In his Autumn Statement today the Chancellor Philip Hammond announced plans to ban letting agent fees in England “as soon as possible” which may be save 4.3 million households hundreds of pounds.
Currently many tenants face charges to draw up tenancy agreements, conduct immigration and credit reference checks in addition to the payment of a non-refundable holding deposit paid before signing up to the deal.
The move comes as numerous reports have indicated that many tenants living in sub-standard housing are discouraged from moving out because of extra fee charges. A report published by the English Housing Survey covering April 2014 to March 2015 found that 69% of tenants living in poor quality homes are discouraged from moving out because of agent fees.
Nonetheless, landlords groups have claimed that banning letting fees will not necessarily reduce rental costs with landlords and letting agents increasing rental values to offset loss of income. However, renters groups assert that the ban will make it easier for tenants to compare the cost of different properties and reduce the incentive for letting agents to replace tenants.
The move is a culmination of greater regulation of the letting market and will move England further in line with Scotland where lettings agency fees to tenants have already been banned. Since 2015 lettings and managing agents in England and Wales have legally been obliged to clearly publicize their fees.
Since the entry into force of the Tenancy Deposit Scheme many landlords and letting agents have devised ways of evading and ignoring deposit protection rules.
One common tactic which renters should be aware of is issuing tenants with a “licence to occupy” in place of an “Assured Shorthold Tenancy”.
A licence gives the right to occupy and is typically used for bed and breakfasts, hotels, holiday lets and some HMOs. Often tenants only discover that a license has been issued when attempting to recover their deposit at the end of their occupation. However, despite being called a license, you may still have an Assured Shorthold Tenancy (AST) in the eyes of the law. In this event it may be possible to use typical AST measures to recoup moneys owed.
Do I have a License or a Tenancy?
A tenancy is created automatically if someone moves in and starts paying rent. Some landlords incorrectly issue licenses, either through inexperience or design to give tenants less rights than they would usually expect with an AST. A tenancy cannot be turned into a license merely by both parties signing a piece of paper headed ‘license agreement.’ A landmark case which defined the requirements for a tenancy as opposed to a license was Street v. Mountford in 1985. This stated that one has a tenancy if one:
pays a rent
occupies the property for a term
enjoys exclusive possession of land / property
These conditions do not apply if one does not pay rent or if the occupier does not enjoy exclusive possession such as in a shared room or if cleaning and meals are provided as in a hotel.
The clearest way to identify the difference between the two [license and Assured Shorthold Tenancy] is exclusivity. If a tenant has exclusive use of at least one room in the property, and that room(s) is specified, this will usually be classed as a Tenancy Agreement. If the property is shared with more than one individual, this is more likely to be a Licence.
I believe I have been incorrectly issued with a license and my landlord has not protected my deposit, what should I do?
It may therefore be possible to claim damages from your landlord if they incorrectly issued you with a licence and failed to protect your deposit. According to current deposit protection rules, your landlord must register your deposit in one of the three government-approved deposit protection schemes within 30 days of the start of your tenancy. The penalty for non-compliance is a fine of between one and three times the deposit amount.
The founder of the Hunters Estate agency and Conservative MP for Thirsk and Malton Kevin Hollinrake has backed a campaign by the Residential Landlords’ Association (RLA) to reduce Capital Gains Tax paid by landlords when selling their rented home to sitting tenants.
The proposal involves an amendment to the Finance Bill currently before Parliament. Currently Clause 72 of the Bill seeks to reduce Capital Gains Tax from 28 per cent to 20 per cent except for the sale of residential property where the rate will remain unchanged.
According to the RLA, Hollinrake is tabling an amendment to the Bill which will extend the tax cut to private landlords selling a rental property to a sitting tenant. “Given the recent attack on the Private Rented Sector by Chancellor George Osborne…more and more landlords will want to exit the market as renting [sic] becomes financially unsustainable for them” the RLA said.
The RLA further purports that 77 per cent of private landlords would consider selling their property to tenants if the tax liability were reduced.
Hollinrake claims that the amendment will support the government’s wider home ownership agenda while at the same time offering landlords a route out of the sector minimizing their financial hit. According to the RLA, the amendment includes safeguards to prevent such a tax change being abused.
Letting agent Foxtons is facing an £80m “class action” over letting agent fees which could see the company forced to pay back hundreds of pounds to current and former tenants.
The case, launched by the social entrepreneurial firm CaseHub, claims that Foxtons’ fees could be illegal under the Unfair Terms in Consumer Contracts Regulations 1999, and its successor the 2015 Consumer Rights Act. CaseHub’s founder, Michael Green, claims that “service charges” such as £420 for administration, £300 for name changes and £165 for checking out a property are vastly inflated. Green states that fees for such services should instead range between £10-£55.
The Foxtons’ case comes at a time when the issue of letting agent fees and regulation has attracted increasing Parliamentary attention. In May the Conservative MP for Lewes, Maria Caulfield, secured an Adjournment Debate in the House of Commons to discuss the Government’s actions in relation to letting agent fee capping.
Miss Caulfield reported research from Seaford and Lewes Citizen’s Advice Bureau which found that letting agent fees can range from £175 to £922. This is in addition to an average of a six-week rent deposit. During the debate Conservative MP Kevin Hollinrake, co-founder of Hunters Estate Agents, argued against fee capping. Hollinrake claimed that agents may choose to decline tenancies to prospective tenants with inferior credit histories or increase rents should fees were scrapped.
