The following are simply notes made from reading through the draft legislation. The legislation in full is also attached, along with the explanatory notes. The comments below could form part of any comments you want to make to your own MP and lobbying your own MP is one of the most effective ways of using your influence. PRSP have written back to the select committee call for evidence with some of the comments. This legislation is designed to apply only to England, though for a couple of cases, it might need a bit of clarification.
We would make the following comments:
Page 7/49 It would be interesting to know if guarantors could be charged a fee or if they will be considered working “on behalf of” the tenant. It hinge son the definition of a “relevant person”.
Page 8/49 clause 3. It is noted the Secretary of State and change the permitted fees at a future date, apart from the fact they cannot remove the requirement to pay rent. Though not stated, but a logical extrapolation is that they do have the power to ban taking deposits or holding deposits as these are not protected in the same way as rent. Essentially this will pass a law allowing them to ban all deposits and holding deposits.
Page 12/49 We note that an offence under the Tenant Fees Ban Act will amount to a “banning order offence” so if an agent is found guilty of charging a fee they can be banned from being a letting agent, on top of the financial penalty. Note that accepting the penalty from the local authority (clause 7) without a conviction (Clause 9) does not amount to a banning order offence.
Page 13/49, clause 13. This makes a small change to the Consumer Right requirement to display fees in your office and on your website. It will become a requirement to display fees on “third party websites”, e.g. RightMove etc. If you don’t display fees on the third party website there must be a link “there is a link on that website to a part of the agent’s website where a list of those fees is published.” We would suggest that a link to your home page may not be sufficient as it is defined as “that part” where the fees are listed. A good moto is probably “only one click”.
Page 14/49 clause 14. The Consumer Rights Act 2015 already requires an agent to state, along with the fees, whether or not they are a member of CMP scheme. This change requires them to be a member of a scheme (see 14 (b) (a)) and also the name of that scheme. Though not intended we believe that as drafted this requirement will apply to agents in Wales as well and the wording does not limit it to England.
Page 14/49 clause 15 (3) note that if you do not display fees or CMP membership etc, you can be fined again provided at least 28 days have elapsed and you have not resolved the issue.
Page 15/49 Clause 16. Estate Agency already uses Powys Council as a lead authority for estate agency. They are now planning on following the same idea for letting agents. This might have a positive benefit in that the lead authority might gain enough expertise to really know what they are doing but experience tends to show that if a local authority feel there is someone else dealing with an issue they will not take action. It remains to be seen if this will be the case with this suggestion as the local authority is in a far better place to identify problems in their area. No enforcement, no point in having the law.
Page 17/49 Clause 49(2)(b). Whilst it is fairly obvious why they might consider this clause (can’t say you are working for the tenant), it would appear that it may also impact the relocation agent market. It will not affect companies arranging relocation but might affect individuals and is almost certainly not intended.
Page 17/49 clause 20 (1) “licence to occupy housing”. The definition will mean that resident landlords are caught and cannot charge a set-up fee. “Tenancy” is, interestingly, limited to assured shorthold tenancies and licences to occupy. Therefore if a property is let on an assured non shorthold, fees can be charged. Likewise if the property is let to a company fees can be charged. This will cause issues around displaying fees as advertising as you will not know who the tenant will be until you have advertised and so you will not be able to accurately advertise the fee that will apply. Some agents have used assured non shorthold tenancies to avoid deposit legislation and this now becomes more attractive (though not to say we would recommend it).
Page 19/49 Clause 22. We lobbied for clear transitional provisions after talking to a letting agent who between now and February would collect about a quarter of a million pounds of tenant set up fees for students moving in in the summer. They were right worried about the law coming in in April 2018 and having to refund all the fees without being able to pass any to the landlord. The transitional provisions deal with this and state that if the obligation to pay is “imposed” before the law comes into force then the fee is due. For fees going forward it may be worth starting to use that word in the paperwork “this fee imposed on the 17 November 2017” for example. Schedule 2 (holding deposits) is again defined as only applying to holding deposits “paid after” the schedule comes into force.
