Tenant Fees Bill (Second sitting)

(Limited Text - Ministerial Extracts only)

Committee Debate: 2nd sitting: House of Commons
Thursday 7th June 2018 Public Bill Committees

[The Chair]

I am going to let the Minister have a go now.

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

Q Thank you, Mr Bone. And thank you very much, both of you, not only for being here this morning, but for the time that I know both of your institutions have spent engaging with the Department in formulating the legislation. I very much appreciate you sharing your thoughts and insights to help us get to where we are today.

May I just start with a broad question as to the role of trading standards? Simon, you have touched on this. Do you think that we have got it right, in the sense that trading standards are the obvious and correct body to enforce this Bill? That was obviously the overwhelming view of the correspondence to the consultation, but I wanted to check with both of you whether you think that is appropriate.

Alex McKeown: I definitely think it is appropriate, because at trading standards we have the power and we are used to dealing with businesses. With the redress scheme legislation, it was the local borough or district council. Having worked in London on that sort of project, I know that the private sector housing departments are used to dealing with landlords and with the Housing Act 2004, but they are not used to going into letting agents and issuing those fines; we are, and we are the best people to deal with it. But the officers need proper training so we can get more officers up to speed to continue that work and encourage more boroughs to carry out this work. That is down to funding again; a lot of the chiefs are saying, “We haven’t got the funding, so we have other priorities at the moment.”

Councillor Blackburn: It should be either trading standards or private sector housing teams that deal with this, particularly in relation to small district councils, which are not weights and measures authorities. It may make sense in some areas for the private sector housing enforcement team, which would probably be one individual, to lead on it, because they will be most familiar. There needs to be flexibility, but in most primary authorities, it would be trading standards.

[Rishi Sunak]

One of my colleagues has a follow-up to that question.

[Mr Robert Goodwill (Scarborough and Whitby) (Con)]

Q I live in North Yorkshire, so the trading standards authority is North Yorkshire County Council, but Scarborough Borough Council is our borough, which is a long way from Northallerton and from some of the trading standards officers. Will the boroughs and districts be able to step up to the mark? Should a disproportionate amount of the £500,000 be made available to the districts and boroughs where we do not have unitary authorities, or will it be difficult for those authorities that are not already trading standards authorities to step up to the mark? They are well involved in housing—we have one of those areas where the housing has to be brought up to standard. Will that work?

Alex McKeown: Some of the difficulty with the legislation that is already there with regard to letting agents is that you have to have knowledge of housing and of trading standards, so you almost need a trading standards and housing officer hybrid person. I have worked in authorities where I was a trading standards enforcement officer but I sat with private sector housing, and that worked quite well.

It is difficult to know, because there are also different problems in different areas of the country. In London, there is a much bigger problem than in the leafy counties. You will not get the same issues. In London, there are more vulnerable tenants who are being exploited, and you get the rogue agent element, but I cannot really speak for how it will work outside London, because I have worked in London for so long.

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[Rishi Sunak]

I can wait until the end.

[Melanie Onn]

I would like to come in.

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[The Chair]

I am sorry; it is very frustrating that we have such little time, but the Minister has been very patient.

[Rishi Sunak]

Q Thank you, Mr Bone. Alex, you gave an example of people receiving multiple fines and your view that that did not act as a deterrent. Are you aware of what happens and the potential penalties in this legislation for a repeated offence?

Alex McKeown: There is option to issue a £30,000 fine or to take criminal action. The difficulty is that criminal action is expensive. Often, we do not get our costs back and we still do not achieve very much. It is better to issue the fines but, again, the repeated offenders—

[Rishi Sunak]

Q But in terms of the deterrent effect, the ultimate penalty for a landlord who breaches the legislation is an unlimited fine and a lifetime ban. Do you agree that that has a pretty significant deterrent effect?

Alex McKeown: It is a significant deterrent.

[Rishi Sunak]

Q Thank you. You also talked about phoenix companies, and the idea, which I completely agree with, that people should not be able to circumvent legislation by setting up as a phoenix company. Have you read clause 13 of the Bill?

Alex McKeown: I think I have; is this the one that says you can hold the directors—

[Rishi Sunak]

Q In the interests of time, clause 13 specifically addresses the point you raised and makes it clear than an officer or member of a corporate body can also be held liable for a breach of the ban, both for unlimited fines and for banning orders. Does that deal with your concern?

Alex McKeown: To a degree, but the burden of proof is beyond all reasonable doubt.

[Rishi Sunak]

Q Given that it is a very significant sanction, that seems appropriate. But do you think that the principle that an individual cannot avoid prosecution is dealt with?

Alex McKeown: To a degree.

[Rishi Sunak]

Q Councillor Blackburn, you talked about training for trading standards and local authorities; are you aware that the Department is planning a series of roadshows, over the summer in particular, to address all these issues and to talk to local authorities about the enforcement of private rental sector legislation and regulation? Would you welcome that engagement with the sector?

Councillor Blackburn: I would have welcomed some earlier engagement to tell me that that was happening so that we could have co-designed it, but yes of course, Minister, I welcome that new development.

[Rishi Sunak]

Q It is not so much new, but perhaps new for you. I appreciate that you welcome it, and that is good.

You talked a little about funding—I hope you welcome the £500,000 that has been indicated. Have you done any bottom-up analysis that you can give us today that suggests that the figure should be different and that provides the figure that you would be comfortable with?

