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Tenant Fees Bill to Come into Force on 1st June 2019

Published On: January 16, 2019 at 10:57 am

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Categories: Law News,Tenant Fees Ban

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The Tenant Fees Bill will come into force on 1st June 2019 for all tenancies signed on or after that date, Lord Bourne of Aberystwyth announced at the third reading of the Bill in the House of Lords yesterday.

The third and final stage of the Bill’s passage through Parliament comes after controversial amendments in the report stage, which lowered the cap on security deposits from six weeks to five weeks’ rent on properties earning an annual rent of less than £50,000. This will likely affect some tenants’ abilities to find a home, especially if they have pets or poor credit history, warns the National Landlords Association (NLA).

In regard to contractual damages, Lord Bourne also provided further reassurance to the House, arguing that there is plenty of case law in place that already deals with damages, which will ensure that they are not used as a back door to default fees.

The Ministry of Housing, Communities and Local Government states: “We believe these amendments strike a fair balance between improving affordability for tenants, whilst ensuring that landlords and agents have the financial security they need.”

Tenant Fees Bill to Come into Force on 1st June 2019

Key points of the Bill include:

  • Default fees will be limited to charges for replacement keys or a respective security device and late rent payments only
  • Holding deposits will be capped at no more than one week’s rent, applying to a maximum of one property only
  • A civil offence with a fine of £5,000 for a first offence will be created, alongside civil penalties of up to £30,000
  • The Consumer Rights Act 2015 will be amended to specify that the letting agent transparency requirements should apply to property portals, such as Rightmove and Zoopla
  • Local authorities will be able to retain the money raised through financial penalties, with this money reserved for future local housing enforcement

Alongside rent and deposits, landlords and letting agents will only be permitted to charge tenants fees associated with:

  • A change or early termination of a tenancy, when requested by the tenant
  • Utilities, communication services and Council Tax
  • Payments arising from a default by the tenant, such as replacing lost keys

Now that the Bill has left the House of Lords, it will return to the House of Commons, after which it will receive royal assent and become law.

David Cox, the Chief Executive of ARLA Propertymark (the Association of Residential Letting Agents), comments on the news: “With the Tenant Fees Bill completing its passage through the House of Lords this afternoon, it appears the tenant fees ban will come into force on 1st June 2019; subject to Parliamentary scrutiny in the House of Commons.

“This now gives agents the legal certainty they need to prepare for a post-tenant fees ban world. To learn about the intricacies of the legislation, we encourage agents to come to our regional meetings over the next few weeks and, of course, our annual conference, where ARLA Propertymark will be doing everything it can to help agents plan and prepare for the introduction of the Bill.”

Jon Notley, the CEO of Zero Deposit, also says: “The passing of the Tenant Fees Bill is a watershed moment in the UK’s rental economy, but one that brings with it a sense of both optimism and caution. On the one hand, we welcome any proposed changes to legislation that enable tenants to move more freely – improving rental affordability is both clear and necessary, while the new regulations should improve practices and standards across the board.

“However, it is vital these changes do not overexpose landlords to risk or unnecessarily burden agencies with time-consuming admin that could be better invested elsewhere. The barometer of the success of this Bill will be a rental market that works for everyone.”

Theresa May Defeat is “Real Blow to the UK Real Estate Sector”

Published On: January 16, 2019 at 10:30 am

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Theresa May’s Brexit deal defeat in Parliament last night is a “real blow to the UK real estate sector”, according to industry experts.

The Prime Minister’s Brexit deal was rejected by 230 votes – the largest defeat for a sitting government in history.

MPs voted by 432 votes to 202 to reject the deal yesterday (15th January 2019), which set out the terms of Britain’s exit from the EU on 29th March 2019.

The Labour Party leader, Jeremy Corbyn, has now tabled a vote of no confidence in the Government, which could trigger a general election. The vote is expected at around 7pm tonight (Wednesday 16th January 2019).

The defeat is a huge blow for May, who has spent more than two years creating a deal with the EU.

The plan was aimed at bringing about an orderly departure from the EU and setting up a 21-month transition period to negotiate a free trade deal.

The vote was originally due to take place in December, but was delayed by May.

The UK is still on course to leave the EU on 29th March, but the defeat throws the manner of that exit, and the timing of it, into further doubt.

