On 1 November 2017, the government moved forward one of its manifesto commitments which was outlined during June’s Queen’s Speech; to ban fees charged by landlords to tenants. The Department for Communities and Local Government published the Draft Tenant Fees Bill, but what does the Bill mean for tenants?
The Draft Bill
Firstly, it is important to note that the Bill is currently in draft form and has not yet been laid before Parliament. Once before Parliament it will undergo usual parliamentary scrutiny in the House of Commons and House of Lords, so is subject to amendments.
Prohibited and Permitted Payments
The bill seeks to prohibit landlords and their agents from requiring tenants to make any payment as a condition of granting, renewing or continuing a tenancy. All payments will be prohibited under the act with the exception of permitted payments which include:
- A refundable tenancy deposit (capped at 6 weeks of rent)
- A refundable holding deposit (capped at 1 week of rent); and
- Default fees (for example, fees charges for the late payment of rent).
Any other fee paid in connection with the tenancy will be considered a “prohibited payment”.
The Bill contains anti –avoidance provisions which prevent landlords (or their agent) from adding the fees into the first month’s rent and then later dropping the rent once the fees have been recovered. The Bill specifies that any additional amount payable in respect of the initial period is a “prohibited payment”.
The Bill imposes a cap on holding deposits at no more than one week’s rent. Holding deposits are payments made by a tenant to a landlord (or agents) to “reserve” the property. The Bill requires the holding deposit to be returned to the tenant within 7 days of the tenant entering into the tenancy agreement. The holding deposit can be used towards the first payment of rent. There will be restricted circumstances in which a landlord might be able to retain a holding deposit which are set out at Schedule 2 of the Bill.
A tenancy deposit is money held by the landlord (or agent) as security for the performance of any obligations of the tenant or the discharge of any liability under the tenancy. The Bill caps tenancy deposits at no more than 6 weeks rent. Any payment which exceeds 6 weeks will be a “prohibited payment”.
Effect of a Breach
Any clause under the tenancy which requires the tenant to make a “prohibited payment” will not be binding. The rest of the tenancy will not be void and tenant will continue to be bound by all other clauses of the agreement.
Trading standards will be responsible for enforcing the provisions. If trading standards are satisfied beyond reasonable doubt that a person received a prohibited payment then a financial penalty of up to £5,000 will be imposed. Repeat offenders can have criminal proceedings brought against them and a fine of up to £30,000 imposed.
Recovery of a Prohibited Payment or holding deposit
Where a tenant has paid a prohibited payment they can apply to the County Court to recover their money. Where a holding deposit has been unlawfully withheld by a landlord (or agent) a tenant can also apply to the county court to recover their money.
Trading standards may help a tenant recover a prohibited payment or unlawfully retained holding deposit by providing advice or conducting proceedings on their behalf.
Trading standards may require the landlord (or agent) to repay the prohibited payments. In these circumstances, the tenant cannot apply to the county court.
What does the Bill mean for tenants?
The bill appears to spell the end of (often extortionate) fees charged by landlord and their agents. The Bill would also end the practice of landlords (or agents) charging tenants for other associated tenancy fees such as check-in inventories and substantial payments of rent in advance.
Enforcement would much depend on local trading standards who would be under a duty to enforce the provisions. If a “prohibited payment” has been paid the tenant would be entitled to bring proceedings to recover their money.