Wednesday 5th September 2018
(6 years, 3 months ago)
Commons ChamberTenant Fees Act 2019 View all Tenant Fees Act 2019 Debates Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 5 September 2018 - (5 Sep 2018)
16:49 - The House divided: - Ayes: 240 / Noes: 299 - Question accordingly negatived.
17:09 - The House divided: - Ayes: 241 / Noes: 302 - Question accordingly negatived.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
I beg to move amendment 5, page 2, line 17, after “(c),” insert—
“() requires the person to do any of those things—
(i) as a result of an act or default of the person relating to such a tenancy or housing let under it, and
(ii) otherwise than pursuant to, or for the breach of, a provision of a tenancy agreement,”
This amendment means that Clause 1 prohibits a landlord from requiring a tenant or other relevant person to make a prohibited payment or take other action within the clause in the event of an act or default of the tenant where the requirement is imposed otherwise than by the tenancy agreement.
Madam Deputy Speaker (Dame Eleanor Laing)
With this it will be convenient to discuss the following:
Government amendments 6 and 7.
Amendment 1, in clause 8, page 5, line 13 leave out “£5,000” and insert “£30,000”.
Amendment 2, page 5, line 16, leave out from “exceed” to end of line 17 and insert “£30,000”.
Government amendments 8 to 23.
Amendment 4, in schedule 1, page 23, line 29, at end insert—
“Letting agent charges
3A (1) A payment to a letting agent or third party for the establishment or renewal of a tenancy is a permitted payment.
(2) In this section, a payment for the establishment or renewal of a tenancy may include, but is not limited to, fees for—
(a) administrative costs,
(b) credit checks,
(c) tenancy renewal fees, and
(d) inventory charges.
(3) The total payment under this section must not exceed £300.”
This amendment would allow letting agents to charge fees for various services connected with the establishment or renewal of a tenancy but would cap such fees at £300.
Amendment 3, page 23, line 30, leave out paragraph 4 and insert—
“Payment of Landlord or Agent expenses
4 (1) A payment that a tenant is required to make to cover a landlord’s or agent’s reasonable loss arising from a breach of a fair condition of the tenancy agreement by the tenant is a permitted payment.
(2) In this paragraph a “fair condition” is one that relates to—
(a) the replacement cost of a lost key or security device, or
(b) payment of the amount of late rent payments and interest relating to those payments
arising under or in connection with the tenancy.
(3) Paragraph 4(2)(a) does not apply if the payment required—
(a) pertains to rent that was paid within 14 days of the date due under the tenancy agreement, or
(b) exceeds the interest at Bank of England base rate on the rent from the day the rent was due to the day it was paid.
(4) Paragraph 4(2)(b) does not apply if the condition in the tenancy agreement prescribes a fixed fee to be paid for each breach of this term.”
This amendment would remove default fees as a permitted payment and permit the payment of landlord and agent expenses where there is a clear cost due to a tenant fault.
Government amendments 24 to 48.
Rishi Sunak
I will speak to all the Government amendments but, for ease, I will take them in a slightly different order from the one in which they have been set out.
I welcome the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for South Derbyshire (Mrs Wheeler), back to her place on the Front Bench. Everything we are discussing today is built on the foundations of her incredible diligence in preparing the Bill for us to consider in Committee, where I enjoyed constructive discussions with my opposite number, the hon. Member for Great Grimsby (Melanie Onn). I am delighted that my hon. Friend is back with us to help us to move the Bill through its final stages.
Amendments 5 and 6 will ensure that landlords and agents cannot charge any fees to tenants in the event of default, except under those circumstances set out in paragraph 4 of schedule 1. That now specifically includes prohibiting default fees that may have been set out in a separate agreement between the agent and the tenant, rather than in the tenancy agreement.
More generally, our provision on default fees in paragraph 4 of schedule 1 has been the source of much discussion and debate. Indeed, the hon. Member for Great Grimsby has tabled an amendment to the provision. Members from across the House, the Housing, Communities and Local Government Committee, and those who provided evidence to the Bill Committee have agreed with the principle that it is not fair for landlords to pay fees that arise due to the fault of the tenant. However, we have listened to concerns expressed by Members on Second Reading and in Committee, including the hon. Members for Great Grimsby and for Dulwich and West Norwood (Helen Hayes), and by tenant groups and the Chartered Trading Standards Institute that the default fees provisions as currently constructed may be open to abuse.
