Lettings agents can expect a ‘big bang’ day of sweeping changes for the industry.
A multi-pronged swathe of regulations will hit them at the same time after the Government revealed it will link the tenant fee ban, introduction of mandatory Client Money Protection (CMP), new minimum training standards and a requirement to belong to a recognised body.
The Government unveiled its long-awaited Draft Tenant Fees Bill yesterday alongside a consultation on introducing mandatory CMP.
This document states ministers’ intentions clearly: “The Government intends to require that all letting agents must register with an appropriate organisation in order to trade.
“This will mean that letting agents would be required to satisfy minimum training requirements, abide by an industry code of conduct in order to practise and comply with all existing legal requirements.
“Once Client Money Protection scheme membership is mandated, non-compliant agents would not be permitted to operate until they obtain cover, since being a member of a scheme will be a requirement to trade.”
For more information on proposals for compulsory CMP, see our next story.
The twin moves come just weeks after the Government launched a call for evidence on the regulation of letting agents and the leasehold sector.
Officials at DCLG yesterday could not give us a definitive timetable for introduction of the fees ban, but the CMP paper reveals that there will be time for agents to get prepared for all the changes.
It says: “The Government proposes to link measures on client money protection to the work underway on the ban on letting fees for tenants and greater regulation of letting agents.
“The Government will also ensure that agents and scheme providers have a notice period to become compliant with the new requirements. This will help to minimise the impact and also not discourage new firms from setting up.”
The Draft Tenant Fee Bill needs to first be looked at by Parliament’s Communities and Local Government Select Committee, a process which can take a few months. It then needs to be presented to the Parliament before being debated by both the House of Commons and the House of Lords, before any amendments are considered by MPs.
Once approved it requires Royal Assent.
The deadlines for the other changes suggest nothing is imminent. The call for evidence on letting agents regulation is open until November 29 and the CMP consultation ends on December 13.
The Government would then need to respond to both of these.
While there is no set time for legislation, generally a parliamentary session lasts for a year, starting with the Queen’s Speech. This Bill was mentioned in the June Queen’s Speech and the current session has been extended to two years to allow for Brexit changes, so technically there is more time than usual.
The Bill also lists prohibited payments and permitted payments and warns that while rent can be taken, landlords must charge the same each month, so couldn’t increase one month’s payment to cover the loss of fee income.
The Government will create a civil offence with a fine of £5,000 for an initial breach of the ban and a criminal offence where an agent has been fined or convicted of the same offence within five years. Civil penalties of up to £30,000 can also be issued as an alternative to prosecution.
There were some new proposals as it also said agents would need to display any charges and details of CMP membership on external websites such as portals.
Holding deposits will be capped at no more than one week’s rent, but the Bill said security deposits will be capped at no more than six weeks’ rent, rather than the four weeks previously proposed.
Chris Norris, head of policy at the National Landlords Association (NLA), said: “Since the plans were announced we have been lobbying the Government and we met with the Housing Minister Alok Sharma to press him to rethink his plans for a cap, taking into account the needs of those living and working in the private rented sector.
“The NLA is happy that the Government has listened to the evidence we presented on behalf of our members. While we remain disappointed that the Government continues to believe a cap is necessary, extending it to six weeks’ rent will reduce those households and landlords disadvantaged by the policy significantly.”
Isobel Thomson, chief executive of the National Approved Lettings Scheme (NALS), was also pleased that the Government had listened on security deposits.
She said: “The introduction of the draft Bill at least gives the sector clarity on the Government’s plans and we will consider the detail. We particularly welcome that Government has listened in relation to the level of a cap on security deposits at six weeks’ rent, something that NALS called for in its consultation feedback.
“NALS has consistently said that any fee ban needs to be set within a wider context of regulation of letting and management agents as well as mandatory client money protection, and it would appear that Government is listening.
“With the publication of the draft Bill the work now starts for agents in engaging with their local MPs who will be scrutinising the Bill in Parliament. MPs need to understand the implications of what on the surface appears to be a quick win for tenants but which will ultimately end up costing them more through increased rent and will disadvantage the most vulnerable tenants.”
ARLA Propertymark chief executive David Cox said the legislation must now be shaped fairly.
He said: “We have discussed the proposal to ban letting agents fees with Government ministers and officials many times since the announcement.
“Having now seen the Draft Bill, it is essential that during its passage through Parliament, this legislation is shaped to make it fair to consumers, while supporting businesses to carry out the work necessary to create and maintain successful tenancies, including legal requirements such as Right to Rent checks.
