Tenant Fees Bill

Debate between Lord Best and Lord Young of Cookham

Committee: 1st sitting (Hansard): House of Lords
Tuesday 20th November 2018 Lords Chamber

[Lord Best (CB)]

My Lords, it is worth underlining that this part of the Bill is an important measure to prevent what is a pretty common abuse, which is, when there is a change of tenancy, at little or no cost to the landlord, the agents involved making serious amounts of money, which the Bill would prevent them doing in future.

At Second Reading, I cited an illustration from my last intern, whose sister was taking her place in a flat share of three. Each of them, on entering the flat, needed to pay the agent a fee of £275 for the privilege of signing up. When one of the occupiers left and was replaced by her sister, the outgoing one was charged £250 for termination of the tenancy agreement and her sister, who was moving in on the same day with her packed suitcase, was charged £275 as a new tenant. The agents got £525 for this transfer from one sister to another. The landlord received exactly the same amount of rent, because there was no discontinuity in the rent paid.

In such circumstances, paying £50 as a takeover fee for the privilege of signing a photocopied document when one person moves in in place of another sounds quite enough. The guidance may be the best place to put this, but the test must be whether the landlord has suffered a loss of rent. If there is no such loss, surely the £50 should kick in as the maximum which the agents can take. One can understand the need to compensate if there has been a loss of rent because of a gap when one tenant has moved out and no new one has arrived. Otherwise, £50 sounds like a maximum not a floor.

[Lord Young of Cookham (Con)]

My Lords, I am grateful to all noble Lords who have taken part in this short debate relating to the charges that can be imposed for variation, assignment, novation or termination of a tenancy where these are requested by the tenant. We have previously set out that it is not fair to ask landlords and agents to pay reasonable fees where these arise from the action or request of a tenant. Following pre-legislative scrutiny, we clarified that both early termination and change of sharer costs were permitted, so long as these were fair. As a result, the Bill provides that a landlord or agent can charge a tenant in these circumstances, but such fees are capped at £50—one-tenth of the fee charged in the case cited by the noble Lord, Lord Best—or reasonably incurred costs if higher.

Amendments 27 and 28 seek to impose a hard cap on the amount that can be charged and to prohibit this charge in relation to a change of sharer. When considering how to manage these amendments, we share the caution mentioned by the noble Earl, Lord Lytton. We want to ensure that landlords and tenants can agree reasonable requests to vary a tenancy. Although we do not expect this charge to exceed £50, it is only fair that, where it does so, landlords and agents are able to recover their reasonably incurred costs. For example, if a landlord is required to undertake a search, conduct reference checks and amend tenancy deposit protection arrangements for a new tenant with no help whatever from the outgoing tenant, those costs may be higher than normal. Landlords and agents will need to be able to demonstrate, if challenged, that their costs are reasonable. They will have to justify them and, if they cannot do so, trading standards officers may have a case to investigate.

Crucially—this point was mentioned by the noble Earl, Lord Lytton—we do not want to create a situation where landlords are reluctant to agree to a change of sharer because they do not believe they can recover their reasonable, justifiable costs. This would not help tenants, who would be required to break their contract if they wanted to leave, nor would it help those hoping to move in to replace the sharer moving out. This matter was discussed during pre-legislative scrutiny and tenant representative bodies recognised the need for the ability to charge in such circumstances, provided that the risk of abuse was mitigated, which we have done by imposing a cap of £50 and requiring any additional costs to be reasonable. In its report, the Housing, Communities and Local Government Committee said that:

“We welcome the Government’s intention to clarify the legislation and to permit charges related to a change of sharer where these are requested by the tenant”.


Amendments 29 and 30 would place an obligation on the landlord to take reasonable steps to re-let the property where they have agreed to terminate a tenancy early. These amendments would also limit the loss a landlord can recover to the period reasonably required to find a new tenant, even if he was unable to find one.