MPs who want either another referendum, a softer version of the Brexit deal proposed by May, to stop Brexit altogether, or to leave without a deal will ramp up their efforts to get what they want, as the Prime Minister offered to listen to their arguments.

In ordinary times, such a crushing defeat on a key piece of legislation would be followed by a resignation by the prime minister. However, May signalled her intention to carry on in a statement immediately after the vote.

“The House has spoken and this Government will listen,” she said.

MPs are set to debate Labour’s no confidence motion for around six hours following Prime Minister’s Questions today at 12pm.

Corbyn said that this would allow the House of Commons to “give its verdict on the sheer incompetence of this Government”.

Theresa May Defeat is “Real Blow to the UK Real Estate Sector”

In her statement to MPs, May said that she planned to return to the House next Monday (21st January 2019) with an alternative plan, if she survives the confidence vote.

She said that she would explore any ideas from cross-party talks with the EU, but she remained committed to delivering on the result of the 2016 EU referendum.

However, the European Commission President, Jean-Claude Juncker, said that the risk of a disorderly Brexit had increased as a result of yesterday’s defeat.

He said that the agreement was “the only way to ensure an orderly withdrawal”, and that he and the President of the European Council, Donald Tusk, had “demonstrated goodwill”, with additional clarifications this week to put MPs’ minds at rest.

“I urge the United Kingdom to clarify its intentions as soon as possible,” he said. “Time is almost up.”

Tusk said that he regretted the outcome of the vote, and later tweeted: “Who will finally have the courage to say what the only positive solution is?”

Mario Berti, the CEO of lender Octopus Property, believes: “Whilst forecast, the size of the defeat is a real blow to the UK real estate sector. Whilst a lot of the uncertainty caused by Brexit has been priced into the property market, this result is likely to lead to even more reluctance amongst real estate developers and investors to move forward with their UK real estate strategies, which will negatively impact the whole sector.”  

Guy Harrington, the CEO of specialist property lender Glenhawk, is pleased with the result: “This outcome is certainly better than the deal that was on offer, that’s for sure. The sooner it is taken off the table, the better. Hopefully, any further negotiations with the EU will now be delayed, and, ultimately, Brexit cancelled.”

The Total Value of the UK’s Housing Stock Reaches £7.29tn

Published On: January 16, 2019 at 9:58 am

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The total value of the UK’s housing stock reached a record high of £7.29 trillion in 2018, according to a new report from Savills.

Last year, the total value of UK housing stock increased by £190.3 billion, led by gains in regional property markets.

London accounted for 24.3% of UK housing value, compared with a fifth a decade ago, the study shows. This comes despite a 1.5% decline in the value of London’s residential property stock in 2018 – the first decrease since 2009.

London’s housing stock was worth £1.77 trillion last year – more than four times the combined value of all of the homes in Birmingham, Manchester, Edinburgh, Glasgow, Cardiff, Bristol, Liverpool and Sheffield.

Lawrence Bowles, a Residential Research Analyst at Savills, says: “Our analysis demonstrates the scale of the housing market, and underlines the importance of housing to the economies of London and the UK as a whole, both as an asset class and store of private wealth.”

Across the UK as a whole, capital growth added £138 billion in total in 2018, some 72% of total gains, equivalent to growth of £4,800 per home, with new housing development making its highest ever contribution to total gains, at 28%, which Savills says highlights the Government’s focus on building more new homes.

In percentage terms, around the UK, Wales showed the greatest gains in the value of its housing stock in 2018, with a 6.3% increase adding £13.4 billion.

The East Midlands and West Midlands followed closely behind, at 6.2% and 6.1% respectively.

In cash terms, the value of stock in the South East saw the greatest rise across the UK last year, with £29.9 billion added, on the back of 2.2% growth.

Bowles comments: “Once again, we see that wealth concentrated in ever fewer, older hands, to the extent that the UK’s over-50s hold a quarter of all UK homeowner equity, while the over-65s in London and the south of England alone account for over three-quarters of the total.

“At the same time, as affordability becomes more stretched, younger households are having to put off buying their first home until later in life. It’s great that we’re seeing more housing delivery, but development will have to make up a much higher proportion of new housing value if we are to come anywhere need building the homes this country needs.”

