Tenant Fees Bill

Lord Kennedy of Southwark Excerpts

2nd reading (Hansard): House of Lords
Wednesday 10th October 2018 Lords Chamber

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, first, I draw the attention of the House to my relevant interest as a vice-president of the Local Government Association. Secondly, I welcome the Bill, which seeks to ban landlords’ and letting agents’ fees. It is something that the Labour Party has called for repeatedly and it delivers on a pledge that the Government made some time ago. It has taken a while to get this far. The private rented sector is a significant part of our housing tenure and an important part of the housing supply available to people. It has grown significantly and it is right that we should put legislation in place to protect people from unfair fees or practices in the private rented sector.

I rented in the private sector when I was in my 20s, having grown up in a council property with my parents, and I have been an owner-occupier for many years since. My involvement with the private rented sector was relatively short, but for millions of people and millions of families it could be the only type of accommodation they ever know. There are many excellent private landlords and letting agents who do a good job. Like lots of legislation, however, the Bill seeks to deal with unfairness, where the balance is unfairly loaded against the private renter, with fees being charged with little or no evidence of what they are for, of whether they are value for money or of any reasonable basis for how those fees were decided, and fees charged by landlords as well as letting agents.

The Bill seeks to ban landlords’ and letting agents’ fees, and most other up-front fees, by prohibiting what landlords and their agents can require a tenant to pay. As the noble Lord, Lord Bourne, has told us, the ban covers shorthold tenancies, tenancies of student accommodation and licences. Looking at the list of what can be charged for, I have an immediate concern that the Government have left the back door open and that, despite good intentions, the Bill runs the risk of not achieving all the Government want to achieve. I propose to go through the Bill and highlight those areas where I have concerns, and which I will be raising in Committee and on Report. The noble Lord, Lord Bourne, is someone I have huge respect for, as I do for the noble Lord, Lord Young of Cookham. In all our dealings, both noble Lords are courteous. I am sure they will listen carefully to the points raised around the House during our deliberations. I hope we will be able to persuade the Government that some areas of the Bill will require amendment. If not, and I am still not convinced by the arguments put forward by the Government, I will divide the House on Report stage a number of times.

Turning to the Bill and the issues that I have concerns about, what can be charged for? As the noble Lord told us, there is obviously rent. The Bill also includes a refundable tenancy deposit, capped at no more than six weeks’ rent. It is disappointing that it has been set at six weeks. This runs the risk of becoming the norm. I would prefer it to be set at four weeks, which is the level at which I believe the Prime Minister first indicated it would be set when announcing the policy some years ago. It also includes a refundable holding deposit, capped at no more than one week’s rent. I fully accept that a holding deposit should be paid, but this is set far too high. It should be capped at, say, three days’ rent or even £50—whichever is higher. At the same time, I would also like the tenant to be provided with a copy of the draft tenancy agreement, so that they can see in writing what they will be asked to sign. They can then raise issues with the landlord and/or the letting agent, while other processes are taking place. It is important for there to be full transparency on the part of the landlord or the letting agent over how they intend to treat a holding deposit, setting out clearly in writing, when the deposit is not returned to the prospective renter, the full reasons for the deposit not being returned. This will enable the renter to be more easily able to challenge the decision if they believe it is unfair.

We then have the ability for certain payments on assignment, novation or variation of a tenancy when requested by the tenant to be capped at £50, or reasonable costs incurred if that is higher. This provision appears open to abuse. How will reasonable costs be determined? What is the protection from the risk that the £50 becomes the minimum figure charged, and that tenants will pay much higher charges? I would appreciate it if the noble Lord could address that in his reply to the debate.

Payments associated with early termination of the tenancy when requested by the tenants, payments in respect of utilities, such as communication services and council tax, and payments in the event of a default of the tenant, such as replacing a lost key or late payment of a fine, are to be limited to the landlord or agent’s reasonably incurred costs, which must be evidenced in writing. This is another provision that I fear will be open to abuse. The Bill fails to protect tenants from unscrupulous practices where, in effect, the fees lost by landlords and agents will find their way back, being recouped through this provision. If the noble Lord, Lord Bourne, disagrees with me on this point, can he explain to me how the Bill in its present form guards against that? To guard against it, you have to go further than we have at present and clearly define matters, maybe in secondary legislation, saying what the Government mean and how it will apply. Secondary legislation will give the Government flexibility to amend regulations as necessary and give greater protection to tenants.

