The Government has published a Draft Bill with plans to make big changes to how landlords can let properties in England. At the centre of the plans is a ban on tenant fees.
If the bill gets enacted, this means that it would become illegal to charge tenants for referencing, inventories, and any other cost you can think of.
Here’s everything a landlord needs to know about the Draft Tenant Fees Bill.
Summary of Tenant Fee Ban
- Limit tenancy deposits to six weeks’ rent
- Limit holding deposits to one week’s rent
- Ban any other fees (except contractual default penalties)
- Fines of £5,000 for first offence (civil)
- Fines of £30,000 for second offence (criminal)
What’s New in the Draft Bill?
Here are the key new rules contained in the Draft Bill.
1. A Ban on All Fees
Landlords – or their agents – will no longer be allowed to charge tenants for anything except: the rent, the tenancy deposit and a holding deposit (more on these below).
This means you will no longer be allowed to ask tenants to cover the cost of their own referencing. This is going to have some big consequences that we’ll be writing about very soon! You also won’t be able to charge check-in, inventory or admin fees.
2. Some ‘Defaults’ Are Exempt
You will still be able to charge ‘defaults’ once the tenancy is set up. These are things like fees to replace lost keys and fines for late rent-payment.
They will need to be included in the tenancy agreement for you to be able to charge them, and previous rules about fair clauses will still apply.
3. Limits on Tenancy Deposits
Tenancy deposits, also called security deposits, are to be limited to six weeks’ rent.
In practice, deposits have always been kept below two month’s rent due to the fear of the tenancy becoming a premium tenancy. This new rule will mean you can’t ask the tenant for a deposit larger than six times the weekly rent of the property.
4. Limits on Holding Deposits
Likewise, holding deposits will be limited to one week’s rent.
This is a big change, since most holding deposits are currently much more than a week’s rent. An OpenRent poll recently found that 47% of tenants have paid a holding deposit of over £750 – much more than the average weekly rent for a UK property.
5. New Rules on Holding Deposits
The Draft Bill includes new rules about how holding deposits must be treated.
The holding deposit must be returned to the tenant: either in payment back to the tenant, or being put towards the first rental payment, or the security deposit.
There are some exceptions. In these cases the landlord can keep the holding deposits:
- The tenant withdraws
- The tenant doesn’t take all reasonable steps to enter the tenancy
- The tenant fails a right to rent check
- The tenant provides misleading information which materially affects their suitability to rent the property
If that last clause sounds a little vague to you, then you’re not alone. We’re hoping that this will be tightened up in the final version of the bill.
What Are the Penalties to Landlords Who Charge Tenant Fees?
Landlord (or agents) who charge illegal fees will face paying huge fines.
The first offence would be a civil offence, with a fine of £5,000.
If the offence is repeated within five years, there would be either a criminal offence or a fine of £30,000.
There are also plans to help tenants recoup any illegal fees they paid from the landlord (or agent). Local Trading Standards organisations will enforce the ban.
Remember: It’s Just a Draft Bill
Although the Government seem set on banning fees and restricting the size of deposits, the Bill is currently only in the Draft phase. The details could still change.
There will now be a period of scrutiny and feedback and the bill will be revised. When that happens, we’ll be back to keep you up to date with all developments.
You can read the whole Draft Bill here.
Update: Housing Committee Report
The Housing, Communities & Local Government Committee finished its period of pre-legislative scrutiny on 29th March, 2018.
The Committee made the following recommendations to amend the Draft Bill:
- Cap tenancy deposits at 5 weeks rent
- Failing referencing should not be grounds to keep the entire holding deposit
- Default fees need to be tightened up
They also recommended that more funding was given to enforce the new rules. You can find their summary here.