Last week the Housing Communities and Local Government Committee published their long-awaited report on the draft Tenant Fees Bill.

The report is the result of an 18-month long conversation between politicians, housing organisations, landlords and letting agencies and discusses the much-anticipated tenancy fee ban in England.

It is widely understood that the ban will prohibit all payments with exception of rent, security deposits of up to six week’s rent, holding deposits of up to one week’s rent and default fees, however the government has called for further clarity around these aspects to prevent what they have stated are ‘loopholes’.

So, with the ban due to go ahead in Spring 2019 there is still time to charge fees, but what can we expect as a result of the recent report on the assumed loopholes and how will it further effect agencies and landlords?

Security Deposits

MP’s discussed the matter of security deposits and suggested lowering the cap from the original proposal of six weeks to five weeks’ worth of rent. The government have suggested that this change will help to make the private rented sector more affordable for tenants, whilst continuing to protect letting agents and landlords, however many are still in favour of a higher cap.

The National Landlords Association (NLA) are doing their best to argue the interest of landlords and agents to ensure property portfolios are protected. When the draft legislation was first proposed, the Government suggested a stricter regulation and wanted to cap deposits at four weeks’ worth of rent. The NLA argued that this would create problems as landlords would be less likely to, for example except pets, to protect against the damage that would usually be covered in a higher security deposit.

Holding Deposits

Unlike security deposits, holding deposits can currently be kept in whole or part if the landlord or agent keeps the property reserved for a tenant and they then fail to move in as agreed. This type of deposit was also discussed in the report and it was suggested that they should not be able to retain the full holding deposit if a tenant fails a reference check despite providing accurate information.

There has been disagreement around this concept and David Cox, Chief Executive of ARLA has commented,

‘While it is positive that the Bill will be clarified to reflect that holding deposits can be paid to letting agents as well as landlords, not allowing agents to retain the holding deposit when a tenant fails the refencing check is both extremely unwise and very misguided. This will result in agents only selecting the very best tenants to avoid the possibility of incurring costs through tenants failing referencing,’

As a result, this could reduce the availability of properties for more vulnerable tenants and families. These individuals are at the heart of the plan and whilst the government’s aim is to help these groups it could in fact have the opposite effect.

Default Fees

Another hot topic was default fees and although the tenancy fee draft planned to permit the fees, the regulation came under scrutiny in the recent report.

The draft Tenant Fees Bill allowed landlords to charge ‘default’ fees once a tenancy is set up on, for example, the replacement of lost keys and fines for late rent payments. However, the report comments on the fact that this fee could potentially be exploited by landlords or agents as a loophole to recoup losses from the ban. It has therefore been suggested that default fees need to be better regulated to provide greater clarity on what constitutes a reasonable fee and is a legitimate cost.

Preparation for the Ban

The bill outlines how the Government plans to make renting fairer for all parties involved, however with a year to go until the ban comes into practice there is a lot of uncertainty around the specific details on what landlords and agencies can and cannot do.

In order to prepare for all outcomes, it is important that measures are put in place to protect properties and an efficient way to achieve this is through comprehensive inventory reports.

A property inventory report is beneficial for all parties involved and provides clear guidelines on how the property should be returned at the end of the tenancy reducing risks.

Set the standard to which your property should be maintained and returned at the end of the tenancy with a comprehensive, detailed inventory report from Assist Inventories.

Assist Inventories offer property inventory services for landlords and agents who require the security of a robust property inventory reports. Please get in touch with a member of our team for more information.