An assured shorthold tenancy is a contract where a tenant commits to pay the landlord rent for a given period of time, the fixed term. The landlord is entitled to the rent for the entirety of that term. If the tenant seeks to leave the tenancy before the end of it, then they would need to seek agreement of the landlord to do so. Where possible, landlords should agree to this, and can ask the existing tenant to find a suitable replacement. We encourage them to do so through our guidance.

Turning to the amendment introduced by the noble Baroness, Lady Grender, paragraph 6(2) of Schedule 1 says:

“But if the amount of the payment exceeds the loss suffered by the landlord as a result of the termination of the tenancy, the amount of the excess is a prohibited payment”.


In other words, the landlord can only recover any loss they incur in permitting a tenant to leave early. They cannot double-charge for the same period of time. They are entitled to recover only the sum of any rental payments which would not be met by the start of a new tenancy. If a replacement tenant is found and there are no void periods, we would expect no early termination charge to be levied to the outgoing tenant. This has been reiterated in the consumer guidance for tenants and landlords, and we welcome the constructive comments made by the noble Baroness on our draft guidance.

However, looking at the amendment, we cannot necessarily expect landlords to know how long would reasonably be required to find a replacement tenant. This depends on several factors, including the rental market in the local area. Therefore, we expect landlords and tenants to consider on a case-by-case basis the likely void period and any reasonable charge for early termination. Again, we do not want to harm tenants by disincentivising landlords agreeing to a reasonable request to end a tenancy early or to a variation of a tenancy. That is not what this Bill is seeking to achieve, but there is a real risk of this if the amendments are agreed to. On that basis, I hope that the noble Baroness will withdraw her amendment.

Tenant Fees Bill

Debate between Lord Best and Lord Young of Cookham

Monday 5th November 2018 Grand Committee

[Lord Young of Cookham]

I hope the noble Lord will accept that, unlike other occasions when new responsibilities have been imposed on local authorities, in this case we are actually offering to help them with some pump-priming finance before the revenue stream comes on board. I hope he will accept that this is a welcome step forward from other initiatives taken by Governments of all complexions, where local authorities have been asked to do things with no resources at all and no opportunity of self-funding downstream. I can only repeat what I read out a few moments ago: the Government estimate that local authorities will incur a new burden in respect of enforcement of £500,000. I will make detailed inquiries to see if we can shed more light on exactly where that sum came from and will write to the noble Lord, with copies to other Members who have shown an interest. I will do that before Report.

[Lord Best]

Will the proceeds of the financial penalties be hypothecated for more enforcement? Trading standards officers work very hard in very difficult circumstances, after all the cuts they have had to face. The danger is that the fines come in but go into the big pot of local government finance and are used—poor old local authorities have many other calls on their time and money.

[Lord Young of Cookham]

I am happy to give the noble Lord the assurance that he seeks that the money will be reimbursed to the relevant section of the local authority that enforces this legislation and other related legislation dealing with rogue landlords.

Legislative Reform (Regulator of Social Housing) (England) Order 2018

Debate between Lord Best and Lord Young of Cookham

Wednesday 23rd May 2018 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, the draft order we are considering today is, I hope, a largely uncontroversial one. Indeed, it passed through the other place without a debate. It seeks to establish the Regulator of Social Housing as a stand-alone body. It implements the recommendation in the Tailored Review of the Homes and Communities Agency to establish a stand-alone regulatory body for social housing. In so doing, it removes any possibility of a potential conflict by separating out the regulatory function from the organisation, which is also responsible for investment. It will not, however, change how registered providers of social housing are regulated or how they operate on a day-to-day basis.

That is not to say that this change is insignificant. The change will ensure the continuation of independent and robust regulation of the social housing sector. At the moment, the regulation of social housing is the responsibility of the regulation committee, a statutory committee of the Homes and Communities Agency. While the organisation responsible for undertaking this function refers to itself as the Regulator of Social Housing, it remains legally part of the Homes and Communities Agency. It is independent from government and is crucial in underpinning investor confidence in the social housing market.