Frank Field (Birkenhead) (Ind)
May I mention a case involving my constituent, which is not uncommon in my constituency or in constituencies throughout the country? A young mother paid a deposit of £595 to her landlord for a wet, mildewed house in Rock Ferry in Birkenhead. When she was driven out by the mould, the landlord claimed that the bins were not emptied by the local authority, so she lost her £595 deposit. She wished to pay the rent for her new property on a day that coincided with her universal credit payments, but the landlord said, “Well, there’s no repayment of your previous deposit, and I want £900 up front if I’m changing the rent day.” In the meantime, during all that stress, my constituent lost her triplets. Will she be covered by the Bill, as amended?
Rishi Sunak
I thank the right hon. Gentleman for his intervention. Without going into the specific details or knowing the full facts, I can say that the example he gives is exactly the kind of bad practice that the Bill is designed to stamp out. It is not just this piece of legislation, which tackles the specific issue of tenant fees, that is relevant, because across the piece, the Government are examining the private rented sector to ensure that there is balance and fairness between tenants and landlords. He touched on the issue of health and whether properties are fit for habitation. The hon. Member for Westminster North (Ms Buck) has proposed a Bill to tackle that exact issue, and the Government are delighted to be supporting its passage through the House.
The issue of transferring deposits from one tenancy to another is out of this Bill’s scope, but the right hon. Gentleman will be pleased to know that the Government have convened a working group to examine deposit passporting. The group has already met, and the findings will be published in the spring of next year.
Frank Field
I am grateful to the Minister, and I will not intervene again, but there is no transporting of the deposit in my constituent’s case. She loses the deposit and then faces paying another deposit of £900 to get her rent payment day in line with her universal credit payments.
Rishi Sunak
The specific issue of one tenancy ending, and the process for recovering part or all of the deposit and starting a new tenancy, is out of scope for this piece of legislation, but it will be a subject for the working group set up by the Government with the sector. There are some interesting ideas about how to solve the problem that the right hon. Gentleman outlines.
Daniel Kawczynski (Shrewsbury and Atcham) (Con)
The right hon. Member for Birkenhead (Frank Field) has quite rightly raised a horror story on behalf of his constituent, but will the Minister acknowledge that there are many highly professional letting agents throughout the country who seek to provide the very best service for their customers under the difficult circumstances that they sometimes face?
Rishi Sunak
I thank my hon. Friend for his intervention, and I entirely agree. The Bill is not about driving letting agents out of business, but about levelling the playing field so that the small minority of bad actors in the industry are not able to continue to the disadvantage of the vast majority of agents who do a terrific and valuable job, which we want to see continue.
Mr Robert Goodwill (Scarborough and Whitby) (Con)
It is precisely the sort of case that the right hon. Member for Birkenhead (Frank Field) raises that gives all landlords a bad name. Most landlords are actually trying to do their best to provide a service to their tenants and hope to have long-standing tenants.
Under the current legislation, for a deposit to be retained by the landlord, there has to be agreement on both sides, otherwise there is an arbitration process. If it is just a case of someone not emptying the bins, there is no way that the landlord would be able to keep all the deposit.
Rishi Sunak
My right hon. Friend is absolutely right. The abuse that the right hon. Member for Birkenhead highlights is exactly why we are all here today to discuss this important subject.
I will return to the topic of default fees. The Bill as drafted already partly mitigates the risk of such abuse by limiting default fees to the landlord’s loss and permitting such fees only if they are expressly set out in the tenancy agreement, which the tenant will obviously have sight of before agreeing to the tenancy. But we acknowledge that more can be done, which is why the Government have tabled a series of amendments to tighten the default fee provision.
As I have said, amendments 5 and 6 will ensure that landlords and agents cannot charge fees to the tenant in the event of default, except under those circumstances set out under paragraph 4 of schedule 1. Secondly, amendment 27 will extend the limitation on what can be charged to incorporate the agent’s costs. We want to ensure that an agent cannot bill a landlord a significant amount only for that to be passed on to the tenant as the landlord’s incurred costs.
Thirdly—and similarly to amendment 3, which was tabled by the hon. Member for Great Grimsby—we introducing a provision to specify that any fees charged must be reasonable in respect of the works undertaken, rather than simply tied to actual loss or costs incurred. This will ensure that landlords and agents cannot make claims for charges that exceed the reasonable commercial value of goods or services.
James Cartlidge (South Suffolk) (Con)
Will my hon. Friend clarify how this would affect fees charged at the end of a tenancy, such as cleaning fees, which we know people will be expected to pay, although they may not have been aware of them at the start of the contract?
