Letting agents could face prosecution or a fine of up to £30,000 if they breach a proposed ban on letting fees.
The tough new measures have been published in a draft bill introduced to parliament today (1 November) with the aim of helping millions of renters by stopping agents from charging costly upfront payments.
Estate agents will face a £5,000 fine for an initial breach of the ban on letting agent fees, and prosecution or a fine of up to £30,000 for a repeat offence within a five-year period.
The action comes after the government found evidence that the level of fees charged by agents is often not clearly or consistently explained, leaving many tenants in the dark about the true costs of renting a property.
As well as boosting transparency, affordability and competition, the measures will prevent agents from double charging both tenants and landlords for the same services.
Other proposals include plans to cap holding deposits at no more than one week’s rent and security deposits at no more than six weeks of rent.
More than nine out of 10 tenants who responded to the government consultation backed the action to ban letting agent fees, with seven out of 10 saying these fees affected their ability to move into a new rented property.
But while renters will no doubt welcome the proposals, concerns have been expressed that agents will respond by passing on the costs to landlords, leaving them with no choice but to raise rents.
In its response to a consultation on the ban, the Residential Landlords Association (RLA) warned that “any ban on fees paid by tenants will be passed back to landlords”, who are already struggling under a higher tax and regulatory burden.
Communities secretary Sajid Javid said: “This government is determined to make sure the housing market works for everyone.
"Tenants should no longer be hit by surprise fees they may struggle to afford and should only be required to pay their rent alongside a refundable deposit.
"We're delivering on our promise to ban letting agent fees, alongside other measures to make renting fairer and increase protection for renters."
Founder and chief executive of eMoov.co.uk Russell Quirk said: "The introduction of this bill brings us a step closer to levelling the playing field between letting agent and tenant and one that is certainly a step in the right direction."
But he also warned the ban could ultimately lead to higher rents, adding: "The only upside is that at least this won't be payable upfront and will go some way in reducing the initial barrier to entering the rental market as a tenant."
RLA chairman Alan Ward welcomed the greater clarity provided by the government and the proposal to cap security deposits at six weeks' rather than one month’s rent.
He said: "Ultimately though, cutting costs for tenants means boosting the supply of homes for rent.
"While we recognise the government’s objectives, this would best be achieved by using the Budget to encourage good landlords to build more homes."
The government has also launched a consultation on making membership of client money protection schemes mandatory for letting and managing agents.
These schemes allow tenants and landlords to be compensated if all or part of their money is not repaid.
simon.allin@ft.com
