Government starts consultation letting agent fee ban

The government has published its consultation on banning letting agent fees in which it argues for a ban that is “clear and simple for all involved”.

It says that the proposed measures will “stop hidden charges and end tenants being hit by costly upfront payments that can be difficult to afford”.

It also says that the move will bring an end to the small minority of agents exploiting their role between renters and landlords, banish unfair charges being imposed and stop those agents that double charge tenants and property owners for the same service.

Housing Minister Gavin Barwell said: “We’re determined to make all types of housing more affordable and secure for ordinary working people.

“Tenants should only be required to pay their rent alongside a refundable deposit and not face hidden fees.”

The government says the ban recognises that landlords are being hit with ‘dubious fees’ and that the measures will create a more transparent market so landlords can ‘easily shop around’ for an agent to provide the quality of service they want at a price they are willing to pay. It says that this will avoid double charging and result in a better service.

DCLG says the variation in the way agents charge for their services, with some still not publicly displaying their fees at all, transparency requirements (introduced in the Consumer Rights Act 2015) have not had their intended impact.

It goes on to state that even if there was full transparency, the tenant will still have little ability to opt-out of letting fees as the decision to appoint a letting agent sits with the landlord.

It states that landlords will be motivated to find the agents with the lowest landlord fees but they have little or no incentive to find agents with low fees for tenants.

The consultation also cites encouraging longer term tenancies and improving affordability as reasons for their proposals.

In implementing a ban, the Government proposes:

• To introduce legislation which will mean that no agent will be able to charge tenants any fees, premiums or charges that meet the general definition of facilitating the granting, renewal or continuance of a tenancy.
• To ban any letting fees charged to tenants by landlords and any other third parties to ensure that letting agent fees are not paid by tenants through other routes. Tenants should only be required to pay their rent and a refundable deposit.
• It also says that it wants to look at how the scale of the deposit needed can be reduced.

The Government says that it wants a clear ban that is easy to communicate for tenants, however it acknowledges that there are certain costs that should continue to be met by the tenant. These are:

• Holding deposits to take the property off the market whilst reference checks are undertaken – the Government wants to carry on letting agents continue to collect holding deposits in order to ensure that there is a commitment from a tenant to a given property and to mitigate the risk of tenants speculating on a number of properties, leading to unnecessary and costly work by agents and landlords. Tenants who proceed with the letting will have their holding deposit refunded. The Government suggests that such holding deposits should be capped.

• In-tenancy property management service charges that come about as a result of the tenant, for example arranging for replacement keys, repairs carried out as a result of deliberate damage or breach of the tenancy agreement, or late rent payment charges.

To view the consultation, which closes on June 2, click here.