Page 20/49. You will see it says the extent include England and Wales apart from certain provisions which apply more widely. When legislation talks about the “extent” it means the geographic are over which the law is true. However, there is another word, application, which defines where the law has any practical effect. So, for example, in clause 2 it only applies to housing in England, so the extent include Wales (the law covers them) but it has not practical effect as this is defined as only for properties in England. This is ignoring there will be agents in Wales who are letting properties in England and the requirements need to be clear. This is particularly true for the issue of stating the name of the CMP scheme to which you belong, clause 14, as it begs the question does this apply across England and Wales (this is how we read the current wording) or only to agents in England, or agents in England or Wales if they are letting property in England. We have sought greater clarity on this point.
Page 22/49 Schedule 1(2). This provision is entirely understandable and it is there to prevent agents making the rent for the first month £1,500 and then £1,000 a month thereafter in order to still get a £500 fee at the set-up. 1(5) deals with the situation where they pay 6 months’ rent up front and then pay monthly. This is perfectly acceptable. 1(6) is more difficult and we feel could be open to abuse. It is presumably there to deal with the possibility of an RPI related rent increase clause going negative and the rent falling. However, if you wrote in the tenancy agreement that the rent for the first month was £1,500 and then it would be £1,000 from month two, the change would be “pursuant to a term in the tenancy agreement which provides for variation of the rent under the tenancy”. We recommend this is limited to changes at least 6 or 12 months after commencement (similar to 1(8)).
Page 23/49 Schedule 1 clause 2(3) Note the limit for a tenancy deposit of 6 weeks rent. The six weeks is not quite truly accurate as it presumes 52 weeks in a year.
Page 23/49 Schedule 1 clause 3(3). This limits holding deposits to one weeks rent (same calculation based on 52 weeks in a year).
Page 23/49 Schedule 1 clause 4. This deals with tenant default and acknowledges that if the tenant defaults they could have to pay the price. We would not recommend putting in a surrender charge as having such a clause could be interpreted to imply the tenant is “allowed” to surrender, therefore possibly not even being a default anyway. In fact as this fee can be negotiated and it is not a fee for the “grant, renewal or continuation” of a tenancy so it is not banned anyway. Others like interest on late paid rent, wasted call outs etc will all need to be clearly specified in the tenancy as only those listed in the agreement, and based on default, will be able to be charged.
Page 24/49 Schedule 2. This deals with holding deposits. There is a default 15 day period to hold a holding deposit. This time can be varied by agreement in writing between landlord and tenant. This will be important for things like student lets where there can be long delays between the agreement to let and the start of the tenancy. If there is no specific agreement in writing to make it longer than 15 days then the landlord must repay the holding deposit (clause (3)(c))
Page 24/49 Schedule 2 clause 5, 6 and 7 deal with the deposit goig forward. It does not have to be refunded if used as deposit or rent, for example. It clarifies that if used at the tenancy deposit this date it is considered to have been received for the purpose is the day the tenancy starts. Sadly it fails to clarify the application of the Housing Act 2004 whilst it is a holding deposit, though we have pressed for greater clarity.
24/49 Schedule 2 clause 7. This says you do not have to refund the holding deposit if they fail Immigration Act test, unless it was evident they would fail (7(b)). However it fails to clarify the situation if one of three fails or similar situations.
25/49 Schedule 2 clause 8, reasonably they say if the tenant provides false information then they are not entitled to their holding deposit back. Note it does not say that if they provide only truthful information but don’t meet referencing standard what will happen. The logical presumption is that that the holding deposit would have to be refunded.
25/49 Schedule 2 clause 10. It is not clear if “all reasonable steps” would mean a tenant whose sale fell through would be committed. Reasonable is a popular but very subjective word.
25/49 Schedule 3 clause 2(2) The local authority must serve notice within 6 months of becoming aware of the evidence of a breach, or six months of the end of the breach if it is an ongoing breach (clause 2(3))).
26/49 Schedule 3 clause 3 gives a 28 day right to make written representations about the proposed financial penalty. Clause 4 give 28 days for the payment of the penalty, the 28 days do not start as long as it is being appealed.
Page 40/49 para 81 and 82 you will notice that on conviction there is an unlimited fine available. Para 84 clarifies that any ban under the Housing and Planning Act would be for at least a year.
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