The Government’s long awaited consultation on banning tenant fees has finally been published this morning.
The proposals, first touted in Chancellor Philip Hammond’s Autumn Statement five months ago in November, outline the controversial measures stopping lettings agents charging fees to tenants.
The document shows that the Government intends to legislate that no agent will be able to charge tenants any fees, premiums or charges that meet the general definition of facilitating the granting, renewal or continuance of a tenancy.
The ban would also include any letting fees charged to tenants by landlords and any other third parties to ensure that letting agent fees are not paid by tenants through other routes. Tenants should only be required to pay their rent and a refundable deposit, the document says.
There are some exemptions proposed, such as holding deposits to take a property off the market while reference checks are undertaken, and in-tenancy property management service charges arising because of the action of the tenant such as replacement keys or for deliberate damage.
The consultation recognises lettings agents should still be reimbursed for their work but claims in many cases they have already been charging landlords.
The document recognises rents may rise if increased costs are passed on to landlords.
It said: “We would not expect the full level of tenant fees that are charged currently by letting agents to be passed on to landlords since there is evidence that a number of agents are charging excessive fees and that some agents are double charging landlords and tenants.
“Under the ban, all agents will need to be efficient and fair with their fees in order to secure landlords’ business and therefore the fees charged should be a fair reflection of the services provided.
“Like any other supplier, landlords will need to set a rent that takes into account their costs whilst still being attractive to prospective tenants. Some landlords may absorb some or all of the increased fees charged, however others may choose to reflect the increase in the headline price for the property.”
The Government claims the changes mean tenants will be able to compare properties based on rental level rather than other fees.
Once introduced, the ban would be enforced by local authorities, primarily Trading Standards, according to the consultation, with civil penalties of up to £5,000, industry bans or criminal prosecutions all possible.
But the Government is also considering the introduction of a lead enforcement authority, similar to that in place in the estate agent sector as well as further regulation.
As if the fee ban wasn’t enough upheaval, the consultation also shows the Government is considering different ways for deposits to be paid.
The document said: “Deposit levels have been increasing and the Government is keen to examine the option of capping the amount of deposit that can be requested by the landlord.
“However, even with a capped deposit level, affordability pressures will remain and in the longer term the Government is seeking to explore the potential and implications of wider options to minimise the financial burden on tenants.
“Not all landlords currently take deposits and we are keen to understand what alternative models there are to remove the need or reduce the scale of a deposit at the outset of a tenancy, and what role the Government might be able to play in supporting and facilitating the growth and development of such models to increase choice in the marketplace.”
One suggestion in the document is for tenants to pay their deposit in instalments over the first few months of the tenancy or using a line of credit approach where an agreed deposit amount is blocked on a tenant’s credit card.
Watch our 60 second guide to the consultation
Housing minister Gavin Barwell said: “We’re determined to make all types of housing more affordable and secure for ordinary working people.
“Tenants should only be required to pay their rent alongside a refundable deposit and not face hidden fees.
“Our housing white paper sets out other ways we will help those renting, including building more homes for rent and providing longer, family friendly tenancies.”
The consultation applies only to England and lasts eight weeks.
David Cox, chief executive, ARLA Propertymark, has labelled today’s proposals as shambolic.
He said: “The Government’s housing policy is shambolic and today’s consultation contradicts its already stated aim to encourage longer term tenancies. Independent analysis launched at ARLA Propertymark’s annual conference last week revealed that if an outright ban was introduced, rents will increase by £103 per year which will only serve to financially punish long term tenants.
“The decision is a short-term crowd pleaser and we are disappointed the Department for Communities and Local Government has not considered our proposals in today’s consultation.
“We urge the Government to use this process to think again to ensure that consumers, and the wider economy are not penalised by contradictory Government policies.”
The Government is running workshops to discuss the consultation and the ban in London, Manchester, Bristol and Birmingham.