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Communities Committee

Stage 1: Rental Fees Bill (pdf)

Published: 26th October 2018

“We believe that this Bill will remove one of the barriers to accessing the private rented sector for the most vulnerable. “We support the Welsh Government taking a legislative approach. We believe that the approach proposed is the most likely to create a fairer market. But we think this law will only work if there are stronger provisions around enforcement with the relevant organisations provided with the resources they need to enforce the rules.”

– Committee Chair, John Griffiths (Lab, Newport East)

The Rental Fees Bill (summary here) intends to ban upfront letting fees and regulate deposits in the private rental sector.

1. The Senedd should support the general principles of the Bill

The Bill was introduced primarily to keep the upfront costs of private renting – which is said to make up around 15% of all housing stock in Wales – under control for prospective tenants. Groups representing landlords didn’t believe it would improve accessibility to the private rental sector and thought the bigger issue was the cost of security deposits.

Others disagreed and thought the barrier was the combination of paying a rent advance, a security deposit and various agency fees. Fees were also said by Citizens Advice to reduce mobility for people who rent privately.

The Committee believed there were a number of areas that needed improvement or further clarification, but AMs should back the general principles of the Bill. A vote on the Bill’s general principles is due to take place in the Senedd later this afternoon (6th November).

2. There’s an expectation that rents will rise slightly

A number of witnesses believed that banning letting fees will result in higher rents, though there was disagreement on how much. Organisations such as Let Down in Wales and Generation Rent actually preferred a small rent increase over upfront fees and one estimate put the potential rent increase at £103-a-year.

The Minister in charge of the Bill – Housing & Regeneration Minister, Rebecca Evans (Lab, Gower) – said there was nothing in the Bill that would “automatically lead” to rent increases, but echoing the comments of witnesses, a small increase in rent might be preferable to upfront fees.

Landlord bodies said that it could put smaller landlords under pressure as rental fees were intended to cover costs.

3. Rent Smart Wales should be given enforcement powers and fines should be higher

Rent Smart Wales was established under the Renting Home Act 2014 to becoming the licensing body for the private rental sector in Wales, covering both landlords and letting agencies.

At the moment, the Bill intends to give individual local authorities enforcement powers, but witnesses were in broad agreement that there needed to be a single lead enforcement body when it came to the Rental Fees Bill. Rent Smart Wales also said it would be a “missed opportunity” if they couldn’t deal with those offences – though having a single enforcement body wasn’t expected to make any significant difference to the Bill’s costs.

The Minister was non-committal and said it was her preference for enforcement to be locally-led. Nevertheless, the Committee recommended that the Bill be amended so Rent Smart Wales has enforcement powers alongside local authorities.

The Committee recommended that fines for breaking the law should be higher – in line with the more “hardline” approach taken in England, which can see fines of up to £30,000 issued.

They also disagreed with having tenants who’ve been mischarged fees having to go through a legal process to recover them, recommending that the Bill be changed so that tenants who’ve been charged illegally will be repaid at the same time as any fines issued to the landlord or agent.

4. Exit fees should be banned too

Some fees will still be allowed under the Bill, including rent itself (obviously) security deposits, holding deposits and default payments.

While there were calls for default payments to be banned, the Committee recommended that they instead be “fair and reasonable”. They also recommended that landlords be allowed to explicitly require tenants to arrange contracts for TV, utilities, pay council tax or make Green Deal payments.

However, the Committee rejected calls from landlord bodies for fees to be allowed for a surrender of tenancy, changing a sharer or for credit checks. They also recommended that only one holding deposit be allowed per property.

The Minister confirmed that exit fees (charged for leaving a tenancy early) are banned under the Bill, though the Committee wanted this to be explicitly included in writing as it was currently unclear.

The Committee also recommended – after receiving evidence from a number of organisations – removing a section which states that landlords and agents don’t have to repay a holding deposit if a prospective tenant has misrepresented their immigration status; there were fears dodgy landlords would deliberately target tenants who they know will fail to meet the criteria. David Melding AM (Con, South Wales Central) and UKIP’s Gareth Bennett disagreed with this recommendation.