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Government pushes ahead with ban on residential letting fees

The government has announced that it will bring forward proposals to ban letting agent fees in England.  The measures, announced in the Queen’s Speech, will be implemented through a new Tenants’ Fees Bill.

The government had already targeted upfront fees in the 2016 Autumn Statement with a promise to ban fees “as soon as possible”; a promise which was reiterated in the conservative party manifesto. An eight-week consultation was published in April of this year and closed on 2 June. The government has yet to publish the results of that consultation. The measure is likely to pass into law, as all the main parties included similar commitments in their election manifestos.

With figures indicating that the average fee for each tenancy is £223, the government’s key measure will be to ban landlords and agents from requiring tenants to pay such costs as a condition of their tenancy. The government hopes that this will increase transparency and make renting fairer and more affordable for millions of tenants. Of course, the cost of renting will only become more affordable if the charges are not ultimately passed onto tenants in other ways, such as rent hikes.

Although the draft Bill is expected to ban any conditional payments for a tenancy there will be exceptions: rent; a capped refundable security deposit; a capped refundable holding deposit (to take the property off the market); and tenant default fees. Holding deposits will be capped at no more than one week’s rent and security deposits at no more than one month’s rent.  Although no reference is made to service charges this was flagged up as an exception in the consultation and we would expect them to be dealt with in the Bill.

Measures are also expected to be introduced to enforce the ban with provision for tenants to be able to recover unlawfully charged fees but it is not clear whether this would be retrospective or only apply to fees charged after the legislation comes into effect.

Until the draft Bill is published, the exact extent of the proposals will remain unclear but the message that the government has chosen to promote is that it is firmly grasping this particular nettle to take the sting out of letting fees for tenants.