Rishi Sunak
I am happy to tell my hon. Friend that the fees he mentions are specifically banned under this piece of legislation. The Bill has been drafted tightly to ban all fees in connection with a tenancy. It is specifically drafted to capture fees such as the ones he raises, so those fees will no longer be in place once the Bill is enacted.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Could the Minister expand on who will be monitoring what happens with default fees? Some charities, including Shelter and Citizens Advice, have concerns that this might be used as a loophole for additional costs. Who will monitor the Bill and the default fees arrangements after the Bill is passed?
Rishi Sunak
If you will indulge me, Madam Deputy Speaker, I will expand a little to answer that question. The great thing about the Bill and the simplicity of a ban is that tenants’ ability to self-enforce will be greatly enhanced, which is something that was recognised by various people in the industry who gave evidence to our Bill Committee. Attached to any tenancy agreement is a consumer guide on how to rent and how to let, which provides straightforward advice for a tenant on what is and is not permissible. That will enable them to know whether something they are being charged is not appropriate.
At that stage, there are several avenues for redress that the tenant can pursue. It is mandatory for letting agents to be a member of a redress scheme, and we are consulting on extending that to landlords, but in the first instance there are redress schemes that the tenant can go to. Obviously they can talk directly to the agent and the landlord themselves. If the tenant does not get satisfaction in those conversations, the next step would be to go to the first-tier tribunal. That was recommended by the Housing, Communities and Local Government Committee, and the Government were happy to introduce it into the Bill as an accessible place for our constituents to go and seek redress.
Debbie Abrahams
The Minister is being generous with his time. I absolutely understand what he is saying, and the arrangement seems very comprehensive. My concern, given the emaciated state of trading standards and other local authority enforcement agencies, is that this will not be an effective way of monitoring the situation. Tenants in such a position are still vulnerable, with potentially little legal redress other than by themselves. Is there no opportunity for the Government to monitor what is happening with default fees?
Rishi Sunak
I am sure that the hon. Lady knows that it would not be appropriate for the Government to monitor every single rental transaction that takes place, but the job of the lead enforcement agency is to have exactly that oversight for the industry. I would point out that the Government will fund the first year’s cost for trading standards and enforcement authorities to the tune of about £500,000. Thereafter, the fines under the legislation will enable enforcement authorities to recoup some of the costs, and indeed to invest some of that money in better enforcement. To go back to the heart of the hon. Lady’s question—
Dr David Drew (Stroud) (Lab/Co-op)
Before the Minister does so, will he give way?
Dr Drew
In my area, the good agents are beginning to say that those who are already exploiting the situation are trying to push up rent levels. Will the Government at least look at what has happened since the Bill was introduced to make sure that rents are not pushed up by landlords artificially to overcome this loss of money?
Rishi Sunak
On that relatively unrelated point, it is worth pointing out that when similar legislation was introduced in Scotland, we did not see any greater increase in rents than we would have anticipated.
On the specific question asked by the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) about tenants’ ability to enforce and the ease of their doing so, it is worth bearing in mind that default fees are specifically required to be identified in the tenancy agreement. Up front, at the outset of a new tenancy agreement, the new tenant’s contract has to say exactly what default fees may be relevant under that contract—for example involving the loss of keys, late rent or the loss of an alarm fob. That has to be there in black and white; it is not as though the landlord can come up later on with something that they want to charge the tenant for. That will also be spelled out in the guidance, so it will be very easy for tenants to know whether the default fees they are being charged are appropriate.
Kevin Hollinrake
May I take this opportunity to draw the House’s attention to my entry in the Register of Members’ Financial Interests?
On the point the Minister was making about redress for a tenant, does he agree that the vast majority of these problems are very easily solved by contacting the redress schemes, which are very effective at resolving any disputes that may arise? Will he clarify the point about cleaning? The cleaning of a property that a tenant has left in an inferior condition should still be the responsibility of the tenant, and that is a reasonable requirement to put into any tenancy agreement.
Rishi Sunak
We are very lucky to have the insights today of my hon. Friend and constituency neighbour. He has been a successful business operator in this particular industry and I always listen to what he says with keen interest. I can tell him that he is absolutely right with regard to redress schemes. Our experience—we have heard this throughout the Bill process—is that they do work well and provide a very easy way to resolve most issues. Simply talking directly to the agent and the landlord in the first place is also a way to resolve the vast majority of issues without having to turn to a specific or formal redress scheme.
On the second point, of course a state of condition and an inventory may be attached to a tenancy, and such a cost would be recovered during the normal course of a deposit return. The tenant would obviously have obligations in that regard, and a breach of those terms would be considered damages in the normal way. However, there will not be a specific charging of fees at the outset of a tenancy; unless otherwise broadly agreed, that is covered by the damages provision in a contract.