I am pleased to see the Bill dealing with enforcement and that for the first year at least some funding has been provided by the Government—although I am not convinced that it is at the right level. Trading standards, like other parts of local government, are under extreme financial pressure. The risk with inadequately funded extra requirements is that it will not be possible for the authority to deliver what is expected of it. I am not convinced that funding this work through fines levied in the future is the right model to develop a system that serves tenants, landlords and letting agents well. Perhaps the Minister can say a little about the thinking behind this when he replies to the debate.

I welcome the proposal to designate a lead enforcement agency. The Local Government Association’s suggestion that National Trading Standards should provide this function is well made and should be considered carefully by the Government when they make their final decision. Enforcement functions will be delivered by local weights and measures authorities. The local district council may also enforce provisions in the Bill if it so wishes. Can the Minister explain why the Government decided to construct the enforcement regime in this way? Is there a risk of confusion or duplication, particularly in the context of my earlier remarks about local government resources?

Where a ban is breached, tenants are entitled to a refund of illegal fees. The local authority can impose a financial penalty on the landlord or letting agent of up to £5,000 for a first offence with a further breach resulting in a fine of up to £30,000 or prosecution. In Committee, I will probe whether these fees are set at the right level. The tenant can apply to the First-tier tribunal for the recovery of illegal payments but is not entitled to any compensation. Why can the local authority not be empowered to recover the illegal payments on behalf of the tenant, in addition to imposing a fine, before passing the illegal payment back to the tenant? That would avoid the need to go to a tribunal in the first place and leave the landlord with the option of challenging the decision in the tribunal. It would be a real help to tenants.

Perhaps we should go even further with a compensation payment to the tenant who has been subjected to this abuse. It is not unusual in this country to award compensation to victims, in addition to levying a fine on an offender. If you have been ripped off and made to pay an illegal payment, you are a victim and it is not unreasonable to receive some element of compensation. That is certainly better than leaving the tenant who has been charged an illegal fee to go to the First-tier tribunal to recover the money taken from them illegally.

It is great that there is a provision in the Bill requiring fees to be published on third-party websites. My only question is: how prominently will they have to be displayed? I ask this because I am aware that companies over a certain size are required to have links to their modern slavery statements on their websites, but it is fair to say that they are not always the easiest thing to find. I want an assurance from the Government that there will be some sort of provision to ensure that they are put in a prominent place on the site. I support the provisions on client money protection schemes.

In conclusion, I look forward to Committee, where I will probe further, with a series of amendments that seek to engage the Government on the issues I have raised. I welcome the Bill. From my remarks, however, noble Lords will see that it can and should be significantly improved for private sector tenants. They are an increasing group of people who deserve regulations and legislation that afford them reasonable protection.

Tenant Fees Bill

Lord Kennedy of Southwark Excerpts

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

[Baroness Grender (LD)]

My Lords, I shall speak also to Amendments 29 and 30 and in support of Amendment 28, tabled by the noble Lord, Lord Kennedy. I thank the Minister for all the meetings with him and his officials and for the meeting today on guidance. I look forward to continuing to meet to make sure that we do what the noble Baroness, Lady Williams, described and make sure that the Bill is beautifully polished before it receives Royal Assent.

Amendment 27 would cap the change of sharer charge to £50 and Amendment 29 would avoid exorbitant charges to end a tenancy. Amendment 30 would avoid what I hope is an unintended consequence, which is that paragraph 6 of Schedule 1 allows landlords to insist on all the rent for the remainder of the fixed term. It aims to make the provision a little more tenant friendly by limiting the tenant’s liability for the rent to the point at which the property is relet.