“We are very pleased to see that the Government has listened to our call and increased maximum security deposits from four to six weeks, and are encouraged that it appears those tenants who wish to break their contract will have to cover the legitimate costs of finding a new tenant.”
Read the Draft Tenant Fees Bill
Read the Call for Evidence on lettings agent regulation
Read the consultation on mandatory CMP
Better late than never!. Why wasn’t the regulation tighter from the outset!? The industry would be in a far better place if this were implemented years ago.
Don’t even get me started on banning fees, this still feels like a nightmare that I haven’t woken up from.
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If only the Government and Local authorities provided the appropriate level of social housing instead of asset stripping all the council housing most of these problems would not have arisen. It is the lack of supply that provides the conditions for criminal landlords. Always Councils and Government want to provide something without paying for it to show how good they are. Then of course blame some one else – the PRS! when it goes wrong.
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Don’t understand why the need for a cap on deposits, never realised deposits were an issue as the industry applies rates at between 1 and 2 times the monthly rent, does anyone go above 2 times and create a premium tenancy? And why 6 weeks rather than 1.5 months, being a much simpler calculation and no need to round it, unless you value the pennies as well! Also, what happens if the rent drops, will we have to return some of the deposit as it will now exceed the limit; and can we increase the deposit to allow for rent increases. What I am really saying is that what appears to be a simple cap, creates uncertainty once legislation dictates the requirements, as, lets face it, Government have a good record of relying on case law by introducing poorly worded legislation.
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Nice video PIE.
What a crazy bonkers industry this is becoming.
With 1. VCs pushing budget which is mindless and leaves little in the pot to do a proper job other than list on portals which isn’t full agency services and 2. heavier legislation and 3. Banks securitising mortgages now at 35/40 years,
. ….. the property market is heading for one steep cliff fall.
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The act talks about fees being shown on 3rd party web sites. The agent Must ensure the 3rd party displays their fees or a link to their fees. Thats fine for rightzoopla but what about the other sites that trawl your ads and put it up on their sites unauthorised and with no links/fees shown?
How can an agent be liable to a fine for something a 3rd party does which we may have no control over.
As another poster has said deposits – WTF rent x 12 / 52 to get a weekly rent and then x 6?
the standard way is rent x1.5 = 6weeks rent. much easier to work out and understand for all shirley?
Like the fact there are criminal penalties for agents and companies but not for the crown – why should the crown or its ministers not also be criminaly responsible if agents are?
Nov 5 roll on – I think Guy had the right idea.
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“There were some new proposals as it also said agents would need to display any charges and details of CMP membership on external websites such as portals.”?????
Trading Standards are already enforcing this in our area?? Anyone else??
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No, they are not as a number of agents still do not display landlord fees on their websites.
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Ok, so 6 weeks rent, that’s basically what I take at the moment….unless there is a pet. For pets we add £150 on to cover the approximate cost of carpet cleaning and/or damage to carpets/curtains etc.
Let’s not forget, good tenants get it all back!!
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Ok, I’ve had a quick scan through the draft bill….
What I have so far is that a Tenant can apply for loads of different properties, putting down a Holding Deposit of one weeks rent, which they get back if the tenancy agreement is not in place by 15 days after the payment. Unless a landlord can prove that the tenant a)lied on the application meaning the landlord may not have granted a tenancy in the first place if they had been honest, b)Tenant failed to take all reasonable steps to enter into the tenancy agreement before the deadline date or c) the Tenant tells the landlord before the deadline date that they have changed their mind.
My questions;
Is not declaring a CCJ (that some people aren’t aware they have) classed as lying by omission?
If a Tenant fails a credit check, or can’t get a guarantor, would that be classed as lying and mean the holding deposit is lost?
Who judges if a tenant has taken ‘all reasonable steps’? If there is a problem with getting a deposit transferred due to a bank issue, is it reasonable to expect a tenant to borrow from a friend or use a credit card?
Is the holding deposit to be dealt with the same as a regular deposit, and would it need to be registered with a deposit scheme? Will Agents be required to hold large amounts of cash on site to refund holding deposits?
Assuming that a holding deposit is not to be repaid to the tenant on an unsuccessful tenancy, who keeps it? The Agent has paid for the referencing and R2R checks, so surely it would be us?
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More ridiculous legislation to tackle a safe made problem. Note how there is never any mention of banning mortgage application fees that average £999 for first time buyers or banning their own rotten stamp duty!
The more you meddle with the economy, the more it back fires..
http://qmentis.com/economics/property/letting/letting-agent-fees-ban/
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