Ban on tenants’ fees announced in Queen’s Speech to disappointment of lettings industry

Prime Minister, Theresa May arrives in the House of Lords to hear Her Majesty The Queen present the government's Queen's Speech at the Palace of Westminster in London. (Image: PA Wire/PA Images)

New legislation to ban landlords and agents from charging tenants’ fees has been proposed in the Queen’s Speech today.

The Draft Tenants’ Fees Ban Bill is concerned with “banning landlords and agents from requiring tenants to pay letting fees as a condition of their tenancy”.

The move was to be expected, following the announcement of a potential ban in the Autumn Statement last year.

The consultation period, which closed on June 2 this month, claimed that the ban would “recognise the stronger market position of landlords” by giving them scope to shop around.

In turn the ban would “sharpen and increase letting agents’ incentives to compete for landlords’ business, resulting in a better and more transparent service.”

Tenants would benefit from the removal of the fees, which often run to hundreds of pounds.

It would also make comparing rental costs easier and make moving between properties less financially draining.

The draft Bill goes further than the consultation did by suggesting that tenants will be able to recover unlawfully charged fees.

It is not clear yet whether this will apply retrospectively to fees charged before the ban comes into effect, or if it pertains to charges made that are already illegal.

Lettings agents are required by law to be transparent about their fees and display them prominently.

David Cox, chief executive of ARLA Propertymark, expressed his disappointment at the news.

“It’s unlikely the Government had enough time to analyse all of the responses from the consultation, as it only closed 12 working days ago,” he said.

“It appears they had already made their decision and therefore the consultation was no more than a ‘tick box’ exercise and they haven’t appropriately taken the industry’s views into account.”

Research commissioned by ARLA predicted the ban would result in the loss of £200 million in turnover for lettings agents, resulting in the loss of 4,000 jobs.

They predict that the cost to landlords will be £300 million, a cost that would be passed on to tenants to the tune of £103 per tenant per year.

Landlords have already had a tough year, with the introduction of a 3 per cent surcharge for stamp duty on second homes last April.

This April new rules were introduced that will see landlords gradually taxed on their income rather than their profit, preventing them from offsetting their mortgages.

Rents have also been falling in Camden due to a combination of an oversupply of build-to-rent, suppressed demand, and an increase in the number of accidental landlords struggling to sell their property due to stamp duty.

Many buy-to-let landlords are turning to the north in search of better yields, or bowing out of the market altogether, freeing up more affordable homes for first time buyers.

With sales of prime property in London proving sluggish, many estate agencies are increasingly relying on profits from their lettings business.

Robert Nichols, managing director of London lettings agency Portico commented:

“While the ban will come as welcome news to renters, the fees allow landlords and agents to carry out a series of vigorous checks on prospective tenants before they let the property.

“Ultimately these costs have to be paid be somebody, and they’re likely to fall on the landlord.”

He added: “I suspect most landlords will end up increasing rents to recover these extra costs, meaning the ban will be simply moving costs around rather than reducing them.”

The Bill will be discussed next parliamentary term.

Legislation that rules in favour of tenants has a hard time getting through parliament.

Last year an amendment to the Government’s new Housing and Planning Bill that would have required homes to be ‘fit for human habitation’ was voted down by 312 votes to 219.

71 of the Conservative MPs who voted against the amendment were landlords themselves.