The government has recently confirmed that under the new Tenant Fees Bill, there will be a five week cap on tenant’s deposits, down from the maximum amount of six weeks for rentals under £50,000. The maximum six week deposit limit will still apply for rentals over £50,000, as revealed recently by The Sun.
The controversial Tenant Fees Bill that was announced last autumn by Philip Hammond, The Chancellor, aims to ban the fees and other payments that tenants have to pay before they move into new rented accommodation.
This Tenant Fees Bill is limited to England, as Welsh letting agents and landlords are still eligible to pass these fees on to their tenants for the foreseeable future. Similar fees have also been banned in Scotland, and therefore isn’t covered in this bill.
These fees have been blamed for the current high costs of renting a home in England, which has been putting cash-strapped renters under severe financial strain.
As the legislation is at present being considered at the House of Lords, it is subject to change and many letting agents and private landlords are concerned about how this new bill will ultimately affect their bottom line and annual rental yields. The Residential Landlords Association (RLA) has advised their members that they should start preparing for the financial impact of this bill now, as it is very likely to get passed.
The recent announcement concerning the new Tenant Fees Bill has been hotly debated by ministers, including Philip Hammond, who is himself a landlord and earns more than £10,000 through his property investments. Ultimately, the Cabinet won the battle for the inclusion of the five week cap on tenant’s deposits to be included in the new bill, as The Sun revealed.
The reduction to the maximum amount of tenant’s deposits from six to five weeks for some residential properties was finally agreed on by the Cabinet. James Brokenshire, Communities Secretary, commented: “Everyone deserves a home to call their own. Yet for some renters, moving to a new house can be difficult due to high upfront costs and letting fees. This is unacceptable.
“I want to see a housing market that truly works for everyone and one which provides a better deal for renters.
“Landlords and agents will not be able to write lots of different default fees into a tenancy contract and tenants cannot be charged hundreds of pounds for a damaged item that actually only costs a few pounds to replace.”
This latest decision regarding the Tenant Fees Bill has been seen as a big win for English tenants in the private rented sector, who currently make up over a fifth of households.
However, the RLA has said that a six week cap is the minimum acceptable amount for some private landlords and a reduction to five weeks could force many to leave the property market completely. David Smith, policy director for the RLA, commented: “If this is true, landlords will feel badly let down by a government which says it wants to support good landlords.
“The government had accepted that a cap of six weeks was the minimum many landlords required. This is needed to address the problem of tenants who fail to pay the last month’s rent and leave a property damaged.
“Ministers claim that they want to cut the cost of renting, yet this is another measure the government is taking that will further cut the number of landlords and properties available as demand continues to rise, so actually driving rents up.”
Currently, the Tenant Fees Bill is making its way through the House of Lords and is nearing the end of consideration, after being passed by the House of Commons.