I believe my hon. Friend the Member for Carlisle (John Stevenson) wanted to intervene.
John Stevenson
The Minister referred to certain clauses being in a tenancy agreement with which the tenant would be obliged to comply. Agricultural law lays down prescribed clauses that have to be incorporated into agricultural tenancies. Has any thought been given to the Government setting out prescribed clauses to be incorporated into a tenancy agreement for residential property?
Rishi Sunak
That is the crux of what we will come on to later. The Government’s approach has been not narrowly to specify the specific things that could qualify as default fees. There has indeed been discussion of this topic. The Government’s point of view, which I will explain later, will I hope provide some clarity on that point.
If I may return to the—
Bob Blackman
A lot of the Government proposals are formed around what is reasonable, and one of the key tests in law relates to what is reasonable. I gently ask him to set out for the House what he considers to be reasonable. To give an example, he has mentioned the loss of keys. The loss of a normal household door key may be relatively cheap, but security keys provided by only one manufacturer can be very expensive. Is it reasonable for a tenant to be charged should he or she lose such a key? If so, that would mean a default charge of quite a considerable sum of money, even if it was specified in the original contract—the lease or rental agreement. Would that need to be specified in that way, or would it be classified as a reasonable default charge if the key was lost?
Rishi Sunak
I again thank my hon. Friend for all his work on the Select Committee in helping us to improve this legislation. I know that he has given great thought to the matters we are discussing today, and we have just heard another example. I can tell him that the word “reasonable” has been chosen very deliberately, because it is a commonly accepted legal term that is widely used in various pieces of legislation and is open to interpretation in a consistent way by the courts. Indeed, the Opposition have chosen the same term in amendment 3.
Mr Jim Cunningham (Coventry South) (Lab)
To come back to the question asked by the hon. Member for Harrow East (Bob Blackman), some weeks ago I watched a documentary about this. It looked at the safety of a particular house, and it ended up with the enforcement officers directing the landlord to replace the sort of very expensive locks that he mentioned. I do not know whether that is common, but the Minister may know more than me.
Rishi Sunak
That ties in nicely with the point made by my hon. Friend the Member for Harrow East (Bob Blackman), but it would not be right for me to stand at the Dispatch Box and define what is reasonable in any particular case. There is a general test of reasonableness, which will vary from circumstance to circumstance. A simple key for a garden gate with no security attached to it will rightly cost very little—people can go down to Timpson or wherever to replace it—but a security identity fob for an alarm system may be much more expensive. The point is that the charges could not exceed the reasonable commercial or market value of such goods or services.
On that point, I reassure my hon. Friend that we want to go further than amendment 3, which was tabled by the hon. Member for Great Grimsby, would have us do. We have listened to concerns about the fact that tenants may find it difficult to challenge the reasonableness of default fees, and we believe that it would be easier for them to do so if they were offered up-front evidence of default charges. That is why amendment 28 introduces a requirement for landlords and agents to demonstrate their loss proactively by providing written evidence—for example, in the form of receipts or invoices—of the costs incurred before charging tenants. That will put the onus on landlords and agents to be clear about the charges that they want to levy, and it will give tenants additional assurance that they are paying a fair and reasonable amount.
To return to the intervention by my hon. Friend the Member for Carlisle (John Stevenson), the Government maintain that it would not be appropriate to list default charges in the Bill, given the risk that such a list will be incomplete or insufficient. We believe it is for the tenant and the landlord to determine what it is necessary and fair to include as default charges, on a case-by-case basis. There are other potential default charges besides those for late payment of rent and lost keys. Charges might also result from not parking in the space allotted to a property in a communal area, from the loss of a home automation smart remote and from the misuse of a common space—perhaps for a barbecue or other party event. Our amendments will increase transparency and fairness by ensuring that landlords and agents can recover their costs, while providing greater protection to tenants over the level of fees that they can be charged and further minimising the risk of abuse.
I turn to our other amendments regarding permitted payments. We want to ensure that the Bill delivers on the policy intention that the party who contracts a service should pay for the service. We have already been clear that where tenants procure their own third-party services—for example, a reference check or an inventory—they should be responsible for the cost. The legislation allows for that, although agents and landlords cannot, of course, require a tenant to use and pay for a third-party service.
Similarly, tenants should be able to make payments to agents whose services they contract for the purpose of finding accommodation, provided that the agent does not work on behalf of the landlord. That may be the case if a tenant lives overseas or otherwise requires assistance in relocating. We do not wish to prevent relocation agents from charging a fee for their services. Amendment 7 is designed to ensure that tenants are free to contract the services of a relocation or similar agent should they wish to do so, provided that the agent does not also act on behalf of the landlord with whom the tenancy is being agreed.
