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The Letting Agency Fees Ban: Everything You Need to Know

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There’s been lots of talk over the last few years around the possibility of abolishing letting agent management fees. Now, it seems, it’s come to fruition. On the 12th February, the Tenant Fees Act 2019 was passed and became law.

While good news for tenants, for lettings agents and landlords, this change requires careful planning. Whichever side of the fence you’re on, it’s helpful to have all of the facts.

That’s why we’ve rounded up all the information about the new letting agent fees ban and what it means for landlords, letting agents, property professionals and tenants.

 

What are Letting Agent Fees For?

Up until now, letting agents have been legally permitted to charge fees for admin, tenant reference checks and other costs.

The responsibilities of letting agents include sourcing tenants, collecting rent, and acting as a means of communication between tenants and landlords.

Typical letting agent fees for tenants should be around £200 to £300 per tenancy, however some groups argue that this figure has been greatly increased by some rogue agencies. For tenants paying higher costs, this ban comes as welcome relief. However, lettings agents who charge reasonable and necessary fees may think otherwise.

 

The Government Proposal

The effort to get letting agent fees abolished was driven by the government’s aim to make renting more stable for tenants. With 4.5 million households in England now renting, this market is growing rapidly.

While they accepted that many letting agents provide a legitimate and valuable service, the issue of varying admin fees from agency to agency needed to be addressed.

According to the government, banning agency fees will result in greater transparency for tenants, make moving more affordable and allow landlords to ‘shop around’ to find the best letting agent.

 

The Tenant Fees Act 2019

The proposal to ban letting fees has been in process for a number of years.

The ball started rolling in April 2017, when the government opened up a dialogue to work on the details of the ban. The aims of the ban were to make renting ‘fairer and easier’ for tenants by making costs more transparent and to improve competition in the rental market. This consultation received responses from tenants (50%), lettings agents (32%), landlords (10%) and other stakeholders (8%).

The Tenant Fees Bill draft was then announced in June during the Queen’s speech at the opening of parliament.

In May 2018, housing secretary James Brokenshire MP introduced the bill to parliament, which then passed through the House of Commons in September.

January of this year saw the ban being passed in parliament which was then cemented as law on the 12th of February as the Tenant Fees Act 2019.

 

What is the Tenant Fee Ban?

The act sets out the new rules and standards for the ban on letting fees;

  • Security deposits cannot be more than the cost of five weeks of rent payments. (Unless rent exceeds £500,000 when it’s capped at six weeks)
  • The ban includes capping holding deposits to one weeks rent and making them refundable to the tenant
  • The fee to change a tenancy will be capped at £50
  • If a landlord or letting agent breaches the requirements, a fine of £5000 is payable in the first instance. If a similar offence has been committed within the last five years, it could be deemed a criminal offence. Prosecution or fines of up to £30,000 could be issued
  • The ban will be enforced by Trading Standards who will help tenants recover funds that were unlawfully charged
  • Landlords will be unable to seize possession of property via Section 21 until they have repaid any unlawful charges
  • Letting agent fee transparency should be extended to property sites such as Zoopla and Rightmove

 

What Can Landlords and Letting Agents Charge Under the New Act?

Under the new act, property agents will only be permitted to charge for the following;

  • Rent
  • Deposits
  • Early termination of a tenancy at the tenant’s request. This means the costs to the landlord or letting agent to find tenants will be covered
  • Council tax, utilities and communication services
  • Payment of damages in the case of breached agreements
  • Late rent payment
  • Replacing keys etc.

 

Can Letting Agents Still Charge Fees?

Currently, yes. The ban only comes into play on the 1st June 2019. Until the letting agent fees ban date, this practice is still legal.

However, if you’re a landlord or letting agent you might want to start thinking about this change and what plans to put in place.

 

The Impact of the Ban on Landlords and Agents

One issue that is being raised regarding the ban is the possible impact on landlords. Some are arguing that the ban will result in charges being passed on from letting agents to landlords.

This, they argue, is counterproductive as it means landlords may be forced to raise monthly rent collections in order to make up costs.

The Association of Residential Letting Agents (ARLA) for example, are against the ban and believe that instead of an outright abolishment, fees should be ‘open, transparent and reasonable’. In response to the Government ban, ARLA recommend that upfront fees should be banned, but letting agents should be allowed to spread these costs across the tenancy.

They believe that a blanket ban would ‘put additional pressures on landlords, with fewer tenant checks and a lower quality of service’ and that ‘spreading the cost of these services will allow letting agents to retain current service levels to tenants’.

The Impact on Inventory Management

One suggested outcome of the ban is that letting agents will start to take inventory services ‘in-house’. A guide has been created by TDS, Propertymark and the Association of Independant Inventory Clerks (AIIC) to provide information on avoiding disputes regarding poorly executed inventories and deposit deductions.

Speaking on the report, the AIIC encouraged unbiased, comprehensive reports to protect all parties involved. Similarly, Propertymark highlighted the importance of a thorough inventory and the need for an ‘evidence-based approach’ to protect investments for both landlords and tenants.

 

Be Prepared with No Letting Go

Whichever stance you take, it‘s best to prepare for the changes early.

If you’re a landlord or letting agent looking to get ahead and prepare for the changes, No Letting Go can help.

We offer reliable, professional property management services to help you stay on top of your responsibilities and protect your investment. From property inventory reports to appraisals and tenant checks, No Letting Go helps protect your property for the long term.

Browse our full range of services here to see how we can help.

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