Renters across the country have been waiting almost two years for the promised ban on astronomical letting agent fees to materialise.
But this week, the Government got one step closer as the tenant fees bill passed its third reading in the House of Commons. It will now pass over the House of Lords to be scrutinised before becoming law.
The new rules, first proposed by Chancellor Philip Hammond two years ago, would see a ban on landlords and letting agents in England charging tenants any additional fees when they sign up for a new rental property.
The bill passed through the Commons yesterday, and will now pass over the House of Lords
It was brought into place due to a minority of agents routinely overcharging tenants for simple tasks – many of which they also billed landlords for, either as part of standard agency fees or as extras.
The bill also proposes a cap on the security deposits renters pay at the beginning of their tenancy – to the equivalent of six weeks’ rent.
Government analysis suggests tenants will on average save around £300 every time they move house as a result of the ban.
Minister Rishi Sunak MP said: ‘Tenants across the country, whatever their income, should not be hit with unfair costs by agents or landlords.
‘The tenant fees bill will make renting fairer and more transparent for all.’
The latest version of the bill also includes a proposal to prevent agents and landlords from overcharging tenants for extras – such as slapping them with a £60 bill to refit a smoke alarm.
Polly Neate, chief executive of Shelter, said: ‘The tenant fees bill is good news for renters and recent changes inch millions of people closer to important protections.
‘It’s great that renters can no longer be fined hundreds of pounds for something as simple as losing a key, but it still doesn’t stop landlords charging for a whole range of ridiculous things like cleaning cobwebs from light fittings.
‘The Government needs to make the bill completely watertight before it comes into force by getting rid of unfair charges. Only then will renters get the absolute protection they deserve.’
Why is the government looking to ban tenant fees?
There is evidence that fees paid by tenants have increased significantly in recent years.
Citizens’ Advice found that 64 per cent of tenants experience problems paying letting agents’ fees, and 42 per cent have to borrow money to cover the cost.
Meanwhile a report from the charity Shelter found that nearly one in four people in England and Wales feels they have been charged unfair fees by a letting agent.
Letting agencies typically charge tenants £337 in fees to rent a home – and many tenants in London are forced to pay over £400.
This has led to concerns that costs are being ramped up rather than passed on.
Credit checks, for example, can cost as little as £3 but many letting agents charge tenants in excess of £50 for them.
In other instances, tenants can be charged for admin work, such as tenancy renewals and inventories, when these should be covered by the letting and management fees already being charged to landlords.
According to comparison site Letting Fees UK, as of April 2016 a two-person household paid an average £386 in letting fees, with fees charged ranging from £40 to up to £780.
The Government predicts that the bill will cost landlords £83million, or £31 a landlord in the first year of implementation.
It could also cost letting agents £157million and even lead to branch closures and job losses.
Renters collectively can expect to save £240million a year. A Government consultation found that 93 per cent of tenants agreed with the proposals.
Tenants will on average save around £300 every time they move house as a result of the bill
Letting agents were less pleased by the bill’s progress.
‘We’re disappointed but unsurprised the tenant fees bill has passed the House of Commons,’ said ARLA Propertymark chief executive David Cox.
‘As the bill moves into the House of Lords we will continue working to ensure parliamentarians understand the impact the ban will have on the whole private rented sector.’
Tradebody ARLA Propertymark has previously suggested that the bill could push rents up by as much as £103 a year for the average tenant.
Could tenants soon see the end of deposits altogether?
Alongside the tenant fees bill, the Government is also running a study exploring alternatives to tenancy deposits as it looks to make renting more affordable.
The average tenancy deposit in the UK is now £1,161 – an increase of 18.6 per cent over five years. On top of this, tenants often have to pay a new deposit when moving before they get their old one back.
Ajay Jagota, founder of deposit-free renting firm Dlighted, said: ‘We’re talking about a system which sucks £4.2billion from our economy, makes renting unaffordable and costs landlords tenants without adequately protecting them against rent arrears and property damage.
‘Intervention is needed to address these market failures, and it could be here by the end of the year.’
The results of the study will be shared in around three months’ time.
Follow this link to see our round up of the alternatives to security deposits that already exist.