Renters (Reform) Bill (Fifth sitting)

(Limited Text - Ministerial Extracts only)

Committee stage
Tuesday 21st November 2023 Public Bill Committees

[The Chair]

With this it will be convenient to discuss the following:

Government new clause 2—Repayment of rent paid in advance.

Government new clause 6—Liability of tenants under assured tenancies for council tax.

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Jacob Young)]

May I join you, Mr Gray, in thanking members of the Committee for their engagement with the Bill so far?

My view is that the Bill delivers a better deal for renters and for landlords. As hon. Members are aware, however, we must tread lightly. This is a fine balancing act. Go too far one way, and good landlords will find it harder to operate and exit the market; go too far the other way, and the Bill will not give renters the protections we all seek against bad actors in the private rented sector. As we delve into the Bill, I ask all hon. Members to consider the impact of proposed amendments on that delicate balance.

Everyone has the right to a secure and decent home, whether they own it or are among the 11 million people living in the private rented sector; that is the guiding principle of the entire Bill. Clause 1 will remove fixed terms. It provides that tenancies will be periodic in future: under the clause, the tenancy will roll from period to period. Any term in a contract that includes a fixed term will not be enforceable.

The clause also has limits on how long a rental period can be. That is to prevent unscrupulous landlords from emulating fixed terms by introducing longer periods to contracts. Fixed terms lock tenants into contracts, meaning that they may not be able to end their tenancy before the end of the term and move to another property when they need to, for example to take a new job or when a landlord fails to maintain basic standards or repair a property. The changes will also give landlords more flexibility: they may end the tenancy when they need to, under specified grounds that are covered in later clauses, rather than waiting for the end of the fixed term.

Government new clause 2 will require landlords to refund rent in advance where the tenancy has ended earlier than the duration already paid for. That applies regardless of how the tenancy came to an end. It will ensure that rogue landlords do not try to lock tenants in with large up-front payments.

Government new clause 6 will deliver a technical change to council tax rules in the light of the abolition of fixed-term assured tenancies. It will ensure that tenants who hold assured tenancies are liable for council tax until the end of their tenancy agreement. In particular, tenants will remain liable for council tax when they have served notice to end their tenancy but leave the property before the notice period has ended. That will ensure that liability for council tax does not pass back to the landlord until the tenancy has formally ended. I commend the clause to the Committee.

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a real pleasure to begin our line-by-line consideration with you in the Chair, Mr Gray. It is a genuine privilege to serve on a Committee with such evident expertise in the subject matter. It is my sincere hope that we can draw constructively on it all in the days ahead to improve this long-overdue but welcome piece of legislation.

As the Opposition argued on Second Reading, the case for fundamentally reforming the private rented sector—including by making all assured tenancies periodic in future, as clause 1 seeks to do—is watertight. As the Minister implied, regardless of whether someone is a homeowner, a leaseholder or a tenant, everyone has a basic right to a decent, safe, secure and affordable home. However, millions of people presently renting privately live day in, day out with the knowledge that they could be uprooted with little notice and minimal justification, if any. The lack of certainty and security inherent in renting privately today results not only in an ever-present anxiety about the prospect of losing one’s home and often one’s community, but—for those at the lower end of the private rented market, who have little or no purchasing power and who all the evidence suggests are increasingly concentrated geographically—in a willingness to put up with often appalling conditions for fear that a complaint will lead to an instant retaliatory eviction.

This House last legislated to fundamentally alter the relationship between landlords and tenants in 1988, when I was just six years old. The Minister may have been even younger.

[Jacob Young]

I wasn’t born!

[Matthew Pennycook]

Well, that just makes my point that the sector should have been overhauled a long time ago. The fact that it has changed beyond recognition over recent decades and now houses not just the young and the mobile, but many older people and families with children, for whom having greater security and certainty is essential to a flourishing life, renders urgent the need to transform how it is regulated and to level decisively the playing field between landlords and tenants.