There are some further minor amendments to clause 28. Amendments 20 to 23 ensure that if a payment, such as a default charge, is required under a tenancy agreement that was entered into before the ban comes into force, that payment will be prohibited where it is paid to an agent after a period of 12 months. The Bill already prohibits that in relation to landlords, and we want to ensure that there is consistency with respect to agreements with agents.
Further to that, amendments 24, 25 and 29 to 42 make some minor drafting changes to clarify that a person acting on behalf of the tenant, or someone who has guaranteed the payment of rent—a relevant person—can also make a permitted payment. That will ensure that if somebody guarantees a tenant’s rent, they can make payments on the tenant’s behalf to a landlord or agent if required.
We have also tabled several amendments to clarify the enforcement and repayment provisions in the Bill. The amendments will ensure that the legislation can be effectively and fairly enforced, and that tenants have proper access to redress when things go wrong. First, amendments 13, 14 and 44 to 48 ensure that if a landlord or agent charges the tenant an unlawful payment, the landlord or agent must repay it as soon as is practically possible. Currently, when a tenant seeks repayment through the local authority or first-tier tribunal, a landlord or agent has 14 days or 28 days, respectively, to return the unlawfully charged payment once an enforcement order has been made.
We are talking about tenants’ money, and we want to ensure that tenants can recover it in good time. It is not fair for a tenant to be out of pocket because a landlord or an agent has charged a fee or unlawfully required a tenant to pay a third party. Our amendments will require a landlord or an agent to repay unlawful fees within seven to 14 days of the making of an order by the enforcement authority or the first-tier tribunal. The authority or tribunal will have discretion over when the payment is required, within that narrow period. We expect that most repayments will be made within seven days, but we have provided for a range because in certain circumstances it may not be possible for a landlord or agent to repay the money within seven days. I hope that this amendment addresses the concerns that we have heard about the speed of repayment when a landlord or agent is at fault, and we hope that it reassures tenants about the recovery of their money.
Mr Jim Cunningham
The last time we debated the Bill, I raised the issue of who would enforce it. The Minister has mentioned the enforcement authorities. Is it still his intention that trading standards officers should be enforcement officers, or has that changed?
Rishi Sunak
That has not changed. In Committee and during the evidence sessions, there was overwhelming support for the idea of trading standards authorities playing a key role in enforcement, given their complementary responsibilities in similar legislation. We have heard good evidence for that, and they will be supported up front by half a million pounds from the Government in the first year of the implementation of the legislation.
We want to ensure that the enforcement authorities are required to notify the lead enforcement authority in the circumstances that I have set out. At present, they are required to notify the lead enforcement authorities only when they impose a financial penalty. Extending the notification requirement to criminal offences will help the lead enforcement authority more effectively to monitor and report on the effectiveness and operation of the ban. This will also help to support local authorities better with their own enforcement actions.
Fourthly, on enforcement, when a tenant takes action to recover their fees, they should have confidence that their local authority can assist them through the process. The Bill already provides that local authorities can assist an individual in recovering a prohibited payment via the first-tier tribunal.
Maria Caulfield (Lewes) (Con)
One issue with current legislation on the requirement to publish letting agents’ fees has been the lack of enforcement. What confidence can the Minister give the House that enforcement will actually happen under this very welcome new legislation?
Rishi Sunak
My hon. Friend spoke passionately on Second Reading about renters in her constituency and the work she has done with them to ensure that they are treated fairly. I commend her for that, and for raising a very good point. I am pleased to tell her that the Government are funding enforcement activity with half a million pounds of fresh funding in the first year after the Bill is enacted. Subsequent to that, the fines that the legislation will enable local authorities to levy—potentially up to £30,000 for a repeat incidence—will help to fund ongoing activity. I am confident that we will be able to deal with the issue that she raises.
Mr Goodwill
Is the Minister confident that local authorities will have the resources and expertise to do what is set out in the Bill? We in the Bill Committee were concerned that 93% of local authorities had failed to issue even one penalty, and that the level of activity in this area was very poor.
Rishi Sunak
As the Minister with responsibility for local government, I am full of admiration for local authorities and their ability to do many things. The pace of the creation of new legislation over the past year or two means that many of the local authorities’ powers in this area are relatively new, so local authorities are getting to grips with them bit by bit. I am pleased to say that there are very positive examples on the ground of local authorities taking action to enforce housing legislation and reinvesting in enforcement the fines that they generate.