In 2016, the then Department for Communities and Local Government conducted a tailored review of the Homes and Communities Agency. The review was forward-looking and focused on the challenges faced by the agency. In respect of regulation, the review found there was a compelling case for change of the regulator’s structure. In recent years, the Homes and Communities Agency has expanded into commercial investments. This makes the agency, in some cases, both a secured creditor and regulator of registered providers. This potential conflict of interest did not exist when the decision was made to incorporate social housing regulation within the Homes and Communities Agency as, at that time, the agency’s funding predominantly focused on grant-making.

I should make clear that existing governance arrangements and an operational “ethical wall” have ensured that information has not been inappropriately exchanged between the regulation and investment functions. However, the financial landscape of the sector continues to evolve and become more complex. Because of that, it becomes ever more important that the Homes and Communities Agency and the regulator are best positioned to adapt to such changes and that commercially sensitive information is safeguarded. Moreover, it is crucial that the regulator is perceived to be adept at handling such complexities, so as to uphold lender confidence.

The regulator’s role and functions are set out in the Housing and Regeneration Act 2008, as amended by the Localism Act 2011. As a result, changes to primary legislation are needed to deliver a stand-alone regulator. We have used the powers in Section 2 of the Legislative and Regulatory Reform Act 2006 to deliver these changes through a legislative reform order. The order ensures that social housing regulation is made more consistent with better regulation principles by providing for greater accountability and transparency for regulatory activities.

I should also make an important point about legislative reform orders. They are intended to be used either to reduce the overall burden of regulation or to ensure that regulation is carried out in a more transparent or proportionate manner. They cannot be used to create new, or vary existing, regulatory functions. That means the current provisions on the regulatory and enforcement powers of the regulator contained in Sections 192 to 269B of the Housing and Regeneration Act 2008 remain effectively unchanged by this legislative reform order. These provisions set out the regulatory framework, for example around the economic and consumer standards that can be set and how they are monitored. They also cover enforcement powers at the regulator’s disposal, for example, to impose penalties or to award compensation in the event of failure by a housing association. So—to anticipate points that noble Lords may wish to make—changes to how the sector is actually regulated are better considered as part of the forthcoming social housing Green Paper. What this legislation will do, however, is to put in place the arrangements for a robust and independent regulator ready to adapt to any policy changes that may arise from these reviews.

A crucial part of the process of delivering changes through a legislative reform order is that there is public consultation on both the changes proposed and the use of a legislative reform order to deliver them. The department conducted a consultation in early 2017. While the number of responses was relatively small, they were overwhelmingly in favour of the move, including from the sector and investors.

I turn briefly to the specifics of the LRO. In effect, this order reverses the changes made by the Localism Act 2011 and removes the regulator from the Homes and Communities Agency, thereby making it a stand-alone, independent body. The detailed provisions that do this are set out in Schedule 1 to the order. Part 1 of the schedule establishes the regulator and transfers functions from the HCA to the regulator. Part 2 makes amendments to other legislation consequent upon the creation of the regulator. Part 3 provides for the transfer of property, rights and liabilities from the HCA to the regulator. Finally, Part 4 of the schedule provides for transitional and savings provisions consequent upon the transfer of functions.

To conclude, the creation of a stand-alone Regulator of Social Housing is a necessary change that will ensure that the sector continues to be regulated effectively. This is essential if we are to ensure that the financial markets continue to have confidence in the sector and to allow housing associations to invest in providing the homes that we need. I commend this order to the House, and beg to move.

[Lord Best (CB)]

My Lords, the argument over whether the grant maker for social housing and the regulator for social housing should be the same government body has raged for 45 years. I was in the midst of the argument back in 1973, representing the housing associations as chief executive of the National Housing Federation. The Housing Corporation was being greatly enlarged by the Housing Act 1974; it had been created 10 years earlier, but only to promote cost rent and co-ownership housing. My federation concluded that that the Housing Corporation, as the body responsible for paying out housing association grants—which frequently covered 90% of the capital costs in order to keep rents low—should also be the body responsible for regulating these organisations. Regulation meant registering each housing association as fit and proper and then visiting it to monitor performance, ensure probity, and so on. These regulatory processes to ensure good governance were of critical importance to the funding agency before it could allocate substantial government subsidies to the fledgling housing associations. It was natural then for the grant-making and regulatory functions to be combined.