This Bill is a good starting point to that end. We are glad that after a very long wait, it is finally progressing. However, we are determined to see it strengthened in a number of areas so that it truly delivers for tenants. In this Committee and the remaining stages, we will seek to work constructively with the Government to see this legislation enacted, but we also expect Ministers to give serious and thoughtful consideration to the arguments we intend to make about how its defects and deficiencies might be addressed.

Part 1 of the Bill seeks to amend the assured tenancy regime introduced by the Housing Act 1988. In the nearly 35 years since that Act came into force in January 1989, with some limited exceptions, all new private sector tenancies in England and Wales have been either assured or assured shorthold tenancies, with the latter becoming the default PRS tenancy following the implementation of the Housing Act 1996. As the Committee will know, assured tenancies can be either periodic or fixed, but the vast majority of ASTs are fixed.

Clause 1 will insert a new section 4A before section 5 of the 1988 Act, thereby providing, as the Minister made clear, that all future assured tenancies will be periodic and open-ended, and that they can no longer have fixed terms. That change will empower tenants by giving them more flexibility to end tenancies where and when they want or need to, including when landlords are not meeting their responsibilities and obligations or in instances in which the property that they have moved into is not as advertised. We support it.

We take no issue with Government new clause 2. Although we are not convinced that it is strictly necessary, given how the Apportionment Act 1870 applies to rent paid in advance, we believe that it is a worthwhile amendment none the less, to the extent that it makes express provision for that.

We believe that Government new clause 6 is a necessary change to how council tax works, given that the Bill abolishes fixed-term tenancies. However, in the sense that its effect will be to render a tenancy that

“is or was previously an assured tenancy within the meaning of the Housing Act 1988”

a “material interest” for the purposes of this Bill, we would be grateful if the Minister provided some clarification. Could he tell us the effect of the proposed change in circumstances in which a tenant used to have an assured tenancy but, after this part of the Bill comes into force, now does not because of circumstances that are out of their control? Let us say, to take an extreme example, that a tenant died prior to the end of their assured tenancy, and the relevant provisions came into force. Would their estate be forced to pay the council tax liability as a consequence of the new clause?

We understand the Government’s intention with regard to the new clause, which is to manage the transition between the two tenancy regimes when it comes to council tax. However, we are a little concerned that, as drafted, the new clause may be unnecessarily broad and may create some problematic outcomes. The explanatory statement accompanying the new clause suggests that it may have another purpose altogether—namely, to make people liable if they leave a tenancy without giving notice—but that raises the obvious question of how the Valuation Office Agency and the relevant local authority are meant to know that, and how the local authority might ever hope to find the tenant who is liable. Could the Minister tell us whether the Government have discussed the matter at all with either the Valuation Office Agency or the Local Government Association?

Lastly in connection with this new clause, is there not a risk that unscrupulous landlords may game this provision by claiming that there is still a tenant in situ who should settle the council tax liability, rather than the landlord doing so? Our concern is that the provision could be abused along those lines and that local authority revenue would suffer as a result. I would appreciate some reassurance and clarification on those points in the Minister’s response.

With or without the incorporation of Government new clause 2 and new clause 6—after clause 6 and before clause 20 respectively—huge uncertainty now surrounds the implementation of clause 1, and the rest of chapter 1 of part 1, as a result of the Government’s recent decision to tie implementation of the new system directly to court improvements. Whatever the motivation behind that—renters will no doubt have reached their own conclusions—the decision has significant implications for when clause 1 and the other clauses in this chapter become operational. We need answers today, so that those whose lives stand to be affected are clear as to what they are.

Clause 67, “Commencement and application”, gives the Secretary of State the power by regulations to appoint a day when chapter 1 of part 1, including clause 1, comes into force. In other words, the Bill has always given Ministers discretion as to precisely when the new system becomes operational—a matter that we will debate more extensively in a future sitting when we come to clause 67 itself and our amendment 169 to it.