Regarding a change of tenant, if a sharer moves out, it is normally their and the remaining housemates’ responsibility to find a replacement. The alternatives are for the remaining housemates to pay rent on an empty bedroom or for them all to move out, with the associated costs. Currently the fees associated with changing a tenant are comparable to those of starting a new tenancy. Indeed, Generation Rent recorded an average of £248 in its research. This reflects the limited options available to tenants rather than the actual costs involved. As the tenants tend to do all the marketing though sites such as Gumtree and SpareRoom, the landlord’s costs are limited to the referencing process. Even then, the existing tenants have an incentive to find a new housemate who will pass the referencing process and whom they can rely on to pay a regular rent.

If there is to be a fee, it should reflect the landlord’s or the agent’s reduced cost in that circumstance. The Bill as drafted says that the charge is capped at £50, but it still allows landlords to charge more than that—so it is not really a cap but more of a floor. The possibility remains that landlords would charge as much as they could. A true cap would not permit fees above a specified sum.

I turn to Amendments 29 and 30. People will always need to move unexpectedly in circumstances where their personal or professional life changes. The Government have recognised this through their proposed longer-tenancies model, which we welcome, giving tenants the flexibility to exit the tenancy without penalty before the fixed period ends. However, paragraph 6 of Schedule 1 allows landlords to insist on all the rent for the rest of the fixed term, which is unnecessary if they are able to relet the property, has the potential to create financial hardship for tenants and could even see some people trapped in difficult relationships. The amendments would limit the tenant’s liability for the rent until the point when the property was relet, which should take place within a reasonable timeframe. I very much appreciate that there is a little more clarity in terms of the draft guidance at the moment, but that is of course draft guidance and I am seeking to probe what can be in the Bill regarding this issue.

Regarding costs at the end of a tenancy, no one makes the decision to move lightly. To end your tenancy early would mean that you face significant changes in your personal or professional life. The Bill should therefore limit the cost of this where possible. As it currently stands, my understanding is that it would appear to make a tenant leaving a tenancy liable for the rent for the remainder of the fixed term, plus the costs of remarketing the property. A tenant moving out could pay all of this and the landlord could still get a new tenant within a month of the tenancy. The landlord therefore could possibly receive several months of double rent through sheer luck. To make it more of a level playing field and limit the departing tenant’s liability, the Bill should apply a reasonableness test. As soon as the property has a new tenant, the former tenant’s liability should end, and the landlord should have an obligation to deal reasonably with any request to leave. I beg to move.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, as this is my first contribution to the proceedings, I draw the attention of the House to my relevant interest as a vice-president of the Local Government Association.

This group of amendments covers Schedule 1 to the Bill, specifically around issues of changing or terminating the tenancy agreement. Amendment 28 is in my name and I have also put my name to Amendments 29 and 30, while I support the intention behind Amendment 27 in the names of the noble Baronesses, Lady Grender and Lady Thornhill. Amendment 27 would cap the amount that could be charged for a change in tenancy to £50, and that seems very reasonable. As the noble Baroness, Lady Grender, said, otherwise the £50 becomes a floor rather than a ceiling. The problem with the clause as worded is that it leaves the way open for a large amount to be charged. I think that that is unfair and not reasonable.

My Amendment 28 seeks to ensure that in a situation where the only change is that of a tenant, a charge cannot be made. I hope that the Government will agree that there is no loss of rental income if you are just replacing one name with another, and to allow a charge to be made in that situation seems very unfair.

Amendment 29 would require the landlord to react reasonably to any request for an early exit, including when taking steps to relet the property. If they do not do so, this payment would be a prohibited payment, for all the reasons that we have heard in this short debate. Amendment 30 seeks to provide better clarification than is provided by the schedule as presently worded.

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Moved by

[Lord Kennedy of Southwark]

31: Schedule 1, page 26, line 3, at end insert—
“( ) In the case of a payment to a landlord, such a payment is a permitted payment only if the landlord is required by the tenancy agreement to review the contract or contracts annually and make arrangements to switch tariffs or suppliers if this would be beneficial to the tenant.”

[Lord Kennedy of Southwark]

My Lords, Amendments 31 and 32 in my name seek to add two new sub-paragraphs to paragraph 8 of Schedule 1. The schedule is concerned with permitted payments and paragraph 8 is concerned with payments in respect of utilities. Amendment 31 seeks to place a requirement on the landlord to review the various utility contracts and switch tariffs or suppliers to one that would be the most beneficial to the tenant.

We are all aware that the utility market is competitive and that there is a whole range of offers and deals. If the landlord or letting agent is able to make a charge for utilities, it is not unreasonable to require them to do something about getting the best deal and the best value for the benefit of their tenant. Looking at the market to see what is available is not too onerous a task and a reasonable obligation.

Amendment 32 proposes that the amount charged to the tenant must be the reasonable costs incurred, and any excess would be a prohibited payment. This amendment seeks to close a potential loophole by restricting what can be charged to reasonable costs incurred. I beg to move.

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[Lord Young of Cookham]

My Lords, the Countess of Lytton is clearly even more formidable than the noble Earl.

I too have a lot of sympathy with these amendments, but I believe there are already sufficient existing protections—not in this Bill but in other legislation—which address the concerns raised by noble Lords. Landlords who resell energy to their tenants for domestic use are governed by maximum resale price provisions set by Ofgem under Section 44 of the Electricity Act 1989 and Section 37 of the Gas Act 1986. This prevents landlords from overcharging tenants; they cannot charge the tenant more than the landlord has paid. If the landlord does overcharge, the tenant is entitled to have the charge lowered and overpayments refunded. The tenant can also bring a claim against their landlord to the small claims court for the amount that has been overcharged plus interest. In addition, on other utilities, landlords are prohibited from overcharging tenants for the resale of water under the maximum resale price provisions set out in the Water Resale Order 2006. If the landlord does overcharge, the tenant can take legal action through the small claims court to recover any overpayment and the tenant is eligible to recover interest at a rate of twice the average base interest rate of the Bank of England for the period they have been overcharged.

Amendment 31 would specifically require landlords to review any contract held for the provision of utilities and to consider switching provider if this would be beneficial to the tenant. In the majority of cases, tenants will be responsible for paying their own energy bills; they will pay them direct to the supplier and not to the landlord. So in most cases, tenants will already have the right to choose their own supplier. The tenancy agreement will set out who is responsible for paying these charges. Where the landlord is responsible for paying the bills, they may seek to recover these costs through the rent or directly from the tenant but, as I have already explained, they are already prevented from overcharging for this for energy and water.

Through, for example, the How to Rent guide, we encourage tenants to speak to their landlord or agent if they think their utilities payments are too high or if they want to request a change of supplier. In many cases, it may be in the interest of the landlord to move to a more competitive supplier as that may help to market their property in the future.

In addition, the Government’s Domestic Gas and Electricity (Tariff Cap) Bill received Royal Assent on 19 July. This requires Ofgem to implement a price cap on standard variable and default tariffs, which will guarantee protection for the 11 million households currently on the highest energy tariffs.

Against that background, I hope the noble Lord will feel able to withdraw his amendments.

[Lord Kennedy of Southwark]

I thank all noble Lords who have spoken in this short debate, and particularly the noble Lord, Lord Young of Cookham, for his very helpful response. I will withdraw my amendment shortly, but I would like to check something. He helpfully set out the legislation which will prevent people from being overcharged by landlords, but I cannot recall off the top of my head whether this will be clearly laid out in the guidance so that people will be very much aware of their rights and obligations. That would go some way to allaying the fears that are behind these amendments.

[Lord Young of Cookham]

Before the noble Lord sits down I would like to say that that is a very helpful suggestion. We will indeed look at the guidance to see whether that suggestion can be incorporated.

[Lord Kennedy of Southwark]

In that case, I am happy to withdraw the amendment.

Amendment 31 withdrawn.

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Moved by

[Lord Kennedy of Southwark]

33: Schedule 2, page 27, line 27, leave out paragraph 7

[Lord Kennedy of Southwark]

My Lords, all the amendments in this group are in my name except Amendment 37, although I support that amendment as well. They seek to amend Schedule 2, which concerns holding deposits. Amendment 33 would remove from the Bill the ability for a holding deposit to be withheld if the prospective tenant is prohibited from being granted a tenancy due to the restrictions of the Immigration Act and has failed the right to rent check. It is of course a probing amendment and I look forward to the Government setting out their case to justify this part of the Bill.

