Why is the Act coming into force?

The Act makes significant changes to the law regulating the supply of goods and services. It aims to make consumer law clearer and easier to understand.

How will it affect me?

The Act will impact on estate and letting agents’ terms and conditions of business. It also introduces brand new regulation for your fees in Sections 83 to 88.  

It’s expected that its main provisions will be brought into force in October 2015. Although, the provisions relating to letting agent fees have already come into force in England (on 27th May 2015).

The previous Government introduced the regulations after research found that around 1 in 5 tenants are dissatisfied with their letting agent. Most complaints concerned letting agency fees.

The Government’s intention was to help increase transparency of fees and promote more competition among both prospective tenants and landlords.

As a letting agent, you now need to prominently display both on and offline information including:

1. Your fees
2. Whether you’re a member of a client money protection scheme
3. Which redress scheme you belong to (if applicable)

What fees do I need to include?

“Fees” are defined as the “fees, charges or penalties” payable to you by a landlord or tenant in respect of letting agency and property management work you’ve done. This includes all work relating to an assured tenancy property or a property that is, has been or is planned to be, let under an assured tenancy.

For a property planned to be let, typical fees might include marketing, viewings, carrying out credit checks, getting references and preparing an inventory. Property management work includes arranging repairs, maintenance and insurance on someone else’s behalf.

The definition will catch all potential charges you may be entitled to levy during the currency of a tenancy. This includes preparing schedules of condition and dealing with other post-tenancy issues, such as arranging for a property to be cleaned or repaired.

The \'relevant\' fees must include VAT and/or other taxes. The nature of the service to which the fee relates to should be set out in full and in a way that is clearly understood by the customer.  

There is no scope for surcharges or hidden fees either, and vague terms like \'administration fees\' are no longer allowed. You must break them down into specific actions and applicable costs.

Where a fee can’t be specified in advance, you must explain and display clearly how it’s calculated. For fees chargeable to a tenant, you must explain whether the fee covers the whole property or is payable by each individual tenant.

You must display the list of fees at all your letting offices where you deal face-to-face with clients or prospective clients, and in a way that is likely to be seen. The list must also be displayed on your company website if you have one.  

There is no requirement to display in the notice information relating to:

1. The rent payable to the landlord
2. Fees you receive from a landlord on behalf of another person

In practical terms, you need to consider what fees a landlord or a tenant would be asked to pay at any time, both before, after and during a tenancy, and clearly display a full list of those fees so there are no surprises. If you already provide details of your fees in a letter, or as part of the tenancy agreement, that’s not going to be enough.

The theory is that this should make it easier for landlords and tenants to shop around and compare the charges of different agents. There’s no attempt to restrict the levels of fees you can impose. So long as they’re transparent you can charge what you like.

Who enforces these new rules?

Local authorities, namely local Trading Standards authorities, will enforce the new duties.

These particular rules do not apply to local authorities or to individual landlords advertising their own properties.

The Department for Communities and Local Government has produced guidance for local authorities for improving the Private Rented Sector and dealing with poor practice. Annex D of that guidance relates specifically to the new duties on letting agents to publicise their fees. You can download this here.

What happens if I breach the rules?

You could face a fine of up to £5000 for a breach of the new rules. Local authorities have the power to impose these penalties.