A brilliant example of that is Torbay Council, which has used the fines from civil penalties to employ an extra enforcement officer to help with exactly the activities that we are discussing.
Sir Christopher Chope (Christchurch) (Con)
Why are we not talking about a duty on local authorities to carry out enforcement? The Minister is saying that they have the powers, but the Public Bill Committee heard evidence that the London Borough of Newham prosecutes around 250 landlords and agents a year and that that represents half the total number of prosecutions in the whole sector. Why is there not a duty on local authorities to carry out enforcement?
Rishi Sunak
As I mentioned previously, Newham is obviously ahead of the curve, and the Committee did hear evidence about that, but many other local authorities are now following suit. Liverpool, Camden and Torbay are examples of local authorities that are getting to grips with the new legislation and putting it into effect in good order. I am pleased to say that, as these are relatively new powers, over the summer recess my Department conducted an extensive engagement activity across five different events throughout the country, involving almost 200 different local authorities, to talk specifically about the enforcement of regulations in the sector. Those conversations have sparked a lot of interesting collaboration across local authorities as they contemplate using the existing regulations and the new legislation in future. As we go forward together, with greater awareness and collaboration and, indeed, the greater funding that will come as a result of the legislation, I am confident that we will see enhanced enforcement activity from local authorities, where required.
Kevin Hollinrake
The Minister is doing an excellent job at the Dispatch Box, as always. Does he agree that another method of sanctioning landlords and agents who will not comply with reasonable regulations is through the redress process? The requirement for agents to be members of a redress scheme was introduced by our Administration in 2014. It was a seminal moment in the raising of standards in the industry. The requirement to be a member of a redress scheme, with an agreement going across the other two redress schemes, means that a practitioner can in effect be banned from the sector because they are not allowed to be a member of a redress scheme. If that idea is expanded to landlords, we will have another method of excluding from the sector people who will not do the right thing in the right way.
Rishi Sunak
I thank my hon. Friend for that clear example of an activity that is already happening that enables redress to be found. He is absolutely right to highlight the potential extension of membership of redress schemes from agents to landlords, which would further improve tenants’ ability to seek redress when they need it and would more generally act as an incentive for good behaviour in the first place. He will know that the Government are conducting a broader conversation about the regulation of estate agents, about ensuring that the industry is properly regulated and that standards are high and about ensuring that the actions of a small minority do not jeopardise the health of the great majority of the sector. That is an ongoing piece of work, and I am sure that we will discuss it in the House in due course.
As we discussed in Committee, when a tenant has paid an unlawful fee, it is only fair that they should be given a say in how those fees are reimbursed, and the hon. Members for Great Grimsby (Melanie Onn) and for Croydon Central (Sarah Jones), whom I am pleased to see the in their places on the Front Bench, tabled an amendment to that specific effect. As I said I would in Committee, I have considered their amendment and agree that such a provision would be a worthwhile addition to the legislation. As such, amendments 9, 10, 12, 18, 19 and 43 will place a requirement on landlords and agents to seek consent if they wish to offset such a fee against a tenancy deposit or rent payment. I hope that those hon. Members will be happy with that incorporation.
I am pleased to say that our amendments go slightly further than the one proposed by the Opposition Front-Bench team, by also requiring agents and landlords to seek the tenant’s consent if they wish to offset the holding deposit from the tenancy deposit or a future rent payment. If the landlord or agent does not seek consent from the tenant or relevant person about how the prohibited payment or holding deposit should be refunded, they will be judged not to have fulfilled their obligation to repay the fee. That will leave the landlord or agent liable for a financial penalty and give the tenant the right to recover their fee through the relevant enforcement authority. It will also restrict the landlord’s ability to serve a section 21 eviction notice.
I have already explained why we do not support the amendment tabled by the hon. Member for Great Grimsby on the default fee provision and why our proposed alternative is fairer and more workable. I wish briefly to address amendment 1, which she also tabled and which would increase the financial penalty for a breach of the ban from £5,000 to £30,000, and explain why we do not support it. We want the fine to act as a serious deterrent to non-compliance. We have listened to feedback from across the sector, and we firmly believe that financial penalties provided in the Bill are the right ones. I think that most people would agree that a £30,000 fine for an initial breach of the ban, as proposed in the amendment, would be excessive. We do not want unfairly to penalise landlords and agents who may inadvertently breach the ban on fees. In particular, that might seriously financially hurt individual landlords who, for context, collect on average rent of around £8,000 from a single properly. A £30,000 fine is almost four multiples of that.