Councillor Blackburn: I anticipated that question and spoke to my officials on the way over. I said, “So when he asks me what we think it ought to be, do we not have a figure?” The answer was that we do not have a figure, but we are doing that bottom-up research. We were consulted about how much we thought it might cost, but we were given about a week to turn that around, which was not enough time to get sufficient data from our members about how much it might cost. That is work is ongoing. As soon as we have a figure, we will come back to you with it.

[Rishi Sunak]

Q I look forward to that. Lastly, on the lead enforcement authority, which we have not had the chance to discuss much today, I understand that the sector has previously welcomed the role of the lead enforcement authority. It is being funded with a few hundred thousand pounds as well. I would like your thoughts on whether that is a valuable addition to the enforcement landscape and whether it can play a role in helping both trading standards and district councils to enforce the legislation.

Councillor Blackburn: Yes.

Alex McKeown: Absolutely.

[Rishi Sunak]

Q Is there anything in particular you would like to see from that body, to help you do your jobs?

Councillor Blackburn: I am reasonably confident that they will want to work with the LGA to help us disseminate best practice and to advise our members. That is certainly what has happened in the past.

Alex McKeown: I do not have anything specific that I would like to see. I suppose I look for it to be very similar to the national estate agency team, which I am used to already.

[Rishi Sunak]

Q Do you think that model works well?

Alex McKeown: Yes, I think so. Generally, when complaints are sent via the national estate agency team, trading standards is more likely to do something about it.

[Rishi Sunak]

Brilliant. Thank you very much for your time.

[The Chair]

Thank you very much to both of you; you have been excellent and informative witnesses, but we have been beaten by time. Thank you very much for your attendance.

Examination of Witnesses

Rhea Newman, Katie Martin, Dan Wilson Craw and Izzy Lenga gave evidence.

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[Richard Graham]

Q It does. My question was whether you support that and think it is a good idea. Is that a yes?

Dan Wilson Craw: Yes, it is.

Rhea Newman: In their responsibilities for enforcing across the private rented sector, it is really important that trading standards and environmental health officers work together. That joint work is fundamental. They obviously have resource challenges at the moment, which need to be addressed. We have always supported having one responsible authority—trading standards—in the Bill, but if they can work with their district councils, that is really important.

[Rishi Sunak]

Q Thank you to all of you for joining us today. You have all been working with the Department extensively in helping formulate the legislation, not least by providing input into the guidance that is currently being formulated. I really appreciate your help there, and I guess congratulations are in order. You have all campaigned for a long time on this issue, so I am sure you are delighted to see it come into practice. Thank you for your broad support for the aims of the Bill.

I have a very quick question about the principle of a holding deposit. Obviously, there is some debate about that. The argument that has been put forward—we heard it again the other day—is that having a holding deposit is sensible because it does two things: it ensures that tenants have a financial stake in the process and that they are not speculating on multiple properties, and it protects landlords, so they do not cherry-pick among tenants. If there were not a holding deposit, landlords might be inclined to pick safer tenants. I understand that you might have some different views about the detail of how it is implemented, but first I would love to hear whether you agree with the principle of a holding deposit. Katie, do you want to start?

Katie Martin: Yes. As I said, we do not object in principle to holding deposits. We think they should be measured to ensure prospective tenants are not taken advantage of. We also think it is really important that the legislation ensures that the landlords or letting agents cannot retain the holding deposit following a failed credit check or reference check. They should do that only if tenants have provided misleading information. The circumstances under which holding deposits are withheld should be closely looked at, but we do not object to them in principle.

Rhea Newman: We also do not object in principle. We think they can play a role. We are not sure, in practice, how much tenants speculate on multiple properties at the same time—in highly competitive markets, tenants often feel lucky to find one property that meets their needs—but we accept the principle of a holding deposit. We have always argued for a lower cap of about two days’ rent, because one week’s rent—I think the average is £192 across England—is a lot to lose if your circumstances change. Our main priority is to ensure the terms for refunding holding deposits are really clear. We think there needs to be a paper trail around what information is taken before holding deposits are given. Landlords and agents should tell tenants how it will be treated, and if they do not refund it they should provide evidence for why they are doing that. We think that, at the moment, the terms are not clear enough.

Dan Wilson Craw: I agree. We think holding deposits serve a function in a market in which it takes a while to get a reference from the tenant. If technology and the market were to develop post the fees ban, and a tenant could be referenced instantly, you would potentially not need a holding deposit.

We have a couple of concerns. Having this Bill to formalise the process of taking a holding deposit is really important. Under the Bill, a landlord or a letting agent could still take holding deposits from several tenants and ultimately give the tenancy to only one tenant. What it would do for tenants who had put down a holding deposit and did not get the tenancy is to put their flat hunting on hold for 15 days. We would quite like to see the Bill tightened up in that respect. Also, as was mentioned before—

[The Chair]

Order. I am afraid we will never know what the second point was, because time has beaten us. You have been excellent witnesses. Thank you so much for coming.

That brings us to the end of the oral evidence session for this Bill. The Committee will meet this afternoon to begin the line-by-line consideration of the Bill. To remind Members, that will happen not in this Room but in Committee Room 12 in the Palace of Westminster at 2 pm.