NEWSFLASH: Lettings fee ban will let tenants recover unlawful charges

Legislation to ban tenant fees has been introduced in the Queen’s Speech, and goes further by allowing tenants to recover fees that have been unlawfully charged.

Tenants will  be allowed to recover them as part of new legislation containing the ban on lettings fee charged to tenants.

The Queen’s Speech this morning outlined a Draft Tenants’ Fees Bill Ban, as expected, to stop lettings agents charging tenants.

Still to be debated during the parliamentary term, the main elements of the Bill are “banning landlords and agents from requiring tenants to pay letting fees as a condition of their tenancy”.

But it also goes further than the initial consultation by saying there will be measures to enforce the ban with provision for tenants to be able to recover unlawfully charged fees.

It is not clear if this will be applied retrospectively, in other words to fees levied before the ban, or will only apply to any fees illegally charged once the ban is in place.

This element does not seem to have been mentioned in the consultation that closed earlier this month.

Documents accompanying the Queen’s Speech also promised a consultation on leasehold reform “in due course” to promote “transparency and fairness for leaseholders”.

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33 Comments

  1. AgentV

    Oh dear! Not that I do lettings at the moment, but I understand this affects lots of other agent’s businesses!!!

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  2. bren_gun

    The most interesting thing for me is that this is being implemented as a new bill, not tacked onto existing legisdlation. The timeframe is teherfore presumably spring 2018 at the very earliest

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  3. Naysayer

    I can see the PPI lot turning to this once they’ve sucked the blood dry. Define unlawfully anyway? We are charging for the administration, referencing and paperwork involved in legally setting up a tenancy. Not sure what is unlawful there?

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  4. jeremy1960

    Aha, so all of us who intimated that the consultation process was nothing of the sort are right? Ask the experts then ignore their views and write your own rules!

    It will be interesting now to see what effect the Fair Fees Forum and whatever ARLA call themselves nowadays intend to do and what input will be allowed.
    Spring 2018 at the earliest I would guess, small matter of sacking the eu to be dealt with as a priority first!

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  5. DarrenBradley37

    If tenants have the ability to reclaim fees retrospectively, then that could spell the end of the industry as we know but surely they can’t be that silly, oh wait, they just called an election they thought they couldn’t loose!!

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  6. Eric Walker

    I think the key wording is ‘recovery of unlawful charges’. That doesn’t necessarily mean all charges which are to be banned were unlawful at the time they were made. I suspect it will relate to punitive charges such as an agent charging £200 for rent paid a couple of days late, or charging 3% for a debit card. It will be very interesting to see how this pans out before the ‘no win no fee’ lawyers who have exhausted PPI claims look for a new venture.

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    1. evilcdivad59

      when you look at the fees being charged by rental companies its disgraceful especially when you realise that tenants also pay a large deposit and rent in advance. where i live this can mean rent £825- £1000 +deposit of 4-6 weeks  =£825-£1500 then the extortionate fees are added making the cost of renting a family home beyond the vast majority of renters causing them to become trapped. below are just a few cases of fees in my area.

      Administration (1st applicant): £360.00 inc vatAdditional applicant: £120.00 inc vatCompany let: £360.00 inc vatGuarantor fee: £90.00 inc vatPermitted occupier: £100 inc vatPet Clause: £30.00 inc vatContract extension: £60.00 inc vatCheckout: £90.00 inc vatLandlord reference: £30.00 inc vat

      Tenancy set up £342 inc. VATAdditional person £120 inc. VATGuarantor £120 inc. VATPermitted occupier £120 inc. VATAmendment fee £342 inc. VATRenewal fee (tenant’s share) £120 inc. VATCheck out fee (tenant’s share) £120 inc. VAT

      These fees of around £1200 boost the cost of moving to well above £3,000.

      The most reasonable fees i found in my area is £470 which although fairer is still over the top.

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  7. AgentAR93

    Are they going to provide guidance on how to apply for charitable status !!!!!

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  8. gardenflat

    I suspect there will be provisions to reclaim excessively high re let / check in / check out / inventory fees that could or should have been part of the landlords costs.

    Good luck to the corporate market.

     

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  9. PLCO

    It should be OK, the BBC’s Queens speech live newsfeed says “a Tenant’s Fees Bill, banning landlords from charging “letting fees“”,

    So unless I’ve missed something we are Letting Agents and not Landlords, so the ban does not apply to us!