The Government were previously clear that there would be a two-stage transition to the new tenancy system, with precise starting dates for new and existing tenancies to be determined by the Secretary of State, and that a package of wide-ranging court reforms was to accompany the legislation, but at no point prior to the response issued on 20 October this year to the Select Committee on Levelling Up, Housing and Communities did the Government indicate that the new system’s implementation was directly dependent on such reforms. As things stand, because of the Government’s last-minute change of approach, not only do tenants have no idea when the new tenancy system will come into force, but they do not even know what constitutes the requisite progress in respect of court reform that Ministers now deem is necessary before it does.

There are three distinct questions to which the Government have so far failed to provide adequate answers. First, is the county court system for resolving most disputes between landlords and tenants performing so badly that reform is a necessary precondition of bringing this clause and others in this chapter into force?

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[The Chair]

Before I ask the Minister to reply to the debate, may I make it plain that I have been relatively flexible in this first debate? I will not be so flexible and open-minded subsequently.

[Jacob Young]

I am grateful to you, Mr Gray, and to the Committee for their consideration. As you and members of the Committee have identified, we plan to debate further a lot of the things that have been discussed already.

I say to concerned hon. Members that the Government are committed to the abolition of section 21. In fact, I am sure the Committee is committed to the abolition of section 21. I invite any hon. Member who is not to speak now or forever hold their peace. That is exactly what we are debating today. No one could expect that the implementation of a brand-new tenancy system would not require reform. Surely all hon. Members agree that we need to get this reform right.

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[Matthew Pennycook]

Can the Minister tell us clearly why the two-stage transition process set out in clause 67 does not afford the Government enough time to make the necessary improvements?

[Jacob Young]

We will come on to that point when we discuss clause 67. I want to address some of the points that have been raised, particularly the question about bailiffs. HMCTS has already begun making improvements at the bailiff stage, including automated payments for debtors, to reduce the need for doorstep visits in those cases. We are also improving guidance to increase awareness of each party’s rights and responsibilities.

The hon. Member for North Shropshire spoke about the concern raised in evidence about longer fixed-term tenancies. I completely understand the hon. Lady’s position. I understand the genuine concern that she and the people giving evidence have. Our fear, which was rightly identified by the hon. Member for Brighton, Kemptown, is that to include any fixed-term tenancies creates a loophole. We are certain about abolishing section 21, so we do not believe that having a fixed-term tenancy will provide any security to the tenant. It could, in fact, lock a tenant into a property that they would be unable to get out of, even if the property was of poor quality, because the term of their tenancy was fixed. I hope that the hon. Member for North Shropshire can accept that.

I will write to the hon. Member for Brighton, Kemptown other Committee members specifically on the points raised by the Opposition on new clause 6. I am pleased that there is a consensus on clause 1. We all want to see this measure implemented. I commend it to the Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Abolition of assured shorthold tenancies

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider Government new clause 18—Abandoned premises under assured shorthold tenancies.

[Jacob Young]

Clause 2 removes the assured shorthold tenancy regime entirely, including section 21 evictions, meaning that in future all tenancies will be assured. Ending these section 21 no-fault evictions will provide tenants with more security and the knowledge that their home is theirs until they choose to leave, or the landlord has a valid reason for possession. It will allow tenants and their families to put down roots, providing them with the stability that we know is a prerequisite for achievement.

Government new clause 18 deals with property abandonment. The Housing and Planning Act 2016 introduced provisions that would allow a landlord of an assured shorthold tenancy to recover possession without a court order if the tenant had abandoned the property, owes more than two months’ rent and the landlord has served three warning notices. Those provisions were never brought into force and we consider they are inconsistent with the intentions of the Bill to provide greater security. Removal of the provisions will help prevent landlords from ending a tenancy without a court order where a property appears to have been empty for a long period. It is possible that, on occasion, a property may appear to have been abandoned, but the tenant is in hospital or caring for relatives. Instead, landlords will need to use one of the specified grounds.

[Matthew Pennycook]

Let me start by making it clear that the Opposition welcome Government new clause 18. Although I have not been in Parliament long compared with other Members, I have been here long enough to remember sitting on the Bill Committee for the Housing and Planning Act 2016. Part 3 of that Act, which this new clause repeals, was always a foolish provision, and has rightly never been brought into force. We believe it is right that we rid ourselves of what might be termed statutory dead wood.