Mr Goodwill
Does the Minister agree that a £30,000 fine might well precipitate the sale of the property and the eviction of the tenant—the very person whom the Bill is meant to protect?
Rishi Sunak
My right hon. Friend is right. He made the same points in Committee, and I appreciate his raising them again today.
The Government have listened to concerns that some agents and landlords see the £5,000 initial fines as a cost of business and thus repeatedly refuse to comply. That is why the legislation makes landlords and agents liable for a financial penalty for each individual breach of the ban that they commit. In addition, setting financial penalty at up to £30,000 for a second or further breach of the ban will act as a serious deterrent for prolific offenders. It is worth pointing out that further breaches will leave the landlord or agent liable to prosecution and an unlimited fine and, indeed, qualify as a banning-order offence. The Government believe that, taken together, this set of sanctions forms a serious deterrent to poor behaviour. To accept the Opposition amendment would be disproportionate and excessive in respect of the cases we are discussing.
Bob Blackman
There is a specific issue in relation to very corrupt landlords who exploit vulnerable people. The concern that I think many Members who have investigated the background to this issue will have had, particularly in parts of London, is that a fine of merely £5,000 will be seen as just the cost of doing business. These people are exploiting vulnerable people to the tune of hundreds of thousands of pounds, so for them even a fine of £30,000 would be nothing. I therefore urge my hon. Friend to consider this matter further as the Bill makes its way through the other place. Will he look at what can be done to take on these people? They are not landlords, but rogues and crooks. They need to be brought to account for the damage they are doing to the rental market and for the exploitation of very vulnerable people who have no choice in where they live.
Rishi Sunak
I thank my hon. Friend for that powerful intervention. He knows first hand, from the excellent work he does with his constituents to tackle this issue, the scale of the problem in particular cases. He will be reassured to know that, while existing legislation allows local authorities to levy a £30,000 fine for a second breach, if they choose not to do so, they can go down the prosecution route. For the cases he mentions, that would probably be more appropriate. The sanctions in that case are an unlimited fine and a banning order, which, for the specific landlords he mentions, would be appropriate. I think that he would agree that being banned from being able to rent any property for 12 months or longer, or an unlimited fine, would serve as a very significant sanction to the core behaviour in such cases. With that final assurance, I commend the Government’s amendments.
Mr Clive Betts (Sheffield South East) (Lab)
I apologise for not being present at the beginning of the debate; I had a meeting on the private rented sector, believe it or not.
I wish to say briefly that there is agreement in principle across the House on this Bill. It was improved by the consideration of the Housing, Communities and Local Government Committee, and I thank the hon. Member for Harrow East (Bob Blackman) for chairing the meetings in which the Committee looked at the draft Bill. I agree with him strongly that this is an issue of a contract between the landlord and the letting agent. That is the principle and that is why tenants should not be charged the fees. I see that one Government amendment clearly spells out that if a tenant goes to a letting agent and says, “Please find me a property,” that contract would be between the tenant and the letting agent and therefore a different arrangement.
I welcome the amendment that means that an enforcement authority will be able to help a tenant who wants to recover a charge awarded to them by the first-tier tribunal. That is a good amendment and I welcome the Government’s tabling it, but it surely shows the need to move to a housing court system, which the Government have promised.
Rishi Sunak
May I briefly thank all Members from all parties for their contributions today, in Committee and in the Select Committee hearings? All those contributions have helped to get the legislation into the fine shape that we find it in today. I appreciate all the insights from everyone. I welcome the broad support for the Bill. If Government or Opposition Members still want to engage on the details, I am very open to having those conversations.
Let me briefly answer the specific questions asked by the hon. Member for Great Grimsby (Melanie Onn). On timing, I am obviously not in control of the parliamentary timetable, but there will be a short period of time after Royal Assent—perhaps we should call it an implementation period rather than a transition period—after which the Act will come into force. Within 12 months of that point, any existing and legacy contracts will be subject to the Act’s provisions.
On the hon. Lady’s question about right-to-rent checks and incorrect Home Office information, I can confirm that under clause 8(5) the landlord would not be held liable.
Let me try one last time to persuade the hon. Lady not to press to a vote amendment 1, on fines. Perhaps she is not aware that the maximum fine is £1,000 under similar legislation in Scotland and that the maximum fine is just £500 in Wales. The Bill contains an initial fine of £5,000; the hon. Lady’s proposed maximum fine of £30,000 would be 60 times that of her party’s Government in Wales. I am sure she would agree that that sounds slightly disproportionate and that it gives her something to digest.
