The Lowdown On The Letting Agent Fees Ban | Vesta Property

The Lowdown On The Lettings Agent Fees Ban

May 30, 2019

Bye bye lettings agent fees

This year, June marks the start of more than just the British summer, it’s also when the lettings agent fees ban will come into effect. 

The proposal to ban tenant fees came after evidence emerged that some estate agents were routinely overcharging tenants – charging renters for simple procedures such as administration, copy-and-paste edited tenancy agreements and credit checks. 

 While some checks help to screen out tenants that may make unreliable occupants, some lettings companies add unjustified fees on top of these costs, even charging landlords and tenants for the same procedures! This ban aims to increase the protection of tenants (and landlords) from this type of exploitation. 

When will lettings agent fees be banned?

Like many things on the British government’s agenda, the plan to limit charges that landlords and estate agents can levy on tenants has been a little delayed. It was originally supposed to be enshrined in law two years ago. But as they say, better late than never. The start date for the letting agent fees ban is now the 1st June 2019. 

The good news

The new law will ban many of the most common charges tenants have previously been required to pay in the lead up to securing a tenancy agreement. This includes fees for:

  • Guarantor forms
  • Admin and processing charges
  • Credit checks
  • Inventories
  • Referencing
  • Professional cleaning
  • Gardening services

However, justified fees are still in place to protect landlords and their properties. Lettings agents and landlords can still charge occupants for late or missed rent and for losing their keys. Holding deposits, security deposits, and charges for defaulting on the contract are also exempt from the ban. However, the remaining fees have restrictions in place to prevent unreasonable increases (a potential retaliation for the lettings fee ban). Landlords and agents will have to provide evidence in writing of how much these charges cost to prevent them overcharging tenants.

Have you seen my keys?

For the loss of keys, property managers and estate agents have to evidence the cost of replacement in writing with receipts to ensure that they only charge a reasonable amount for a new set. While for late rent payments, they’re only allowed to charge 3% above the Bank of England base rate in interest from the date that the payment is missed, and they cannot charge for sending reminder letters.

What about deposits?

Likewise, deposits will be brought back down to reasonable amounts. Up to now, the average security deposit in England and Wales for renters has come to around £1,110. While security deposits are traditionally the equivalent of one month’s rent, more than 40% ofrenters have been asked to pay more. Although not required by law, security deposits provide a financial safety net for landlords and agents if a tenant causes damage to the property or does not pay their rent on time. But after the Tenant Fees Act is implemented, security deposits will be capped by law to the equivalent of five weeks' rent. At the same time, holding deposits will be limited to one week’s rent and must be repaid in full if the tenancy does not go ahead, such as if a landlord backs out. According to government analysis, this means that renters will save on average £300 every time they move home.

If a landlord or lettings agent breaches the letting fees bill, this will be classed as a civil offence, and culprits could see themselves being issued a fine of £5,000, with civil penalties going up to £30,000. Local authorities will be able to use the money generated from financially penalising rogue agents and landlords for future local housing enforcement. 


Some tenants may be wandering “so, what’s the catch?”. After all, there will be a fair share of tenants who were enticed by too-good-to-be-true renting deals, only to be caught out by a long list of ‘admin’ fees which quickly bumped up the price of moving to a new place. Well, the letting agent fees ban is no different. One of the drawbacks is that the new restrictions will only apply to tenancy agreements signed after the start of June. For renters already tied into contracts, tenant fees will continue for a further 12 months. But luckily, after this 12-month timeframe, the ban will apply to all pre-existing tenancies and any clauses in them that charge fees will become void. 

Also, landlords and agents will still be allowed to charge small sums if an occupant requests a change in the tenancy, such as swapping tenants. But this is limited to a £50 fee for the costs incurred and must evidence any other costs in writing. Likewise, if you’ve requested to opt-out of your tenancy early, your landlord or agent may charge fees equivalent to the loss incurred. As processing charges for procedures like referencing and tenancy drafting are prohibited under the ban, landlords and estate agents can only charge for the equivalent of the rent lost due to the unforeseen void period. This protects landlords from loss of income but prevents tenants from being overcharged. 

Finding revenue elsewhere

Many of the offending lettings fees were introduced over a decade ago during the aftermath of the financial crash by struggling agents looking to increase their revenue. Now, many letting agents have become dependent on this regular income from the fees they charge, so adjusting their revenue stream will be a difficult change. There are three options for their survival – take the hit, put up rents or charge landlords more. This could jeopardise many agents’ position in an already saturated and highly competitive market. 

Landlords and property managers may start to turn away from traditional lettings agent relationships to avoid the growing costs and red tape. Instead, the benefits of managing their own properties becomes increasingly attractive. 

  • Firstly, it’s never been easier to invest in multiple rental properties online using digital property management technology
  • Secondly, managing your own properties means you avoid lettings agent fees altogether, keeping costs to an absolute minimum.

Tenant mobility

There will undoubtedly be a significant shift in the renting industry as landlords adjust to these changes. A potential impact of the letting agents fees ban is an increase in tenant changeovers and potential void periods. It wouldn’t be surprising to see many renters ending their tenancy agreements before June so they can shop around for a new place without the worry of paying any estate agent fees.

On one hand, it’s great that tenants have increased mobility when it comes to moving properties and shopping around the market without the burden of expensive letting fees. However, the mobility could become a source of uncertainty for landlords by making it more likely that their tenants will choose to move onto a more attractive property or service if theirs is not up to scratch. This could lead to properties going unoccupied for extended periods as renters take full advantage of their increased protection and flexibility.

Standing out

On a positive note, this makes it even more important for landlords and property managers to offer properties that are well managed and in excellent condition. Otherwise, they run the risk of more void periods. Letting agents and landlords should also prepare for the market to go quiet as tenants hold out for after the start of June. Even landlords who don’t charge fees may be affected – if you’re used to having no difficulties when it comes to finding new tenants, you might be in for a shock. 

Tenants can take advantage of their new mobility from the reduced cost of moving. These transient tenants will be in a more favourable position to demand well-maintained properties and management from their landlords. This means that those tenants who do choose to stay in a home for longer are increasingly valuable to rental property investors. Tenanted properties with a reliable payment history can provide landlords with the security in a market where the tenants now have a stronger hand. 

So, where does Vesta come in?

At Vesta, while we’re happy to see increased protections for tenants, we can help letting agents and property managers adjust to these changes and streamline their investments at the same time. We’re achieving this by helping landlords and agents see the benefits of buying and selling tenanted properties. Unlike with vacant properties, tenanted properties allow sellers to receive income right up to completion, as well as enable new investors to receive rental income from day one. Our marketplace avoids the need for evictions, therefore avoiding unnecessary disruption for tenants, as well as allowing providing new landlords with the luxury of the tenants’ payment history. It’s a win-win for all concerned. 

 Our professional, experienced team will help with all the marketing, buying, and selling of your tenanted property, without any hidden or unexpected fees. Our online rental marketplace is designed to make the rental market more transparent for everyone – tenants and landlords alike. If you want expert advice on how to prepare for the letting agent fees ban or want to find out more about how we can help you mitigate the shift, get in touch with our experienced team today.



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