The total value of the UK’s housing stock has been broken down by region for 2018, with the change in percentage and cash terms on an annual basis:

RegionTotal value Percentage
change		 Change in
cash terms
London £1.77tn -1.5%+£26.2bn
South East £1.39tn +2.2% +£29.9bn
East of England £810.5bn +3.0% +£23.5bn
South West £670.4bn +4.4% +£28.0bn
North West £529.3bn +5.1% +£25.5bn
West Midlands £468.2bn +6.1% +£26.9bn
Scotland £400.7bn +5.3% +£20.3bn
East Midlands £389.3bn +6.2% +£22.6bn
Yorkshire and the
Humber 		£382.0bn +4.6% +£16.8bn
Wales £226.1bn +6.3% +£13.4bn
North East £152.7bn +2.7% +£4.0bn
Northern Ireland £100.7bn +6.0% +£5.7bn

£2.4m of Extra Funding for Councils to Tackle Rogue Landlords

Published On: January 16, 2019 at 9:04 am

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Almost £2.4m of extra funding will be made available to more than 50 councils across the country to help them tackle rogue landlords, the Minister for Housing and Homelessness, Heather Wheeler MP, has announced.

The Government acknowledges that the vast majority of landlords provide good homes for their tenants, but it hopes that the extra funding will enable local authorities to step up action against the small minority who continue to flout the law and force vulnerable renters, such as young families, to live in unsuitable or unsafe housing.

Various councils will benefit from the extra funding, including Walsall, which will look to improve cross-agency enforcement work, including the innovative use of drones and thermal mapping to identify potential problem properties.

Lancaster plans to create a training programme for existing enforcement staff across the Lancashire region.

Meanwhile, the Greater London Authority (GLA) and Greater Manchester Combined Authority (GMCA) have been allocated over £330,000 between them to conduct coordinated work to tackle rogue landlords who operate across multiple local authorities in their regions.

Wheeler insists: “Everyone has the right to live in a home that is safe and secure, and it is vital we crack down on the small minority of landlords who are not giving their tenants this security.

“This extra funding will further boost councils’ ability to root out rogue landlords and ensure that poor-quality homes in the area are improved, making the housing market fairer for everyone.”

The Government has already given local authorities stronger powers to tackle criminal landlords, ranging from hefty fines to banning orders for the worst offenders.

The extra funding will be used to support a range of projects that councils believe will help them to ramp up action against criminal landlords.

Councils may also decide to support tenants to take action against poor living standards through rent repayment orders, or develop digital solutions, helping officers to report back and make decisions quicker.

Councils that receive funding will be encouraged to share best practice and examples of innovative approaches, to help improve enforcement in other areas.

Councillor Judith Blake, the Housing Spokesperson for the Local Government Association, says: “The vast majority of landlords are responsible and provide decent housing for their tenants, however, the reputations of that majority are being tarnished by the small minority of landlords who exploit loopholes with no regard to their responsibilities.

“Councils want to support a good quality local private rented offer in their communities, but can be held back by significant funding pressures and uncertainty. It is therefore good that the Government has announced a funding boost for councils, to help ensure the small minority of rogue landlords improve standards.”

She adds: “We ask that the Government now follows this announcement by granting more freedom for councils to establish local licensing schemes.”

Letting Agents Could Unknowingly Break the Law after Tenant Fees Ban

Published On: January 15, 2019 at 10:20 am

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Letting agents in England could unknowingly break the law after the tenant fees ban comes into force, due to a possible flaw that has been found by lawyers.

The lawyers were helping a tenant referencing company review its terms and conditions when they found the potential flaw.

The legal experts are warning that letting agents could be caught out by using other industry services as part of their lettings processes, for example, repairs reporting systems and inventory firms.

Tony Williams, the Managing Director of UKtenantdata, says: “Reviewing our terms on an annual basis is standard practice for our company and, with the tenant fee ban on the horizon, it made sense to identify changes that may be required.

“Our lawyers identified an issue that could place every single letting agent in England in a position where they are unknowingly breaking the law.”

He explains: “The current Bill states that an agent cannot charge a tenant a fee, nor force an applicant to contract with a third party.

“However, the agent would still be in breach of the proposed legislation, because the applicant would still have to agree to our terms pre-application and, therefore, would be contracting with us.”

Williams continues: “So, in short, this would prevent an agent from performing any due diligence checks on tenants.

“If the Bill goes through in its current form, this will create a major issue for agencies.”

The Bill is set to have its third reading in the House of Lords today (15th January 2019).