With the arrival of housing benefit—the personal subsidies to tenants—charging higher rents created fewer problems and the Housing Corporation could reduce grants somewhat without those on lower incomes having to be turned away. The Minister was Housing Minister at the time. When it fell to him to oversee cuts to the Housing Corporation’s grant making, he could declare, with some justification, “Let housing benefit take the strain”. Moreover, loans from the Housing Corporation became increasingly less relevant after the Housing Act 1988, under which the housing associations could borrow the money they needed on the private market. So the dominant funding rule of the Housing Corporation was changing.

Increasingly, the combination of funding and regulatory functions within the one agency looked less relevant, and the earlier requirement for combining the roles in one body was becoming strained. The Labour Government, with Yvette Cooper as Housing Minister, in 2007 appointed Professor Martin Cave from Warwick University to review the position. Professor Cave argued convincingly that these were two different roles, requiring different skills. Indeed, Cave pointed out the potential conflicts of interest if the funder and regulator were one and the same.

Housing Associations

Debate between Lord Best and Lord Young of Cookham

Thursday 8th February 2018 Lords Chamber

[Lord Young of Cookham]

The noble Baroness will know that, for any given sum of public investment in housing, you can build either more houses at slightly higher rents or fewer houses at slightly lower rents. In 2010, her party and mine decided to go for the higher-output option. That was the right decision at the time to make faster progress in adding to the stock of good-quality, permanent homes for rent. In October last year, the Prime Minister announced an extra £2 billion for affordable housing and made it clear that a big chunk of that should be redirected towards social housing, as the noble Baroness suggests. We have listened to the representations from housing providers. The £2 billion will be available for social rents as opposed to affordable rents, and by lifting the cap on what local authorities can borrow we are enabling local authorities to build more council houses.

[Lord Best (CB)]

My Lords, the Minister knows that tens of thousands of affordable homes have been produced by requiring the housebuilders to include a percentage of affordable housing in all their big new developments. He will also know that over recent years the housebuilders have found a loophole—the so-called viability test, a specious argument—to renege on those obligations. Can he reassure the House that the Government are going to close this loophole, which is just a scam to enable the housebuilders to get out of the agreements that they have already made and increase their profits?

[Lord Young of Cookham]

The noble Lord makes a valid point. We are concerned at the way in which certain housebuilders use the viability test to reduce the percentage of homes on their sites for social housing. We are reviewing the viability test with a view to increasing the original intention on these sites to have a fixed percentage of social housing units.

Housing: Rental Market

Debate between Lord Best and Lord Young of Cookham

Thursday 2nd November 2017 Lords Chamber

[Lord Young of Cookham]

I am not sure that I would sign up for a short-term letting on those sorts of terms, which sound penal. Many landlords would rather have their property occupied throughout the year rather than for up to 90 days and then not used for the rest of the year. The balance we have tried to get in London is to safeguard the stock of long-term accommodation for rent by Londoners with the freedom for Londoners, when they are not using their home themselves, to let it out to other people who want to rent it.

[Lord Best (CB)]

My Lords, does the Minister agree that the real deterrent for landlords letting on the open market to people on lower incomes is the policies of the Department for Work and Pensions, which mean that, if the tenant is on universal credit, the landlord will not get any money for six weeks and will then not get the full market rent and therefore is having to make a sacrifice? With those deterrents from the welfare system, is it not likely that homelessness will rise as private landlords increasingly will not accept anybody who is on a low income?

[Lord Young of Cookham]

The noble Lord is right to raise the issue of universal credit. It is one of the issues that is now being looked at as we run up to the Budget later this month. We will also have a debate on universal credit later this month, before the Budget, when he can make the point again. However, in certain circumstances the rent can be paid direct to the landlord in order to provide the security of income that the landlord may need.