As of January 2019, the government unveiled plans to bring in a new piece of housing legislation which is set to affect landlords and tenants alike from the summer onwards. From 1st June 2019, the Tenant Fees Bill will be brought into English law, which means that certain charges expected of tenants will be erased altogether. While this may sound like a good idea from one angle, it will have a significant knock-on effect for millions of people.
What Will the Tenant Fees Bill Do?
According to official government advice, the Bill will ban all letting fees expected on tenants renting in England. This means anyone renting English property will no longer be expected to pay additional letting charges before signing a contract with a landlord or agency. It will also mean that certain deposits for tenants are capped.
The government states that the Bill has come into force as a result of aiming for a fairer private sector. Tenant fees have proven controversial in recent years for several reasons, and this law will, in effect, eradicate any ‘hidden’ costs that aren’t shown to tenants before they rent a property.
While the date for implementation has been set at 1st June, as is the way with lawmaking, there are still a few processes and hurdles to be navigated. Therefore, at present, the law is going to pass. However, we will let you know if there are any last-minute changes.
This ban may sounds like a great idea for tenants, however, there are positive and negative repercussions for parties involved.
So how will this law affect tenants and landlords?
The ban will be welcomed by tenants. Lettings agencies and landlords will no longer be able to request fees of their prospective renters beyond the following:
- Basic rent charges
- Security deposits
- Reservation deposits
- Council tax
- Utility fees
- Termination fees
- Late fees or default fines
- Contract amendment fees
Therefore, administration charges or similar fees will no longer be demanded of the tenant. These will be banned outright while holding deposits, security deposits and contract amendment fees will all be capped. This, in effect, is all in the name of making things more affordable for English tenants.
This ban has already taken effect in Scotland, though Northern Ireland and Wales will continue to operate as usual.
A ban on tenancy fees and additional charges has been welcomed by many, though the Bill will also have repercussions for the other party involved.
Why is the Ban a Bad Idea?
While the tenancy fees ban will make things cheaper for tenants, landlords and agencies will have to start paying extra for administrative costs. Certain running expenses and fees were passed over to tenants in the form of handling charges. These are fees which, under the new law, will be banned outright. Caps on existing fines and charges, too, will mean that landlords need to pay more to let properties in the long run.
The news has also been met with some concern; It a potentially costly change for landlords. If a ban on fees is set to make things more expensive for lettings agencies and landlords, we may see a rent charges increase in the short term.
This means tenants, ultimately, may still be paying the same fees, only through slightly different channels. Landlords and agencies who are forced to increase rent charges may face difficulty appealing to new tenants if they are perceived to be ‘too high’. Therefore, there will likely be a change in how properties are valued for rent over the next few months and years.
This could make the market difficult for both landlords and tenants to navigate. The knock-on effect of this bill could mean that fees are simply moved into everyday costs. There is a risk of tenants being put off by increasing prices, and those who don’t know about the fees ban may assume costs to be too high for the property they are renting.
A Fine Balance
The Tenant Fees Bill may be seen as a victory for tenants in one way. However, it will not be seen this way by landlords and lettings agencies. It will take time to see how the law impacts general rent prices across England.
For the time being, the best action landlords can take is to prepare for fee increases. What happens next to the housing market, however, will remain to be seen.
SOURCES CONSULTED https://www.property118.com/tenant-fees-act-2019-draconian-legislation/ https://www.property118.com/tenant-fees-act-rent-arrears-default-fees/ https://www.arla.co.uk/news/january-2019/tenant-fees-ban-comes-into-force-from-1-june-2019.aspx https://www.gov.uk/government/collections/tenant-fees-act https://www.moneysavingexpert.com/news/2019/01/letting-fees-to-be-banned-from-june/