Agents are being warned to prepare for April 6 as the date when the lettings fees ban could kick in.
Although some in the industry are saying that October is a far more likely start date, ARLA boss David Cox warned last night that the earlier date – some 12 weeks away – remains a strong possibility for implementation.
The Government has already said that the fees ban will not be implemented until after Client Money Protection has been made mandatory, as it recognises that there could be firms going under as a result of loss of income.
Compulsory CMP would protect landlords and tenants who have handed over money to letting agents.
Should agents go bust as a result of the fees ban, the public would therefore be protected as long as agents have taken out CMP insurance.
Agents that we have spoken to believe that compulsory CMP could not be introduced until April, with the fees ban therefore unlikely to be implemented until six months later.
But Cox said that the Parliamentary timetable could still allow for the ban to be implemented as early as April 6.
He said: “The timetable is a bit tight, but we would rather the industry prepared for April 6, even if it does still have a few more months to get ready.”
ARLA is promoting its annual conference – on April 2 – as being “just days before the likely introduction” of the ban.
Cox also told EYE yesterday evening that he has taken advice following our story that agents could inadvertently break the law after the ban if they introduce tenants to a service where prospective renters have to sign up to the terms and conditions of a third-party supplier, even where they are not footing the costs.
Our story yesterday reported referencing firm UKtenantdata’s advice from its own lawyers, that tenants who agree to terms and conditions are entering into a contract, regardless of who pays
The fees ban Bill, due back in the Commons today for a last chance at amendments, prohibits agents from making prospective tenants enter into a contract with a third party.
Cox told EYE that he was intensely concerned at seeing our story yesterday.
He said: “I could completely understand where they are coming from,” and he took immediate advice.
However, he said that after consulting the Ministry of Housing, Communities and Local Government, he has been reassured that a tenant not footing the bill would not be entering into a contract with a third party supplier that is part of an agent’s business process.
Cox said that tenants would have to sign up to the terms and conditions of firms used by agents – for example, referencing and inventory firms – only because of data laws under the GDPR regime.
For clarity, this fees ban is billed as the “Tenant fees bill 2017–19”, in the same way as a wife isn’t a wife and a husband not a husband until after the wedding, a tenant isn’t a tenant until they have been accepted for the tenancy and the contract between the applicant and the landlord is formed.
Whilst I’m clear the bill is intended to ban fees to tenants has anyone enquired whether the ban actually extends to applicants?
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Full marks Mr May. That is an excellent question.
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Instead of tenants just grant licences and have licensee’s not tenants!
Or create company lets, where the agent is the tenant with the landlord, then you can charge the applicant what ever you want as they never become the tenant, just an occupier.
I’m just throwing ideas about I don’t know if they would work!
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Good point Robert, BTW, a Wife isn’t a Wife, and a Husband isn’t a Husband until they have paid for the marriage certificate/registration 😉
So I guess an applicant isn’t a tenant until they’ve paid to become one, at which time future fees cease to be allowable?
I’m sure there’s a long list of charges that could be added to this thread which the public are systematically charged for services they might not even want, or need (some of which will no doubt be government initiatives).
Not to mention the TV licence!
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The bill doesn’t explicitly say tenants. It says “relevant person”, “(1)
A landlord must not require a relevant person to make a prohibited payment to the landlord in connection with a tenancy of housing in England.
(2)5A landlord must not require a relevant person to make a prohibited payment to a third party in connection with a tenancy of housing in England.
(3)A landlord must not require a relevant person to enter into a contract with a ”
So that can be anyone from applicants to guarantors, I think.
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What if the landlord doesn’t require it?
What if the system changes to make the application fee voluntary, sure they don’t have to volunteer a payment, but then they’re behind the person who does. If I go to a property or motor auction my bid doesn’t secure me the goods unless it’s the winning bid.
Auction your application forms 🙂
Obviously I’m joking, but I wouldn’t be surprised if this type of rule bending emerges quickly.
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Subscetion (9) defines revelant person as the tenant
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the definition of a tenant is included in section 28 of the act *interpretation* (i think that covers all the angles)
(a)
a person who proposes to be a tenant under a tenancy,
(b)
a person who has ceased to be a tenant under a tenancy,
(c)
a licensee under a licence to occupy housing,
(d)
35a person who proposes to be a licensee under a licence to occupy housing, and
(e)
a person who has ceased to be a licensee under a licence to occupy housing;
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What about permitted occupants, or could they be treated as a licensee.
Charge the someone else, say a family member unconnected to the prospective tenancy. Something along the lines of “you can rent this property if your parents pay us £500”
I know, set up a premium rate line for tenants to contact me by.
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stop thinking of ways around the ban, that is just going to land you in all sorts of trouble in the long run
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Being deliberately obtuse now, there will be typically at least a few applicants who would like to take up a tenancy, what probably has to be assessed is at what point does an applicant become a prospective tenant? I can’t see an issue in charging to vet applicants in order to propose or recommend a prospective tenant to a client.
Offer, acceptance, consideration and, for property, evidenced in writing are the basics of contract law, deeming a person who proposes to be a tenant under a tenancy before their offer has been accepted to mee appears to be legally jumping the gun.
Could it be that referencing sits fractionally on the wrong side of the legal border between the two statuses? How about if all those tests fail suddenly referencing might become a legitimate taxable deduction from a landlord’s SA105 L&P return? Agents carry on charging for referencing, landlords pay but then claim it back from HMRC.