Green states that the proposed class action against Foxtons is about extravagant, gratuitous and hidden fees. These include overcharging, double charging landlords and tenants and introducing fees at the last minute.
Foxtons dismisses the claim, saying its fees are “open and transparent” and that tenants have full visibility of charges before renting a property.
Landlords in the UK may soon find it easier to track renters’s private social media content using software developed by a UK startup. The company, Score Assured, uses a program to scan prospective tenants’ social media profiles and private posts to record information such as relationship and family status. Also recorded are key words such as “no money,” “poor” and “staying in” which the company claims may indicate how reliable a tenant may be in maintaining rent payments.
The company’s co-founder, Steve Thornhill, has rejected claims that the program breaches privacy laws saying that the software is more innocent than it appears. “It’s about giving the tenant more opportunity to get the property they want,” he says. “A lot of people now, millennials, for example, don’t have credit scores — so how they can get a property when the answer from the traditional credit score is going to be no?”
Supporters of the program claim that a tenant must consent to a landlord running the program on their social media profiles before it can be used. Thornhill claims that such consent means that the program, Tenant Assured, is no different from a traditional credit check.
Others say that often tenants have no other option than to accept the download of their social media information to secure a property and hence tenants will be forced to accept an invasion of their privacy. Also consumer protection laws regulate credit checks because of their potentially large impact on consumers. Regulators also have recognized that although such checks may technically be “opt in,” they’re effectively not optional for those who don’t have the luxury of only choosing landlords, jobs or loans that don’t require them, or who work in industries or live in areas where such checks are standard practice.
A Renters’ Rights Bill was given a second reading in the House of Lords Yesterday. Under the proposals presented as a Private Member’s Bill by the Liberal Democrat Baroness Grender, local authorities would be required to give tenants access to a database of rogue landlords and property agents. Also included are proposed amendments to the Landlord and Tenants Act 1985 which would abolish a large number of letting agency fees currently paid by a large number of renters in England such as: These include:
inventory check fees
reference check fees
tenancy extension or renewal fee
The Baroness also proposes that persons deemed suitable for inclusion on a database of rogue landlords would preclude one the right of obtaining a HMO (House of Multiple Occupation) license.
Baroness Grender claims that the short-term nature of many modern tenancy agreements, with around one in four renters moving home in 2013-14 makes the abolition of agency fees significant. The Baroness claims that in London, the median anount that a renter must pay before moving is £1,500 with some renters forced to use loans or cut down on food and heating to cover up-front moving costs.
Contributing to the debate was the Conservative Viscount of Younger who commended Baroness Grender for introducing the Bill but expressed the Government’s reservations about the bill. The Viscount claimed that the banning of letting agent fees would not make renting any cheaper for tenants and Tenants would still end up paying through higher rents.
Aside for reservations however due to the the definitions of rogue landlords and letting agents and the best manner of regulating letting agent fees, the Bill enjoyed broad support and is scheduled to be considered by a House of Lords committee later in the year.
The private rental sector in England has the highest proportion of poor property standards of any tenure type according to a research published in Parliament. This finding follows the 2014/15 English Housing Survey which found that 29% of private rented properties would fail the Government’s decent homes standard for social housing, compared to 14% of social housing.
Despite numerous regulations in the private letting sector which govern repairs and maintenance requirements such as the Housing Health and Safety Rating System, a risk-assessment based regulatory model introduced in 2006, there are effectively no minimum property standards for rented housing in England.
The parliamentary report on the state of housing in England follows recent failed attempts to establish minimum housing criteria such as a Private Member’s Bill proposed by Karen Buck, the member of Parliament for Westminster North.
The proposed Fitness for Human Habitation Bill sought to amend the Landlord and Tenant Act 1985 to require that residential rented accommodation be provided and maintained in a state of fitness for human habitation, was adjourned on its second reading debate on 16th October 2015.
The Conservative MP for Lewes, Maria Caulfield, secured an Adjournment Debate in the House of Commons to discuss the Government’s actions in relation to letting agent fee capping.
Miss Caulfield reported that research from Seaford and Lewes Citizen’s Advice Bureaux which found that letting agent fees can range from £175 to £922 in addition to an average of a six-week rent deposit.
Also participating in the debate was Kevin Hollinrake, co-founder of Hunters Estate Agents and the Conservative MP for Thirsk and Malton who added that agents may choose to decline tenancies to prospective tenants with inferior credit histories if fees were scrapped rather than capped.
The Conservative MP for Thirsk and Malton, Kevin Hollinrake also contributed to the debate adding that letting agents rely on fees for their income, which would probably be obtained from higher rents or landlord’s costs if such fees were prohibited.
Letting agent fees are attracting increasing political attention as the housing crisis deepens with reports of many letting agents insisting on six month rotating tenancy agreements against the wishes of many landlords or tenants in order to charge additional contract renewal fees.
The private rented sector in London has grown from 17% of all homes to 26% over the last decade according to a London Housing Committee
However despite the rapid growth in private renting in the capital, the rules governing the sector remain largely unchanged since the 1980s. According to the report which represents the view of the majority of the London housing commitee, the Mayor of London should:
Stimulate the build to let sector by getting government help for landlords competing to develop land;
Set up a London-wide register of landlords to help the boroughs enforce existing legislation and better protect tenants; and
Support London’s low-income renters by lobbying government to review the freeze imposed on Local Housing Allowance levels in London until 2020.
In addition to its consumer protection role, the National Renters Alliance is always open to ideas to present to government. If you have any suggestions to better protect and improve the situation of renting in London and across the rest of the United Kingdom please send us our thoughts.