The Bill states:

“Prohibitions applying to letting agents

“(1) A letting agent must not require a relevant person to make a prohibited payment to the letting agent in connection with a tenancy of housing in England.

“(2) A letting agent must not require a relevant person to make a prohibited payment to a third party in connection with a tenancy of housing in England.

“(3) A letting agent must not require a relevant person to enter into a contract with the agent or a third party in connection with a tenancy of housing in England if the contract is –

(a) a contract for the provision of a service, or

(b) a contract of insurance.”

Letting Agents Could Unknowingly Break the Law after Tenant Fees Ban

Williams says that one point in the Bill is clear: “As an agent, you simply can’t take any money from the tenant if it’s connected to the grant of a tenancy. That is clear.

“Again, point two is clear.”

However, he says that it’s point three that is problematic.

Either the letting agent or landlord will have absorbed the cost of the due diligence process after the ban comes in, so that there are no cost implications for either the prospective tenant or guarantor.

However, it is what happens next that could cause difficulties.

Williams explains: “The applicant receives their application link, enters the application area and, before proceeding, agrees to our terms and conditions.

“Now, believe it or not, the applicant has just contracted with us (the third party) and the agent has broken the law. It really is that simple.”

He believes that other providers will also be affected.

He says: “The Government’s proposed legislation doesn’t just affect the applicant due diligence process; it will knock on to other areas of the industry where an agent outsources to third party providers where there is no cost involved to the tenant.

“These services could include inventory providers, who require the tenant to access their platform to view the property inventory and post back comments, or where agents have property issue reporting systems in place as part of their process.”

Williams points out that contracts are created when they require the tenant to agree to the third party terms.

He believes: “To both myself and our lawyers, it looks like the Government hasn’t thought this through. Looking at the legislation now, it really is glaringly obvious that this is a potential issue and, frankly, I can’t understand why this hasn’t been picked up previously.

“This really is an area of concern and will potentially cost letting agents thousands in fines.”

We will continue to keep you up to date with developments to the tenant fee ban on our dedicated page: https://www.landlordnews.co.uk/category/tenant-fees-ban/

London Tenants Could be £1,800 Better Off Due to Brexit

Published On: January 15, 2019 at 10:00 am

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London tenants could be £1,806 better off since the UK’s vote to leave the EU in June 2016, according to the latest Rental Index from Landbay, which is powered by MIAC.

Using a conservative projection, rent price growth in London is now 2.84% lower than expected back in June 2016, but this could be as high as 4.15%. This higher estimate would leave London tenants with an extra £1,806, due to subdued rent prices, or £1,218 for the mid-point calculation.

The capital’s property market, which has arguably suffered disproportionately from uncertainty since the EU referendum, saw average rent price growth drop from 1.26% in June 2016 to a low of -0.33% in June 2017, before starting a slow recovery in February 2018 (+0.05%), up to 0.58% in December last year.

The rest of the UK has largely stayed in line with expectations for growth, with the decline in rent price inflation being confined to London.

The average UK rent price rose by 0.96% in the year to December, Landbay reports. Nationally, growth continues to be weighed down by slower inflation in London on otherwise resilient increases in the rest of the UK (1.16% excluding the capital).

Rent prices in Wales (1.57%) and Scotland (1.48%) were growing more than 55% faster than the rest of the UK, and almost twice the rate of growth for Northern Ireland (0.75%).

On a regional level, rent price growth in the East Midlands (2.19%), West Midlands (1.48%), and Yorkshire and the Humber (1.40%) continues to lead the way, while growth in the North East (0.01%) continues its downward trend towards falling rents.

John Goodall, the CEO and Founder of Landbay, says: “It’s hard to ignore the impact that the vote to leave the EU has had on property market in London. While tenants are better off, without necessarily realising it, uncertainty in the market has caused a conundrum for landlords.

“Many landlords will have been looking to offset the Government’s punitive tax regime by raising rents, however, the uncertainty surrounding Brexit has forced the vast majority to forfeit this to maintain a steady income.”

He believes: “Employment and immigration are the two main concerns for the housing market when considering Brexit. While nobody is any clearer about Britain’s future relationship with the EU, it’s clear the impact of a no-deal Brexit would be significant for the UK economy and property market.”

The findings arrive as MPs prepare to vote on Theresa May’s Brexit deal today.

Another study claims that UK rents are expected to increase by an average of 11.4% by 2024.