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RM, if you want to charge a person to be vetted, let me know how you get on in court
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In 2007 I pointed out obvious flaws in Yvette Cooper deposit legislation, 5 years later my amends got tested in court, I was right. This is a discussion form where we are discussing the sort of ambiguity that gets tested in court.
This legislation is failing in its aims because it does not understand the problem it it trying to solve.
A tenant fee ban will not make more properties available for the less well off, it simply makes a tenancy cheaper for those who already have financial advantage over poorer tenants.
The legislation will affect decent agents and industry service suppliers to solve a problem caused by a minority of agents in one specific area of the country.
This legislation will drive some suppliers and agents out of business and with them will go lost tax and vat revenue to benefit the very small minority of tenants who run up against a rogue agent, scammer or exploitative agency.
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Sorrrry Robert.
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You are not permitted to charge fees in relation to the granting of a tenancy – this extends to applications, the last debate included discussion on applicants that fail due to failing to disclose or deliberately misleading being charge a reasonable fee…this would most likely have a cap or be listed as a fixed fee.
There are other exceptions in the draft related to fees.
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what happens to the holding deposit by the way, if a tenant fails the credit check and the Landlord doesn’t accept them? I’ve had one recently where they failed, but had a guarantor lined up if the landlord would accept them with the guarantor? If the landlord says no, does the holding deposit have to be refunded?
And if a tenant fails due to them misleading or not disclosing pertinent information, does the Agent keep it, or do we have to send it to the Landlord?
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a lot will depend on the terns and conditions of taking the holding deposit….an applicant cannot fail a credit check, only fail the level you have set. If I score 1 on the credit check, I have not failed, only failed to reach the minimum credit score you have set of 2. Therefore you would have return the holding deposit unless you prove that the applicant has provided misleading information i.e. they said they earned £50k, but the credit check/referencing found that they earn £20k, and you would have never had taken an application at £20k.
In terms of the second question, it depends on the clauses contained within your agency agreement with the landlord, about whether it is you or the landlord who receives the holding deposit. In fairness, this has nothing to do with the tenant fee ban, this should already be clearly stated in your agency agreement.
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My understanding and what we were told at the time of Scotland moving into “no Fee” arena is that the no fee situation is in relation to “the creation of a tenancy”. That would stop applicants being charged a fee for referencing etc which we cannot do in Scotland.
However I think it’s really important to get clarity on all points of the legislation and be crystal clear what is in / out of scope and then there is no misunderstand – or likelihood of being penalosed.
Keep asking questions
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Who creates a tenancy with an applicant who they haven’t verified as able to fulfil the terms of what is a contract to take possession of a property?
I appreciate I am deliberately splitting hairs but preparing and creating the tenancy only happens after the due diligence process of making sure the applicant has a right to rent, has the means to pay and is likely to look after the property they’re about to move into.
In my mind any applicant unable to provide satisfactory confirmation they are a low risk for section 8 ought to be required to have, without exception, a guarantor. Faced with that prospect I’m fairly certain most applicants would see good reason and value in a reasonable referencing process.
The real issue with referencing fees is where they are excessive or are taken fraudulently by rogue agencies and scammers who don’t have properties to let in the first place.
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You may be splitting hairs but is a very pertinent point that you make. There are too many loopholes at present that will allow rogue agents to bend the rules and cause further disruption in the market. Or even just honest agents that are trying to save their business because of the loss in revenues….
I get the issues with fees, but it should simply be capped, not scrapped altogether – it’s ruining the industry, we still have to pay for the referencing and then on top of that extra overhead we lose an income stream – attacked twice in one go.
There’s a quality Tory government for you – oh wait…no, I think I may be mistaken!!
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I’d prefer them to sort out Brexit first! Do they really think that within a week of us leaving the EU is a good time to make another mass -shake up? Let the dust settle from that, and do it in October when we have had a chance to react and acclimatise to the new reality and economic changes.
At the moment, Brexit and Universal Credit are the two main things they should be concentrating on.
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Fear not Country Lass, 650 of the country’s brightest elected folk are dealing with these issues…I mean how hard can it be for all those people to only have to deal with 3 issues…oh hang on a minute!!!
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650 of the brightest elected folk, and I’d trust less than half of them to figure out how to open a packet of crisps…
When you get officially elected, or visit the house of commons for your first sitting, do you think they anethetise you before removing your logically capacity, or do they just whap you on the head and do it when you are unconcious? I find it hard to see how supposedly intelligent people can b*gger everything up so much…
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IMHO, it will be the Autumn not the spring.
You still need to prepare, update your tenancy agreement, update your terms with the landlord, if your service is going to change etc.
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“However, he said that after consulting the Ministry of Housing, Communities and Local Government, he has been reassured that a tenant not footing the bill would not be entering into a contract with a third party supplier that is part of an agent’s business process.”
May I remind you the same said in relation to deposit protection:-
Q.46 What happens if the tenant has a tenancy agreement that was taken out before 6th April 2007 but he continues occupying the property after the end of that tenancy?
A. For a statutory periodic tenancy – i.e. the tenancy continues with no new agreement – TDP will not apply, as no new AST will have been created.
I stopped paying attention to Communities and Local Government aka Ministry of Housing, Communities and Local Government a long time ago.
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What about if we have a current tenancy with a deposit of say the equivalent of 2 months rent plus a £100 pet bond, then the tenant ask’s to renew the tenancy. do we have to refund part of the deposit so as not to exceed the 5 week deposit cap??
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How will this affect Inventory Companies?
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