Agents who charge tenants after the fees ban comes in could be bankrupted and put out of business, the head of trade body ARLA has said.
David Cox, chief executive of the Association of Residential Letting Agents, also warned that referring tenants to third party companies that pay agents commission could mean that legally, those agents will be sailing dangerously close to the wind.
The Tenant Fees Bill finished its passage through Parliament yesterday and is now ‘inevitable’, Cox said yesterday.
Earlier in the day, he warned: “Agents who are continuing to charge fees after June 1 could be prosecuted to the full extent of the law.
“They could be fined to such an extent that it bankrupts their companies.”
Cox was speaking at a webinar hosted by Goodlord on the tenant fees ban.
He emphasised that agencies which are found to be still charging fees will not be fined once, but penalised £5,000 for every fee charged.
Cox said: “The concept is that these will be bankruptcy-level fines, because otherwise, it is not going to be fair on professional agencies, and ARLA has no objection to that.
“A simple mistake is a different matter.
“But we all know there will be agents out there who will wilfully ignore this law.”
During the webinar Cox answered questions submitted by letting agents from throughout the country who were looking for more clarity on the ban.
Many questioned whether fees already charged or deposits greater than five weeks taken would need to be refunded after June 1.
Cox said: “We’re expecting the guidance to say that as long as the tenancy continues after the introduction of the ban, you won’t be expected to retrospectively give back two or three weeks of the deposit.
“If you’re signing the contracts today or in the next few days you can continue charging fees for a period of 12 months after the ban comes into force – so the last date of chargeable fees for existing tenancies will be May 31, 2020.”
Cox said letting agents would still be able to earn commissions for selling products such as insurance to tenants, but only where those products were optional.
He said: “If they’re a condition of the tenancy, they’ll be a prohibited charge, but if they’re optional, that’s absolutely fine as it’s the tenant’s choice to take that out.”
However, he strongly urged against letting agents referring tenants to any third party companies from which they earn commission, such as referencing firms.
He warned: “You will be skirting very close to the edge of the law.”
Speaking about how letting agents could make up for the loss of revenue from the ban, Cox said it could be time for agents to start charging for extra services they provide to landlords.
He said: “You don’t need to put up your fees, but it might be time to start charging your landlords for extra work that goes above and beyond, that you’ve been doing free for years.
“That’s very laudable but we’re moving into a very different world now.
“Landlords take agents for granted and I think it’s time to tell your landlords the amount of work you actually do for them.”
Under the fees ban, agents do face potentially huge penalties. Accompanying guidance (currently draft) to enforcement bodies states:
Each request for a prohibited payment is a breach. For example, the following would be considered multiple breaches:
- An agent/landlord charging different tenants under different tenancy agreements prohibited fees
- An agent/landlord charging one tenant multiple prohibited fees for different services at different times
- An agent/landlord charging one tenant multiple prohibited fees for different services at the same time
- An agent/landlord charging one tenant one total prohibited fee which is made up of different separate prohibited requirements to make a payment e.g. £200 requested for arranging the tenancy and doing a reference check would represent multiple breaches
Where an agent or landlord is being fined for multiple breaches at once and they have not previously been fined, the financial penalty for each of these breaches is limited to up to £5,000 each.
Yesterday, the Bill completed its passage through Parliament, and Cox said: “The tenant fees ban is now an inevitability, and agents need to start preparing for a post-tenant fees world.
“The Bill will now receive Royal Assent in the coming few weeks, before being passed into law and implemented on June 1.”
You can watch the complete Goodlord webinar at: