Tenancy (Deposits and Arbitration)

1st reading: House of Commons
Wednesday 13th March 2019 Commons Chamber

Motion for leave to bring in a Bill (Standing Order No. 23)

14:52

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

I beg to move,

That leave be given to bring in a Bill to establish a single custodial tenancy deposit scheme; to provide for that scheme to invest deposits; to require interest on such investments to be used for the provision of tenant advocacy, tenant support and arbitration services; to establish a mandatory arbitration service for the resolution of disputes between landlords and tenants; and for connected purposes.

I declare an interest in that I use the current tenancy deposit system as a landlord. It neither works for landlords nor provides the safeguards the last Labour Government intended in the original legalisation.

I am introducing my Bill partly because of the treatment of my constituent Andy Smith. He was living in an apartment owned by Baron Homes and had a tenancy agreement to December 2018. In January of that year, he was offered council accommodation, which he gratefully accepted, and, as his tenancy required, he got a mutual agreement in writing to break his lease. Given that he had fulfilled all aspects of his contract, one might have thought him entitled to his £650 back. Sadly, that was not the case. Baron Homes alleged that there was damage to the property and said it would keep the entire deposit. I have seen photos of before and after, showing that the damage it alleged was pre-existing, accept for some wear and tear, but, in any event, withholding the deposit was an act of bad faith because the property was to be gutted and turned into two luxury studio flats.

Brighton has a history of rogue landlords, from Nicholas van Hoogstraten, when I was growing up, to Baron Homes today, which has a woeful record of exploiting tenants in our city. It was no surprise, therefore, when Baron Homes forced Andy to challenge its decision through MyDeposits, the tenancy deposit scheme that Baron Homes uses. Judgment day came and MyDeposits ruled there was no damage to the property, but it claimed that Andy had broken his lease early, meaning that Baron Homes could keep the deposit as punishment.

I thought there had been an error. Andy had proof of an agreement to leave early, but, because both the challenge and the withholding of the deposit were not on this point, he had not provided the letter as evidence. I wrote to MyDeposits with the further information, and after chasing them for months, I finally got a very simple letter stating: “We don’t do appeals. There is no right to a review”. When I went back to Baron Homes, its response was to threaten that if Andy continued to complain, it would take him to the cleaners, charge him for council tax covering a period when he was not in the property and require him to settle the rent due. This required further appeals, including to Brighton Council, which, I am pleased to say, ruled in Andy’s favour.

All this is commonplace in Brighton and many other places up and down the country. Just as the law had to change to prevent the practices of people such as Peter Rachman, whose name in the 1960s became a synonym for exploitation and intimidation, so the law again needs to change to prevent the names of, in this case, Ms Blencowe, the director of Baron Homes, and many other landlords and agents from becoming synonyms for today’s unethical practices.

As a result of legal aid cuts, Andy has no access to legal advice and the only route left is an expensive challenge through the courts. Baron Homes and its partner in crime, MyDeposits, and landlords and agents across the country have in effect stolen my constituent’s money and that of many other constituents.

That is why I am introducing my Bill. Michael Ball, professor of urban and property economics at the University of Reading, concludes:

“Tenancy deposit schemes are poor value for money in the UK - costing the sector more than £275 million a year in fees and administration”.

He also points out that last year they released only £7 million pounds in disputed rents. A recent Nationwide survey found that the average waiting time for a deposit return was nearly two months. Most people do not realise it, but about half of deposits are not even held in a custodial scheme; instead, they are held directly by landlords and underwritten by their insurance, meaning that tenants have to complain to the insurance underwriter, which many do not do. Even when they do, as we have seen with my constituent, there is no right of appeal and no ability to set a precedent when a case is won, and of course, because the landlords are their clients, the companies have an incentive to keep them happy.

Some £4 billion is held in deposits in this country, almost all of it providing interest to the landlords or schemes, not the tenants. Generation Rent suggested I look at a deposit scheme in New South Wales, Australia. Set up in 1977, this scheme is wholly administered by the Government with no third parties involved. The landlord must deposit the bond in the scheme within 10 working days—no insurance, no underwriting—and every year the scheme earns interest of 56 million Australian dollars. Half covers the cost of running the scheme and the remaining 26 million dollars is used to fund services for tenants, including tribunal, advice, including legal advice, and advocacy programmes. Further, low-income tenants can receive what is called a “rentstart” loan, which is an interest-free loan from the Government to cover the cost of the deposit. Renters can also transfer deposits between tenancies. I propose that we introduce a similar scheme here.

Turning back to this country, £4 billion of private renters’ money is currently being held, as I mentioned, serving no productive value. If I was to put that in an ISA, it would produce £40 million to £80 million a year in interest. My Bill would create a single custodial tenancy deposit scheme that would eventually hold that £4 billion. I would propose to use the money to fund two areas.

First, the Bill would create an independent arbitration tribunal service that could hear disputes from landlords, agents and tenants, not only over deposit deductions at the end of a lease, but over whether a landlord had fulfilled its obligations in respect of tenant evictions and requirements for property repairs. It would be a way of abolishing no-fault evictions, and would provide tenants with a way of seeking redress without costly court proceedings. Until recently, MyDeposits even allowed landlords to withhold deposits without giving any reason whatsoever. That, along with their track record on due process and appeals, shows that we need to cut them out of the system altogether. It should be noted that £8 million would restore the early legal aid for housing that was removed by the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

Also, the money could be spent on renters unions. I am a trade unionist and a co-operator, and I know that unions and co-operatives turn power relations on their heads. After decades of privatisation in the housing market, landlords now have almost unprecedented power in the lives of the renting public. In Brighton we have a growing renters union called Acorn, a democratic member-led organisation that empowers its members with knowledge of their rights in the rental sector and takes direct action when it is required. If we funded such organisations they would be able to provide legal support and advocacy, and to fight for their members just as trade unions and co-operatives do. I have seen them achieve incredible successes—preventing evictions, winning repairs in dangerous properties, and stopping banks requiring landlords to discriminate against tenants on housing benefit. We could do that for all tenants throughout the country.

We can change the law all we like in this place, but unless we empower people out there with the tools and skills that they require to support their rights, our words and our laws are hollow. That is why my Bill is intended to establish a fund for renters unions to fundamentally rebalance the power relationship between landlords and tenants. It would cost the Exchequer no money, and it would provide justice in an area in which we desperately need it.

Question put and agreed to.

Ordered,

That Lloyd Russell-Moyle, Marsha De Cordova, Matt Western, Faisal Rashid, Yasmin Qureshi, Stella Creasy, Stephen Doughty, Gareth Snell, Mr Paul Sweeney, Catherine West, Ruth George and Helen Hayes present the Bill.

Lloyd Russell-Moyle accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 22 March and to be printed (Bill 358).

Business of the House (Today)

Ordered,

That, at this day’s sitting, the Speaker shall put the questions necessary to dispose of proceedings on the motion in the name of the Prime Minister relating to the UK’s withdrawal from the EU not later than 7.00 pm; such questions shall include the questions on any amendments selected by the Speaker which may then be moved; the questions may be put after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Mike Freer.)