rent.
Under the terms of this new Act, the maximum amount which can be charged to tenants for a change to the tenancy will be £50. Any landlord found to be in breach of the ban could face a £5,000 fine.
The government trusts that this bill will make renting property in England more affordable and fairer for tenants by limiting the costs which are required at the outset of tenancies, while simultaneously improving competition and transparency within the private rented sector.
James Brokenshire MP, the Secretary of State for Housing, further stated that tenants in England should not face unexpected costs from landlords or agents. According to the Ministry of Housing, the cap on deposits for tenancies, and the ban on letting fees, will save tenants an estimated £240 million each year. This is the equivalent of £70 for each household.
More people than ever are becoming lifetime tenants, with no prospect of buying their own home, so this safeguarding against unpredictable, unfair and unscrupulous fees from letting agents and landlords will revolutionise the sector. This will potentially make a huge difference to so many tenant’s lives.
While letting agents are aware of how this new legislation will greatly alter the current charging structure, an important question will be how the cost of implementing a new tenancy will be covered.
Some agents are still trying to answer this question, while others assume that additional fees such as those for property inspection, will be passed onto landlords, who will then have to increase rents in order to balance the books. There are some cases in which this scenario is already happening.
According to HomeLet Rental Index’s latest data, rent prices for new tenancies in the UK have started to increase at a rate which has not been witnessed in the market for over two years.
Rental prices have risen by 3.3 per cent during the past year, which is a rate that is above inflation, and rents are now an average of £942 per calendar month. A landlord’s capability to increase rent prices will be determined largely by the dynamics of supply and demand in the local market for property. The recent growth in rental prices reflects the resilience of the private rented sector.
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