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Letting fee ban becomes law in England, could save tenants £240 million a year

The ban on letting fees in England and a cap on tenancy deposits is set to save renters at least £240 million a year, or up to £70 per household, according to the Ministry of Housing.

The new law has now received Royal Assent and the changes comes into force in June and Secretary of State for Housing, James Brokenshire, said that they will protect tenants from unfair fees and tenancy deposits will be capped at five weeks’ rent.

He pointed out that unexpected letting fees and high deposits can make properties harder for people to afford and are often not clearly explained upfront, leaving many prospective tenants unaware of the true costs of renting a property.

‘Tenants across the country should not be stung by unexpected costs from agents or landlords. This Act not only delivers on our promise to ban letting fees but also caps deposits at five weeks’ rent and sets out how and when landlords can charge tenants fees, helping renters keep more of their hard earned cash,’ said Brokenshire.

‘This is part of our ongoing action to make renting fairer and more transparent and make a housing market that works for everyone,’ he added.

Under the Act, landlords and agents are only able to recover reasonably incurred costs from tenants and must provide evidence of these costs before they can impose any charges.

This will put a stop to, for example, tenants being charged hundreds of pounds for a damaged item that actually only costs a few pounds to replace, such as £60 to replace smoke alarms.

The Act also ensures that tenants who have been charged unfair fees get their money back quickly by reducing the timeframe during which landlords and agents must pay back any fees that they have unlawfully charged.

Brokenshire said that taken together, these provisions help reduce the costs that tenants can face at the outset, renewal and termination of a tenancy and added that the Act is part of a wider package of government reforms aimed at rebalancing the relationship between tenants and landlords to deliver a fairer, better quality and more affordable private rental market.

The Government has already introduced a range of powers for local authorities to enable them to crack down on the small minority of rogue landlords and agents who let unfit properties. This includes fixed financial penalties of up to £30,000 and banning orders, possibly for life, for the most serious offenders.

Ministers have also extended mandatory licensing for Houses in Multiple Occupation to improve living conditions of tenants in shared homes and tightened up rules on smoke and carbon monoxide detectors. Private tenants can also apply for a refund of up to 12 months’ rent if their landlord does not deal with health and safety hazards in their home.

Other government steps to reform and improve renting include a national database of rogue landlords and agents to keep track of those that have been banned from letting, and a comprehensive review of the rating system used by local authorities to assess the presence of serious risks to the health and safety of tenants.

They have also introduced mandatory client money protection by which rental money held by letting agents is safeguarded against theft and fraud for all agents, a mandatory redress scheme for landlords and an independent regulator to oversee letting agents, setting standards and maintaining minimum qualifications.

There is a new, mandatory five yearly electrical installation safety inspections and Ministers are considering the case for a specialist housing court to provide greater access to justice for landlords and tenants in property disputes.

‘These measures are all part of ongoing government action to protect tenants and drive up standards in the private rented sector, helping make a housing market that is fairer and works for everyone,’ Brokenshire added.

Becky O’Connor, personal finance specialist at Royal London, said that the fees ban will help around 4.5 million households renting in the UK. ‘Many face a lifetime of renting, so this protection from unscrupulous, unfair and unpredictable fees from landlords and letting agents will make a difference,’ she said.

But she called for more to be done to make rents more affordable. ‘The Bill does not address the structural issues of increasingly unaffordable rents, a lack of supply of decent private rental accommodation or the problem of security of tenure for people who want to put down roots while renting,’ she added.