Finally, I thank my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) for his passionate defence of the free market economy in free enterprise and competition, with which I wholeheartedly agree and to which I wholeheartedly subscribe. It has been a pleasure to engage with him on the details of the Bill, and I assure him that as a fellow champion of small business, I continue to ensure that nothing we do will jeopardise the health of that free enterprise economy. I appreciate his advocacy on behalf of small business and look forward to future conversations with him.
Question put and agreed to.
Government amendment 5 agreed to.
Madam Deputy Speaker (Dame Rosie Winterton)
I can now inform the House that I have completed the certification of the Bill, as required by the Standing Order. I have confirmed the view expressed in the provisional certificate published with the selection list. Copies of the final certificate will be made available in the Vote Office and on the parliamentary website. Under Standing Order No. 83M a consent motion is therefore required for the Bill to proceed. Copies of the motion are available in the Vote Office and on the parliamentary website, and have been made available to Members in the Chamber. Does the Minister intend to move the consent motion?
Rishi Sunak
indicated assent.
The House forthwith resolved itself into the Legislative Grand Committee (England) (Standing Order No. 83M(4)).
[Dame Rosie Winterton in the Chair]
The Secretary of State for Housing, Communities and Local Government (James Brokenshire)
I beg to move, That the Bill be now read the Third time.
I thank Members on both sides of the House for their passionate and constructive contributions to the Bill’s passage through the House. We all agree that the Bill’s aim of making renting fairer, more transparent and more affordable for tenants is important. As such, it is a key part of the Government’s housing agenda. More people are renting, and they deserve help now, which is what the Bill is all about. We want to ensure that everyone, regardless of whether they own their home or rent, or whether they are in the social or private sector, has the security and dignity they need to build a better life.
The feedback and evidence we received recognised the challenges that tenants in the private sector face, especially regarding unfair fees and the need to rebalance the relationship between tenants, landlords and agents. Having listened, we introduced amendments on Report to ensure that the Bill better delivers on our commitment to create a system that works for everyone. I thank all those who have engaged with the process, from our initial consultation through to pre-legislative scrutiny and since the Bill’s introduction to the House. That includes members of the Housing, Communities and Local Government Committee, with their invaluable pre-legislative scrutiny of the Bill; those who provided written and oral evidence to the Committee; and the organisations that have engaged so constructively with my officials in drafting guidance for the Bill.
Mr Betts
I thank the Secretary of State for his kind words about the Select Committee. Does he think that there is a wider lesson to be learned—that it would be helpful if the Government more generally provided draft legislation for Select Committees to consider, rather than simply coming to the House with proposals that they have already determined without any consideration in Select Committee?
James Brokenshire
I recognise the important contribution that Select Committees, and Joint Committees of both Houses, make to pre-legislative scrutiny of draft Bills, and we can point to a number of examples. As I am sure the hon. Gentleman will appreciate, at other times the Government need to act quickly. The Bill has been a good example of the balance needed between ensuring consultation and engagement.
I also wish to pay special tribute to the Under-Secretary of State, my hon. Friend the Member for South Derbyshire (Mrs Wheeler), for all her efforts to develop the Bill and ensure its successful introduction. We all send her our heartfelt best wishes.
I also wish to thank the Under-Secretary of State, my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak), who has been instrumental in leading the Bill through the Commons and has been careful and conscientious in listening to the views of Members on both sides of the House.
We can all agree that the Bill has benefited from everyone’s input and, as a result, will be more effective in delivering on its promise to protect tenants from unfair charges. As we have heard, those charges can impose a significant burden on tenants, who often have little choice but to pay excessive and unjustified fees time and again for each property let or even just to renew an existing agreement. The Bill will put a stop to such unacceptable practices by banning unfair and hidden charges, making it easier for tenants to find a property at a price they are willing to pay and saving renters an estimated £240 million within the first year alone. The Bill will also help to introduce a level playing field for landlords and agents by protecting reputable players in the market from having their reputations tarnished by rogues.
I know that the changes have raised concerns in some parts of the letting market, but agents who offer good value and high quality services to landlords will continue to be in demand and play an important role in the sector. In addition, the Bill introduces a cap on tenancy deposits of six weeks’ rent, and we are not stopping there. We want to ensure improvements to how deposits are protected in the interests of both tenants and landlords, to reduce up-front costs to tenants. That is why we recently established a working group to look at the merits of innovative approaches to tenancy deposits, such as deposit passporting.
I am confident that the measures in the Bill will help to deliver the fairer, clearer and more affordable private rented sector that we all want to see—for tenants, yes, but also for decent, professional landlords and agents who are providing a vital service. I am happy to commend the Bill to the House.