Banning fees imposed on tenants by landlords and lettings agents in the private rented sector has the potential to save renters hundreds of pounds but the proposed legislation could be improved to make the market both fairer and more transparent, the Housing, Communities and Local Government Committee concludes.
The Committee was asked by the Secretary of State to undertake pre-legislative scrutiny of the draft Bill ahead of its proposed passage through Parliament.
The draft Bill proposed prohibiting all payments with the exception of rent, security deposits of up to six weeks' rent, holding deposits of up to one week's rent, and default fees.
The Committee's report on the Government's draft Tenant Fees Bill welcomes the aims of the proposals but recommends the maximum amount that can be charged as a security deposit be lowered from the proposed six weeks' worth of rent and calls for more funding for enforcement.
Among the Committee' s recommendations are:
- Security deposits should be capped at the equivalent of five weeks’ rent in recognition that finding six weeks’ worth of rent can cause financial difficulties for tenants.
- Landlords should not be able to retain the full holding deposit if a tenant fails a reference check despite providing accurate information.
- Default fees are open to abuse so the type and amount of default fee needs to be better regulated
- Additional funding should be made available to local authorities to enforce the legislation.
- Impact Assessments should be published alongside every draft Bill
Potential to save tenants hundreds of pounds
Clive Betts MP, Chair of the Housing, Communities and Local Government Committee, said:
"With more and more people living in the private rented sector, this legislation has the potential to make a difference to millions of people by cracking down on unfair fees and saving tenants hundreds of pounds.
We believe however that there are clear improvements that could be made to the Bill that would ensure it has a much better chance of delivering on its aim of making renting fairer and easier.
Moving home is already an expensive time and many people struggle to find large sums of money at the start of their tenancies to put down as a deposit.
Lowering the cap from six weeks' worth of rent to five will help make the private rented sector much more affordable, while also keeping protection for landlords from rogue tenants.
We also had concerns about how the law will be enforced. Funding enforcement through the retention of fines gives local authorities a perverse disincentive to proactively engage with lettings agents and landlords.
If councils are to be given this extra enforcement responsibility, they must either be given extra resources or the maximum amount of civil penalty needs to be increased."
Greater clarity needed
The report concluded that it was unclear whether fees could be charged at the end of a tenancy agreement and the Committee welcomes the Government's intention to clarify that these fees will be banned.
The Committee is also calling for greater clarity on what constitutes a reasonable default fee, a legitimate cost to the landlord that would be permitted under the legislation.
The Government estimates that the average household in the private rented sector will benefit by between £18 and £50 a year from the reforms, but the Committee heard that tenants could benefit by much more given renters paying an average of £200 to £300 per tenancy.