Clause 2 will remove section 21 of the Housing Act 1988 and, as the Minister made clear, will abolish assured shorthold tenancies and remove mechanisms by which assured social housing tenants can currently be offered ASTs—for example, as starter tenancies—or be downgraded to an AST as a result of antisocial behaviour. The provisions in this clause, as well as those in clause 1, will be brought into force on a date specified by regulations made by the Secretary of State under clause 67. It is appropriate to raise a very specific issue on this clause. We have just discussed court improvements at length. I know that is not the Minister’s brief, and that this is his first Bill, but I have to say to him that his answers on court reform were not adequate. At some point, the Government will have to explain specifically what improvements they wish to see enacted and on what timeline they will be brought into force. Leaving that aside, can the Minister provide further details on precisely how the Government intend to phase in the provisions in this clause? What consideration, if any, has been given to preventing unintended consequences arising from the proposed staged implementation?

The guidance on tenancy reform that the Government published alongside the Bill on 17 May said:

“We will provide at least six months’ notice of our first implementation date after which all new tenancies will be periodic and governed by the new rules”—

that is when they will introduce Part 1, Chapter 1. It continued:

“The date of this will be dependent on when Royal Assent is received”.

I take that to mean that, at some point in the future, a Government Minister will hopefully determine that the court system is, in the their eyes, finally ready to implement the new system—although there is nothing in the Bill to ensure that will happen. He or she would then presumably announce that the first implementation date—that is, the date when all new periodic tenancies come into force—will be six months hence.

I would like the Minister to confirm whether my understanding of how the Government expect the process to develop is correct. If so, can he respond to the concern—the flip side of my hon. Friend the Member for Mitcham and Morden’s point on a rush to section 21 evictions—that this may create a clear incentive for landlords to offer new tenants a lengthy fixed-term assured tenancy before the new system comes into effect?

If the safeguard in the Government’s mind is that all existing tenancies will transition to the new system on the second implementation date, can the Minister provide any reassurance that the period between the first and second implementation dates will not be overly long? I raise the point because the guidance makes explicit reference to a minimum period between the first and second dates, but does not specify a maximum period after which the second date would have to come into effect. As the Bill stands, it could enable a scenario where all new tenancies become periodic, but there is an extensive period of time where all existing fixed tenancies remain as such. It could be an indefinite period, there is nothing in this Bill to put any time limit on it at all. I look forward to hearing whether the Minister can provide any reassurances in relation to that concern. If he cannot, we may look to table another amendment to account for this loophole, whether it is intended or unintended.

[Jacob Young]

I thank the hon. Member for his support. He asked about the first and second dates. He is entirely right on the first date—it is six months. The second date is 12 months. I hope that gives him reassurance.

[Matthew Pennycook]

Just to clarify: as I understand it, 12 months is the minimum. Is the Minister saying that there is a maximum? If not, will the Government consider introducing a maximum? I see the officials shaking their heads. There is no maximum in the Bill. We could have a system where, six months after Royal Assent, all new tenancies become periodic and all existing tenancies could remain fixed indefinitely. What is there in the Bill to prevent an incentive for landlords to rush before the first implementation date to hand out fixed tenancies across the board for very extended periods of time to circumvent the measures in the law?

[Jacob Young]

Ultimately, we want to bring in these measures as quickly as we can. The system will be in place soon. What I will do to give the hon. Gentleman the assurances he desires is to write to him further. We can agree on that principle and if changes are needed to the Bill, I am happy to consider them.

[Lloyd Russell-Moyle]

I want us to give the Minister an opportunity to elaborate on court reform, because it is also relevant to this clause, in terms of when it will be implemented and the indicators as to when it will be implemented. Will he be able to write to us, or publish after the Bill receives Royal Assent, what those clear indicator thresholds are regarding when court reform will be completed, so that it will be clear for everyone? It does not need to be set out in the Bill, but a commitment that the Government will do that, so that everyone will know when that threshold has been met, would be useful.

