MPs push Government to reduce costs to tenants

Although the detail of the tenant fee ban remains a grey area, one thing has been sorted – the deposit cap has been upped from four weeks to six weeks. Still not ideal for many, but better than the original plan. Right?

Well, don’t count your chickens just yet.

A new report, based on the Housing, Communities and Local Government Committee’s pre-legislative scrutiny of the fees ban legislation has prompted MPs to call for the security deposit cap to be reduced from six weeks to five, as part of a range of changes to the legislation.

The report noted that security deposits should be capped at the equivalent of five weeks’ rent, as finding six weeks’ rent can cause financial difficulties for tenants. It was also stated that landlords can’t charge a higher rent in the first month of a tenancy, and then reduce it for the rest of the tenancy to cover any fees or deposit shortfalls.

There were also changes to the proposals surrounding holding deposits. With regards to holding deposits, the report states that landlords should only be permitted to retain the full holding deposit if the tenant provides false or misleading information. If the tenant provides information in good faith, however fails a referencing check, the landlord should only be allowed to keep the cost of the reference check. The cost of the reference check should be limited to an amount set by the Secretary of State.

There has been much confusion in the lead up to the ban with regards to which fees will be permissible to charge to tenants if a tenancy agreement is breached. It has been made clear that landlords will be able to charge for items such as replacement keys if lost by the tenant, but question marks still hang over contentious issues such as court costs in possession cases. These question marks remain!

It was however suggested that tenants should be allowed to recover any prohibited fees through the property chamber of the First Tier tribunal, rather than the county court as is currently the in the proposal – it was also suggested that the tribunal be given enforcement powers. Additionally, the report suggests landlords should not be allowed to regain possession of their property until they have repaid all prohibited fees.

The report was compiled following several meetings between the select committee and a number of tenant, landlord and letting agent groups, as well as local councils. Between them, the groups decided upon the suggested changes. Although the report noted that the ban will ‘deprive letting agents of an income source’, it agreed that it will introduce ‘fairness and transparency to the market’.

With more and more people living in the private rented sector, this legislation has the potential to make a difference to millions of people by cracking down on unfair fees and saving tenants hundreds of pounds. We believe however that there are clear improvements that could be made to the Bill that would ensure it has a much better chance of delivering on its aim of making renting fairer and easier. Moving home is already an expensive time and many people struggle to find large sums of money at the start of their tenancies to put down as a deposit. Lowering the cap from six weeks’ worth of rent to five will help make the private rented sector much more affordable, while also keeping protection for landlords from rogue tenants. We also had concerns about how the law will be enforced. Funding enforcement through the retention of fines gives local authorities a perverse disincentive to proactively engage with lettings agents and landlords. If councils are to be given this extra enforcement responsibility, they must either be given extra resources or the maximum amount of civil penalty needs to be increased.

Clive Betts, chair of the Housing, Communities and Local Government Committee

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