New tenants charter will highlight good practice on fees

A new tenants’ charter will tackle the subject of letting agent fees.

The charter will lay emphasis on the need for transparency about letting agent fees and ensure prospective tenants know full costs before they sign up to any contract.

The charter, announced by secretary of state Eric Pickles, will be voluntary rather than statutory.

However, it will operate alongside the forthcoming requirement for letting agents to belong to a redress scheme – meaning that agents who have not been clear about fees as per the charter could be investigated by one of the property ombudsmen.

The charter is intended to be a simple guide for tenants, suggesting questions they should ask before entering into agreements, and telling them about sources of help should things go wrong.

Other new measures announced by Pickles include the right of tenants to be able to request longer tenancies.

A new model tenancy agreement, to be developed with the private rented sector, will allow for longer tenancies without changing the existing legal framework of the rental market.

Currently, most buy-to-let lenders insist on AST tenancies of six months to a year. However, the Government will encourage lenders to follow Nationwide, which announced this summer that it will permit tenancies of up to five years.

There would also be several safeguards built into the new model agreement.

These would include a probationary period before landlord and tenant committed to a long-term tenancy; a break clause allowing the landlord to get the property back if they needed to sell it or have it for their own occupation, and also allowing the tenant to leave early; and rent reviews in line with inflation. 

In his announcement, Pickles said the aim was to improve the private rented sector without strangling it with red tape.

Pickles also announced that the new £1bn Build to Rent Fund, which will encourage a new breed of institutional landlords and investors into the market, has already identified 45 potential schemes.

He said that Build to Rent would encourage the supply of new homes for the private rented market, providing tenants with more choice as well as longer tenancies.  

Pickles said: “The private rented market is a vital asset to this country, and plays an important role providing flexible accommodation for those who do not want to buy, or are saving up for a deposit.

“The last thing we want to do is hurt hard-working tenants by increasing costs and strangling the sector with red tape. But families deserve stability for their children, and all tenants deserve a good and transparent service from their landlords and lettings agents.

“Today’s proposals will raise the quality and choice of rental accommodation, root out the cowboys and rogue operators in the sector, and give tenants the confidence to request longer fixed-term, family-friendly tenancies that meet their needs.”

The package of announcements met with a generally warm reception, although Shelter called the proposals toothless.

However, Which? executive director Richard Lloyd said: “We welcome this crackdown on hidden charges in the rental market. People need to know exactly what they are signing up to so that they can more easily shop around. Longer tenancies could also mark the end of unnecessary renewal fees for landlords and tenants.”

The Residential Landlords Association and National Landlords Association both said they welcomed Pickles’ approach.

The RLA said it was pleased there would be no heavy-handed legislation, and the NLA said it agreed there was no need for further legal intervention.

Peter Lawrence of Lawrence Rand added: “Anything that helps make the lettings process simpler and more transparent is to be welcomed and, if it does help remove some of the bad operators in the market then it is to be welcomed.”