    However, the BBC have probably reported it wrong!!!

     

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  10. Headache

    The good news is we should have a labour government before this becomes law.

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    1. Will

      And you think that would be good news? Rent control will decimate supply and tenants will be able to moan whilst sleeping in cardboard city!

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  11. Rivero

    How can a charge be deemed ‘unlawful’ if it was applied prior to the law banning said charges being passed?

    Surely it can only be unlawful if it breaks existing law?

    How very confusing!!!

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    1. Beam Splitter

      It’ll be in the same manner as PPI, in otherwords parliament will review the charges that were generally made by lettings agents and those that they deem to have been unfair/unlawful will have to be refunded to the tenants/landlords IF the tenants/landlords apply for it.
      I guess bye bye tin-pot agencies and look out corporates.

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      1. Rivero

        Yes I guess you’re right…it just seems to me that a PPI policy which was mis-sold or just added without mention is easier to understand and identify as illegal, rather than retrospectively deciding that ‘tenants fees’ by definition are unlawful. 
        Except in the extreme instances (again subjective) how could any business expect to have foreseen what is essentially a political and populist move.
        But then again…!

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      2. Eric Walker

        PPI was deemed as misselling of a regulated product where the customer did not receive the appropriate advice or was signed up as a matter of course. This is completely different. 

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        1. evilcdivad59

          correct this is overcharging to a massive order in some cases exploiting those unable to buy or unable to gin access to social housing because the rules the councils and housing associations  work by leave those in private rentals stranded.

          Administration (1st applicant): £360.00 inc vatAdditional applicant: £120.00 inc vatCompany let: £360.00 inc vatGuarantor fee: £90.00 inc vatPermitted occupier: £100 inc vatPet Clause: £30.00 inc vatContract extension: £60.00 inc vatCheckout: £90.00 inc vatLandlord reference: £30.00 inc vat

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    2. Romain

      It just means that once fees become unlawful if you still charge tenants then these tenants will have a statutory claim against you for a refund (and perhaps more).
      It won’t be retroactive.

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  12. Colshop19

    Wow retrospective!! Is that a bell I hear tolling??

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  13. J1

    An industry in pain has just taken a good kicking………

    I think the word industry is part of the problem though; this used to be a profession……..

    As always, the actions of a few unscrupulous agents who have been milking the cow too much, have brought about the need for this…….greed by the London agents in particular is now going to punish the rest of the country.

    Share prices will be a falling this afternoon – get those short orders in now boys and girls!!!!

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  14. proper21

    ‘This element does not seem to have been mentioned in the consultation that closed earlier this month.’

    funny,that.

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  15. Gloslet

    Unfortunately the most effective way of defending retrospective allegations of unlawful charges is to terminate any tenancy older than say, 1 year. A landlord can then offer a new tenancy on new terms. If this were done before a fee ban comes in then the tenant can be asked to pay for it, whether through increased rent of possibly an admin. charge.

    Just to confirm, we will not be doing this and I suspect no other reputable agent would condone such actions, but I suspect that a lot of less scrupulous agents – and not a few landlords – will react by taking take this route.

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  16. abull2810

    In light of the Queens Speech and as an industry we should now require tenants to use the services of a Solicitor to prove their ability to fund / their credit worthiness, their previous history as a tenant – suitably referenced and their identity. Whilst also ensuring that the tenant is fully aware of the terms of the AST and the obligations placed upon them.

    On behalf of the landlord we can find a tenant, negotiate a rent, provide compliance and ensure that our client is fully protected whilst charging our client a reasonable fee.

     

     

     

     

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  17. smile please

    Call another election,

     

    Monster raving loony party are not this mad!

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  18. Scottish_Mist42

    I suggest English agents shouldn’t get too hot and bothered about retrospective claims because, as I understand it, charging tenants fees at the moment is lawful.  Therefore it will only be when the ban comes into place it becomes unlawful, so it’s fair enough to allow tenants to recover any fees paid.  I suspect it’s simply a headline that will look good in the papers but in effect do nothing.  As Sir Humphrey Appleton said “it’s best to get rid of the difficult part in the heading”

    It was different in Scotland because the law banning tenant fees (or ‘premiums’ as there were referred to in legislation) dated back to 1984.  However due to how it was written it was open to interpretation.  All the Scottish Government did was simply clarify the law, not introduce a new one.

