What does the Tenant Fees Bill 2019 mean for Landlords, Tenants and Managing Agents alike?

The Tenant Fees Bill (“the Bill”) has made its way through Parliament and the House of Lords, and is on the way to Royal Assent. It is intended to come into force on 1st June 2019 and is set to ban letting fees paid by tenants in the private rented sector and cap tenancy deposits for residential properties in England. Essentially, this pending legislative change means that there will be a nationwide ban on letting fees paid by tenants and a cap on security deposits for all new tenancies signed on or after 1st June 2019. The aim of the Bill is to ensure that tenants in the private rented sector will be able to see at first glance, what a property will cost them without hidden costs. This change means that from 1st June 2019, Landlords will be responsible for paying for the service of Managing Agents, not tenants.

The implementation date for the Bill was announced by Lord Bourne of Aberystwyth in the House of Lords during the Bill’s Third Reading on 15th January. At the most recent discussion on the Bill in the House of Commons on 23rd January 2019, all of the proposed amendments to the Bill as suggested by the House of Lords were approved. This means that the Bill will now be prepared for Royal Assent.

The Parliamentary Under-Secretary of State for Housing, Communities and Local Government, Mrs Heather Wheeler, made the following comment on the Bill in the House of Commons on 23rd January:

It has been clear throughout that the Bill is one that we all support and that will deliver important changes in the private rented sector, improving the lives of millions of tenants. Letting fees can impose a significant burden on tenants, who often have little choice but to pay them time and again. The Bill will put a stop to such practices by banning unfair and hidden charges, making it easier for tenants to find a property at a price they are willing to pay, and saving renters an estimated £240 million in the first year alone. I know the changes may worry some in the lettings market, but agents who offer good value and high-quality services to landlords will continue to be in demand and play an important role in the sector.”

A similar ban on tenant’s fees has already been implemented in Scotland, since 2012. It is clear that the government was keen to follow suit  in a bid to create, what they say, is a more level playing field and provide further transparency for tenants, in an ever growing rental market. It is seemingly hoped by the government that (although Landlords will now be obliged to pay letting fees) this change will benefit the rental market for Landlords in the long term; provide a more trusting and attractive environment for tenants and ultimately increase rental returns. It remains to be seen however whether this will in turn result in increased average rental prices for Landlords who now have to cover these costs.

The Parliamentary Under-Secretary of State for Housing, Communities and Local Government, Mrs Heather Wheeler, also had this to say on the capped deposit implementation, on 23rd January:

We wanted to ensure that landlords had sufficient financial security and flexibility for their properties, but recognised concerns that a six-week cap for all tenants might not best deliver the changes to affordability that are needed at the lower end of the market. Importantly, a cap of five weeks’ rent for properties with an annual rent of less than £50,000 extends the benefits of the deposit cap to an estimated one in three tenants.”

The Bill appears to cap deposits dependent upon the rental income of the property. If the annual rent is lower than £50,000.00, the maximum deposit a Landlord can take from a Tenant is capped at 5 weeks rent; if the annual rent is higher than £50,000.00, the maximum deposit a Landlord can obtain is capped at 6 weeks rent. For example, it appears that if a Landlord achieves an annual rent of £11,400.00, payable by 12 monthly instalments of £950.00, they can obtain a maximum deposit of £1,096.15.

The Government will shortly be publishing guidance for Tenants, Landlord and Managing Agents to fully explain how the Bill shall affect them, once it has come into force. For now, it appears from material published to date that the above changes are the prevailing outcomes of the Bill.  The private rented market sector appears set for yet more change.

Should you have any queries/ require any assistance in relation to private rented property please do not hesitate to contact our experienced team on 03330 585 222, or visit our website our department page at www.btmksolicitors.co.uk/landlord-tenant/.

You can contact our experienced team 24/7 on 03300 585 222. Call now for a FREE initial chat!

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