[Jacob Young]

I appreciate the hon. Gentleman’s concern about this point. As I mentioned earlier, I think we will discuss this issue when we debate clause 67, so we can have that debate then.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3

Changes to grounds for possession

[Matthew Pennycook]

I beg to move amendment 145, in clause 3, page 2, line 32, at end insert—

“(aa) after subsection (5) insert—

‘(5ZA) The court shall not make an order for possession under Ground 1 if the court is satisfied that, having regard to all the circumstances of the case, greater hardship would be caused by granting the order than by refusing to grant it.’”

This amendment would extend the greater hardship provisions to new Ground 1 (occupation by landlord or family).

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[Lloyd Russell-Moyle]

Thank you, Mr Gray.

We have a problem here. It is important that the court is able to weigh up where the greater hardship is. Is it a greater hardship to evict a tenant who has complained to the council so that the property can be fixed? Or is the ground being used to get rid of a tenant who is constantly complaining about enforcement action? Without an element of discretion—other amendments would afford wider discretion—and without this particular measure on greater hardship, there is a danger that ground 6A could be misused. That is why it would be good to hear reassurance from the Minister, particularly on amendment 150, that advice and guidance will be provided to the courts to ensure that the ground is not manipulated or abused, and that the Government are considering other changes to prevent that.

[Jacob Young]

I thank hon. Members for their contributions. I thank the hon. Member for Greenwich and Woolwich for his amendments 145, 146 and 150. As has been discussed, the amendments look to make grounds 1, 1A and 6A discretionary.

[Matthew Pennycook]

To clarify, the amendments do not seek to make those grounds discretionary in any case. We accept that they are mandatory. We believe that the amendments would allow those mandatory grounds to be used in almost every case, unless great hardship would result from them. They do not make those three possession grounds discretionary.

[Jacob Young]

However, judges would be required to assess whether possession would cause greater hardship than not. We think that would count as making the grounds discretionary.

The changes would add significant uncertainty to the system. It is right that landlords should have confidence in the process, and can manage their properties, including when they want to move into or sell a property. The uncertainty that the amendments would cause means that landlords may simply choose not to rent their properties in the first place if they know that they may want to move into or sell a property in future. That would reduce the vital supply of homes in the private rented sector. In the case of ground 6A, on enforcement compliance, if possession is not granted, the landlord would continue to be in breach of their obligations, and could face fines and other penalties. Given the adverse consequences that the amendments would cause, I hope that the hon. Member will withdraw them.

[Matthew Pennycook]

I am disappointed by the Minister’s response. I welcome the clarification he gave. The amendments would introduce a limited amount of discretion. We would argue that they do not make the grounds discretionary—it is a point of debate—but introduce a limited amount of discretion into the system. However, we trust judges in county courts to make these decisions in most cases. The amendments would put the burden on the tenant to prove great hardship, and make the presumption that the mandatory ground award will be issued in most cases.

I will bring the Minister back to some of the hypothetical scenarios I gave. We absolutely agree with the Government that landlords need robust possession grounds to take their properties back. In one of my hypothetical examples, the Bill would allow a terminally ill cancer patient to be evicted and put at risk of homelessness, just because the landlord wished to sell. They may have no need to sell; they might own eight properties and wish to sell one or two of them. In limited circumstances and cases, we should give the judges a bit of discretion. Otherwise, some very vulnerable and in-need tenants will evicted through these means.

I am disappointed that the Government have not accepted the amendments. I hope that they go away and think about them, but I will not push them to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Lloyd Russell-Moyle]

Following on from the debate on the last group of amendments, I want to add my concern about ground 6A. Where there are issues with fire or flood, landlords are often expected to find alternative accommodation before a house is vacated, but there is no such provision when enforcement action has to be taken. There is a real worry that a landlord who has multiple properties that are perfectly fit for habitation might seek to punish tenants who have pushed for enforcement, rather than moving them into those properties. That seems wrong, so it is important to require the courts to go through a checklist of other options that the landlord has to consider before they get to ground 6A.

