The Government has announced that from the 1st June 2019 the Tenants Fees Bill will be enforced across England. The announcement follows the Third Reading for the Bill in the House of Lords, and it is likely to receive Royal Assent in the near future. Lord Bourne of Aberystwyth, speaking at the House of Commons, explained that the Government must enable landlords and agents to become compliant following the Royal Assent of the Bill, with the Government intending for the provisions to come into force from June 2019.
This would result in the ban on letting fees for any tenancy signed after 1st June 2019. Letting agents and landlords have been expecting these changes for a while, so the announcement will come as no surprise for many. However, those in the rental sector must come to terms with the changes, as they will need to assimilate some of these costs which are normally covered by tenants.
It is uncertain whether these changes will result in rent increases. While some industry experts argue that it will, others acknowledge that there is a limit to how much rental prices can be increased when considering the current stress on renter’s budgets. Therefore agents and landlords may have no choice but to adjust to these extra costs.
In Scotland, a fees ban has been implemented for a while, and some letting agents claim that rather than passing on the fees and increasing rents to tenants, which would put people off renting the properties, they have had no choice but to absorb them. Arguing that tenant fees are legitimate and cover the cost of credit checks and references, letting agents claim they will continue to take losses. In any other industry, such as medicine, they would charge for their services, but as letting agents, many feel vilified.
However, some letting agents in Scotland are aware of some unscrupulous agents and landlords who continue charging tenants for processing paperwork and administration. It is estimated that around 4.8 million rental households across England will benefit from the ban, saving in the region of £200 to £700 in each property move. This is a considerable financial saving for tenants who may move property every few years.
The Government tabled two technical and minor amendments, and both passed, However, a loophole has been identified by the lawyers based at a tenant referencing firm which could impact third party contracts. It is unclear whether this recent issue will be fully addressed. Legal experts are also warning that landlords and letting agents could be trapped by using other services as part of the lettings process, for example, repairs reporting systems, inventory firms and tenant referencing companies.
As the Bill currently stands, one clause states that a letting agent cannot require that a person enters into a contract with a third party or agent in connection with renting a home in England if the contract is for insurance or the provision of services. The agent or landlord is required to absorb the costs of any additional services from third parties when the Bill comes into force, which will ensure that there are no financial implications for prospective tenants or guarantors.
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