Letting agents’ fees

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There has been much talk of banning letting agents’ fees over the last couple of years, but the Government has now put its money where its mouth is and published the draft Tenant Fees Bill 2018 (“the TFB”).

If the TFB is passed by Parliament in its current form then both landlords and letting agents will be prohibited from charging fees to residential tenants for matters such as undertaking reference checks or preparing new tenancy agreements.

The TFB also restricts security deposits to six weeks’ rent and restricts holding deposits to one week’s rent.

If a tenant is made to make what is referred to as a “prohibited payment” then there are a number of consequences:-

  1. The tenant can recover the payment from the landlord or letting agent by making an application to the First-tier Tribunal;
  2. The landlord or letting agent may be fined by the local weights and measures authority up to £5,000 or up to £30,000 for a repeat offence, or may be convicted of a criminal offence; and,
  3. A landlord under an assured shorthold tenancy will be unable to give the tenant a section 21 notice until the prohibited payment has been repaid.

The legislation will have prospective effect only so monies paid under existing tenancies will not be affected, although it appears that the legislation will apply when an existing tenancy is renewed or varied.

The legislation will be welcomed by tenants but could have a significant impact on the businesses of many letting agents who rely on this income. It will remain to be seen whether the effect will simply be that rents will increase to cover the landlords’ costs of having to pay letting agents themselves.

For advice contact John Wagstaffe.

Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.