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    1. spin2009

      That’s very interesting the ref in Scottish legislation to a “premium”. 
      The 1953 Accomodation Agencies Act made it a crimnal offence to charge for registration and lists of properties as they were effectively premiums. Once the fees become excessive they could be be deemed a premium by way of amending the current act.
      Relevant bits.
      Illegal commissions and advertisements.
      (1)Subject to the provisions of this section, any person who, . . . F1 —
      (a)demands or accepts payment of any sum of money in consideration of registering, or undertaking to register, the name or requirements of any person seeking the tenancy of a house;
      (b)demands or accepts payment of any sum of money in consideration of supplying, or undertaking to supply, to any person addresses or other particulars of houses to let; or
       
      (5)Any person guilty of an offence under this section shall be liable on summary conviction to a fine not exceeding [F3level 3 on the standard scale] or to imprisonment for a term not exceeding three months, or to both such fine and imprisonment.
       
       

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  19. SJEA

    The other worrying thing as noted on another website is the cap on the Security Deposit being no more than one month’s rent ! If this is passed into law, I cannot see many Landlords allowing pets in our part of the world as we ask for a ‘Pet Bond’ in addition to the normal deposit as pets can often cause more damage than the security deposit allows.

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  20. Woodentop

    Nuts just nuts and where was our side fighting our corner. Seems that charitable status can have what they want. I’m not convinced that this is actualy down to members of parlimant but more likely civil servant pulling strings. This threat has been going on for years, politicians come and go, civil servants don’t and have always done as they please.

     

    Rents just went up and tenants will pay more in the long run. Time will tell.

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  21. Sunbeam175

    Bye bye to pets and bye bye to tenants needing guarantors, why would a professional agent want to do ‘extra’ referencing for free? I run a business not a facility for tenants to abuse and to be walked all over, also no new 12 or 6 month contracts for my existing tenants to give them greater security, instead they can all go onto rolling contracts and then if the landlord wants to sell (and who can blame them) the tenant won’t be an obstacle. Well done to the government for a totally ill thought through policy!!!

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    1. evilcdivad59

      some charge fees that are totally unfair

      Administration (1st applicant): £360.00 inc vatAdditional applicant: £120.00 inc vatCompany let: £360.00 inc vatGuarantor fee: £90.00 inc vatPermitted occupier: £100 inc vatPet Clause: £30.00 inc vatContract extension: £60.00 inc vatCheckout: £90.00 inc vatLandlord reference: £30.00 inc vat

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  22. Ryan Baker

    What if the Landlord charges equivalent to 1.5 months rent in the first month , and then the regular 5 months rent for a dwelling and it’s written in the tenancy agreement? How to prove this will be unlawful as its rent. There’s no rule to force/stop a landlord to increase/decrease rent? Just saying ad till the time you don’t use the word admin/agency fees charged by agents then the landlord can charge what he wants. Predicting that this could possibly be one way forward by landlords to get the fees and pay agents.

    2: More Referencing Agencies

    i think more referencing agencies will pop up now due to the ban. Agents can get away with that as it won’t be related to that property and anyone can get a reference from XYZ company, that XYZ company is the only company the agency accept. There will be incentives for agents to sign up for that referencing company. Let’s say a tenant has his/her references but the letting agent only approves of a shortlist of referencing agencies as now the tenants will have to have their paperwork sorted before they can apply. The letting agency won’t be doing the tenants part of the job as he is now only working for the landlord ! Tricky situation as tenants will be going to referencing agencies first then to the letting agent who will assess the credentials.

    Rent Increase:

    if all agents start charging tenants’ fees from the landlords then it will be anything between £25-£100. If this is the scenario then it would mean the tenant paying £30-£100 as reference fee and then an Addl min £300-£1200 a year in increased  rent. This will in turn increase income from management properties.

     

    Poor Service for Tenants:

    The tenant is no more the paying client of the Agent. The tenant could face hurdles such as not getting a copy of the inventory and not getting the choice for check in /check out timing etc and the list goes on. The could cause distress and disputes in the longer run.

     

    boom in online letting / management agencies:

    till now the sales aspect has been the dominant in the online estate agencies. I think there would be more online letting and management companies popping up with crazy cheap deals. This would be beneficial for some landlords but certain business loss for the high st agents.