The amendment also provides a checklist for landlords. They can go down it and say, “Okay, I need to comply with enforcement action. Have I considered these things?” It also allows the local authority to consider other courses that they could pursue, such as management orders. We do not want tenants punished. Although revenge evictions are illegal, we know that they happen time and again, because there are loopholes in the law. Closing those loopholes is important, and a statement from the Minister on the matter might suffice.

[Jacob Young]

I thank hon. Members for their comments. Amendment 149 would require judges to consider whether there are suitable alternative courses of action available before granting possession under ground 6A, which permits a landlord to evict if evicting a tenant is the only way that they can comply with enforcement action taken by a local authority. That includes cases in which, disgracefully, a landlord has received a banning order, meaning they are unable to continue operating as a landlord. It also includes situations in which a prohibition order is incompatible with the tenant’s continuing to occupy the property. The ground is mandatory, so there is certainty that possession will be granted to the landlord and they can comply with enforcement action taken against them. That means that tenants will not be left living in unsafe situations and gives local authorities confidence that their enforcement action demands can be adhered to.

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[Lloyd Russell-Moyle]

Will the Minister clarify that when courts grant possession under ground 6A, they will have to take into consideration whether that is the only option, and whether other options might be on the table? Confirmation of that would help courts’ deliberations in future.

[Jacob Young]

I should be clear that the landlords who are subject to enforcement action are the rogues; they are the people we are trying to root out of the system through the Bill. They are unlikely to be able to provide the suitable alternative accommodation that the hon. Member mentioned. If things get to this stage, they are that bad. We therefore do not feel that we can accept amendment 149, and I hope that the hon. Member for Greenwich and Woolwich will withdraw it.

[Matthew Pennycook]

I have been on enough Bill Committees to know that the Minister has been sent out with explicit instructions to resist amendments—we all understand that—but the Government will have to grapple with the Bill’s weaknesses regarding how the new possession grounds will affect tenants who are not at fault. They could clearly be affected by a landlord’s using ground 6A—a ground that I find perverse, because it allows for possession where the landlord is at fault.

The Minister gave the game away when he said that 6A can be used only when it is the only way that the landlord can comply with an enforcement order. Well, we could leave it to the court to make that determination under the amendment. If possession is the only way that the landlord can comply with an enforcement order, the court will grant the possession order, but there will be cases in which it is not the only way, and the Minister said that he encourages local authorities to explore those other means. I would say that, in those circumstances, encouragement is not enough. We need some provision to ensure that all alternatives are completely exhausted before this very severe mandatory ground—we are talking about eviction and potential homelessness—is brought into force.

[Jacob Young]

I take the hon. Gentleman’s point on board, but as I have outlined, these are landlords who are subject to enforcement action. Does he accept that such landlords should not be operating in the private rented sector anyway, and that this ground allows us to root out those bad landlords?

[Matthew Pennycook]

I think the Minister has to be very careful on that point. It depends on what the enforcement action is, and on the degree to which the landlord is at fault. The enforcement action could relate to a breach under the housing health and safety rating system that merely needs to be rectified before the landlord can continue to rent as an appropriate and good-faith landlord; or it could relate to a very severe enforcement ground, as the Minister described. I come back to the point I made when moving the amendment: there are other enforcement powers that could deal with those types of landlords. I gave the example of a management order under the 2004 Act. There are ways that local authorities could enforce that do not require a mandatory possession ground order to be awarded. All we are saying is: give the courts the discretion to decide that.

If the Government are not minded to give the courts that discretion, there are other ways that the clause might be changed. The local authority might be required to have first exhausted other grounds before the landlord can issue a 6A notice. Let us find a way of protecting tenants who are not at fault from being evicted by landlords. In this situation, landlords, not tenants, are to blame, and they could abuse this new mandatory ground in ways that will have detrimental consequences for tenants.

I hope that the Minister has taken that point on board. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.