A new law banning unfair lettings fees has come into force, offering private renters protection from unexpected – and unpleasant – surprises.
The Tenants Fees Act, which came into effect on 1 June, caps tenancy deposits at five weeks’ rent, where the annual rent is less than £50,000, while unexpected fees imposed by landlords or letting agents are banned.
Unexpected fees and high deposits can make properties harder for people to afford and are often not clearly explained upfront – leaving many prospective tenants unaware of the true costs of renting a property, said the Ministry for Housing, Communities & Local Government (MHCLG).
The new legal protections are expected to save tenants across England at least £240 million a year, or up to £70 per household.
“Tenants will no longer be stung by unreasonable costs from agents or landlords, thanks to the implementation of the Tenant Fees Act,” said communities secretary, James Brokenshire MP.
“This Act bans unnecessary letting fees and caps the majority of deposits at five weeks’ rent – helping renters keep more of their hard-earned cash. Alongside our recent announcement to scrap no fault evictions in the sector, this will make renting fairer and more transparent – creating a housing market that works for everyone.”
The legislation also puts a stop to tenants being charged hundreds of pounds for admin or renewal fees. Under its default fee provision, landlords and agents are only able to recover reasonably incurred costs from tenants for lost keys or other security devices and must provide evidence of these costs before they can impose any charges. They may also charge a default fee in relation to late rent.
However, the National Landlords Association (NLA), expressed concern that the Tenant Fees Act would limit access to rented property for tenants living in areas with selective licensing schemes in operation.
The organisation claims that many lettings agents have signalled they are unlikely to provide post-tenancy references – something they have previously charged for – because of the fees ban. However, most selective licensing schemes require landlords to complete reference checks. If tenants are unable to satisfy these checks, landlords will be unable to let to them without breaching the conditions of their selective licensing, the NLA argues.
“Tenants are at risk of losing out on the chance to find a home because letting agents are doing everything they can to minimise workloads to cut down on costs,” said Richard Lambert, the NLA’s chief executive.
“While landlords who self-manage their portfolios will be covering many increased in costs, letting agents are looking at any way they can limit what they have to do on behalf of tenants, now that the costs cannot be directly recovered.
“The smooth running of the housing market requires a little give-and-take, and unfortunately the reaction of some letting agents to the ban on most charges looks set to throw-up more barriers to moving from one tenancy to another.
“Just like private landlords, letting agency businesses are being put under increasing pressure by government regulation. However, they must realise that penalising outgoing tenants by refusing to provide references will ultimately cost them more than just the price of a reference as landlords opt to do without agents altogether.”