     

     

     

     

     

     

     

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  23. HomezoneBeckenham38

    Rather than get involved early, I decided to let the preamble of the tenant fee ban wallow through the swamp some distance to see how things unfold. Unsurprisingly, there is a lot of speculation and uncertainty – fairly standard for our government!!

    Tenant fees – when is the last time you used the services of a company without paying for it? If you apply for a mortgage from a mortgage lender, is there not usually an arrangement fee? If you use a mortgage broker, do you not pay a brokers fee? Even if you think you don’t you usually do!

    I most other walks of life, you pay for the services of a company that you approach. this is normal. More important, it’s expected.

    So why are letting agents being punished? Well, there have been a multitude of attacks on letting agents and landlords over the last few years. It seems that the government and/or those who influence them have an agenda. The result of which is to punish the small to medium sized investor whilst the wealthy landlords remain unscathed.

    If you have a buy to let mortgage, you are now in the staged “count down” to losing the ability to claim your mortgage interest as a cost against your investment. Very few other investments work in this way, as most costs to run an investment are tax deductible. Wealthy landlords are far less likely to require a mortgage, and because of that, they usually own the property or properties in a tax efficient vehicle, perhaps a limited company or a pension scheme or other similar investment. But try to get your buy to let lender to agree to switch your buy to let mortgage into a limited company and you will be declined because the mortgage is to you, not the company.

    But tenant fee ban is just another attack in the long line of attacks on the industry. There is however a reason. That reason is because many greedy agents charge far more than they should, using the desire of the tenant to live in the property as leverage (I’ll keep the word blackmail out of it!).

    We’ve heard talk of spreading the fees over the first 6 months! I’m not sure who’s bright idea that was. But if the fees are banned altogether, agents will find other ways of securing this revenue stream, and for the greedy agents who charge ridiculous fees, the pursuit for the replacement revenue will be wide and varied, and very determined!

    If a landlord’s charges increase to cover the loss, the first thing that will happen is the landlord will demand an increase in the rent to cover the additional costs. If there were too many properties on the market and the demand for rental property was low, this approach might backfire. But remember where we are. This is the South East. This is London. “Too many properties” is like saying there are “Too many unicorns”!

    The demand for rental property, coupled with the reducing number of rental properties as the small to medium sized investors sell up over the next 2 – 3 years will see landlords able to dictate rents, and will almost certainly see rents rise, at least enough to cover the uplift in agency costs but quite likely more, driven by the supply and demand.

    Now. picture this…. a tenant pays a “reasonable fee” to the agent for processing applications, administration, contribution towards documentation etc, and they pay this just once. Alternatively, the rent goes up to cover this cost and the tenant keeps paying the equivalent of these increased costs, year after year.

    Reasonable agents charge a reasonable fee, and my agency falls under the average fee per tenant. In nearly 20 years of trade, we have NEVER had a tenant complain about our fees. But this whole debate has been created by the greedy and ruthless agents who seize opportunity to profit at every given opportunity. And as a result, everyone suffers!! Cheers!

    I have a good idea. Find a fee level that that the market place and government find acceptable, and CAP all agents at this level. this way, the reasonable agents can continue to work as they do, with happy tenants. And the greedy unscrupulous agents are the only ones that will have to curtail their fees to a reasonable level. And if those agents still try to recover some of that loss of income from the landlord, let the landlord come and find us reasonable agents who wont.

    It’s so simple, it’s genius! Now let’s see if the government can stumble upon this idea and avoid the ridiculous and time consuming debate and we can all get on with business…

    …and if any tenants want to argue about a reasonable cap on fees to tenants (perhaps maximum £200 per applicant) still being too much, consider this….

    If you rent a property worth £500,000 as a couple, this reasonable fee and a reasonable inventory charge will likely see your fees come to around £500-£550 to move in.

    If you buy a house worth £500,000 as a couple, your costs including stamp duty, legal fees, mortgage valuation, broker fees, survey fees etc, could cost you as much as £15,000 to £20,000!!

    The very government that is trying to attack reasonable tenant fees is the government that charges you £15,000 for doing absolutely nothing when you buy a house for £15,000.

    Still think you’re hard done by as a tenant? Please!

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  24. Colliers03

    I am getting ready to pay the government’s property redress fee, can they charge a fee?

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