By Dermot Mckibbin
Introduction
The Government has at long last introduced the draft Lettings Fees Bill into Parliament. The bill is about to be scrutinised by the House of Commons Select Committee that cover the Department of Communities and Local Government.
The proposals
The bill seeks to abolish letting fees completely and therefore some degree of complexity is to be expected. By virtue of section 1, a landlord must not require a tenant or prospective tenant to make a prohibited payment to the landlord as a condition of grant, renewal or continuance of a tenancy of housing in England. Similar payments or loans to third parties are also prohibited.
Section 2 imposes similar prohibitions on the letting agent. Where any payment breaches sections 1-2, it is not legally enforceable.
Schedule 1 defines payments which are permitted. Rent is a permitted payment. However, there is a long and complicated definition of when a rent payment is not permitted so as to prevent an agent loading fees on to the rent.
The Bill caps tenancy deposits at no more than six weeks’ rent, and caps holding deposits at no more than one week’s rent and requires holding deposits to be returned to tenants. Where the tenancy agreement allows the tenant to be charged for breaking a term of the tenancy agreement, this is allowed.
The enforcement for breaches of sections 1-2 will be by trading standards officers. The burden of proof will be beyond reasonable doubt. The maximum penalty will be up to £5,000 subject to the council’s discretion. Repeat offenders can be fined more.
Criticism
There is nothing in the bill to require lettings agencies to register either with the local authority or any other trade association. This is a major omission as the quality of letting agencies is very variable. In Wales the Labour Government requires all private landlords and lettings agency to register with a government agency and to obtain a licence with compulsory training.
The Government assumes that any obligation in the tenancy agreement that requires the tenant to carry out any obligations will be lawful. This is obviously not the case. There is nothing in the bill to deal with scenarios where the landlord fails to carry out their part of the tenancy agreement.
The Government has ignored the work done by the Office of Fair Trading in outlawing certain contract terms that are contrary to the unfair terms in consumer contracts regulations. This a major error as some agents will seek to recoup prohibited fees by imposing punitive clauses in the tenancy agreement.
It is doubtful that a tenant will co-operate with a local authority’s investigation if they have no security of tenure. Tenants will need expert legal advice to understand the bill. Such advice is in short supply due to cuts in legal aid.
A separate lead enforcement body is to be set up to oversee the enforcement role. This is an error. The government body that has the most contact with the private rented sector is the local authority.
The government is relying on trading standards officer to be the enforcement body. However, a freedom of information based survey found that over 93 % of councils in England had yet to issue a legal notice on lettings agencies for failing to display their fees. This has been the law since 2014. Local authority budgets have also been stretched to breaking point in recent years.
Campaign proposals
Local labour parties should campaign on this issue. The excellent House of Commons Library research briefing on Banning Lettings Fees in England by Wendy Wilson should be compulsory reading.
In Conservative areas, public questions should be tabled at council meetings to expose the failings of the council to enforce the legislation whereby all letting agents are required to display prominently their fees. Constituency parties should conduct surveys of lettings agencies to find out whether they display their fees. The results of the survey could be press-released to the leader of the council.
Labour councils need to copy the excellent work by trading standards officers in Camden and Islington. In Hackney the council has written to all letting agents to ask them to stop charging fees in advance of the bill becoming law.
Local Labour parties need to campaign on private rented housing. Jeremy Corbyn is correct to raise the state of private rented housing as a political issue. The Tories are clearly on the defensive on housing.
Dermot Mckibbin
Beckenham Labour party