Amendment 34 would strengthen paragraph 8 of Schedule 2 by adding the word “knowingly”. That is a reasonable bar to have to reach for a deposit to be lost. Otherwise, it is unfair on the prospective tenant. If you knowingly provide false and misleading information, fine, but if it is unintentional, it seems harsh that the deposit can be withheld.

Amendment 35 would allow a tenant to decide not to proceed with a tenancy by notifying the landlord or letting agent before the deadline. It gives the tenant a reasonable period in which they can change their mind and not lose the deposit. I hope the Government can respond positively to that amendment.

Amendment 36 seeks to put into the Bill a requirement, where a holding deposit is withheld, that the landlord or agent say why they are doing so; that they set out the information they believe is false or misleading and which has been relied upon to withhold the deposit; and that they explain how the tenant can challenge the decision, including how to get advice on doing so, to ensure that the decision is sound. Again, I hope that the Government can respond to this amendment because people should be able to understand why a decision has been made and be clear on whether there is anything they can do. If your deposit is withheld, it must be right that you be told why and that the reasons be set out. If you do not like the decision, you should be told where you can go to get further advice and challenge it.

The final amendment in the group, Amendment 37, has been tabled by the noble Baronesses, Lady Grender and Lady Thornhill. It looks sensible and I look forward to hearing the explanation behind it. I beg to move.

[Baroness Thornhill (LD)]

My Lords, I rise to speak briefly to the final amendment in this group, Amendment 37. I thank the noble Lord, Lord Kennedy, for his remarks and I should say that we support his amendments.

If the Bill is rightly concerned with redressing the balance of power a little more towards tenants, this modest amendment would surely do that. Its purpose is to ensure that on payment of a holding deposit, which can sometimes be a significant amount of money, the tenant actually gets to see the tenancy agreement and therefore knows the terms of the contract that they will be asked to sign and abide by. The real question is whether there is a good reason for tenants not automatically and always being given this right. I am at a loss to understand this. In life, if we buy a product or a service, we see all the terms and conditions. We tick the “I agree” box online, while on paper we sign on the dotted line—although, like me, I suspect that we do not actually read all of the small print. The situation we are discussing would not arise in any other consumer transaction, so the amendment seeks to ensure that the same applies when people rent their home.

It is impossible for tenants to spot and negotiate out of the tenancy agreement any unfair terms if they have not received it before signing or moving into the property, the more so as they might ultimately incur default fees. Even if they receive the agreement in good time, they do not have much power to negotiate the terms because they stand to lose their holding deposit if they walk away. The ability of tenants to negotiate unfair terms out of a contract would be made just a little easier through the provision in this amendment.

It is equally important that the Bill makes it clear that the draft tenancy agreement must meet a certain universal standard. Thus the amendment refers to the Consumer Rights Act 2015, the legislation that would form the basis for the standard. The rationale is that if the tenancy agreement contained unfair terms, the tenant could ask for those to be removed. If the landlord refused to remove them, the tenant could pull out of the tenancy and claim the holding deposit back on the basis that the draft agreement did not comply with the Consumer Rights Act.

Existing government guidelines for the Act on what are and are not “unfair terms” are quite clear. They talk about transferring risks to consumers—in this case the tenant—that cannot be controlled. The tenancy agreement might be the first time the tenant gets to see what default fees the landlord is setting, and sometimes, even more significantly—and perhaps horrifically—it does not specify the level of default fees they might subsequently wish to apply. Efforts elsewhere in the Bill to define default fees more tightly might help to address these concerns, but surely it is both fair and reasonable for tenants to have some ability to negotiate the terms of their contract before signing it.

[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords for their contributions and the noble Lord, Lord Kennedy, for moving his amendment.

This set of amendments deals with the treatment of holding deposits under Schedule 2 to the Bill. As I have set out on previous occasions, the purpose of a holding deposit is to enable both the landlord and the tenant to demonstrate their commitment to entering into a tenancy agreement while reference checks are undertaken. It is important that there is earnest from both parties to the agreement. As I have said on a previous occasion, it must be wrong for a landlord to have more than one agreement with a tenant; there can be only one on both sides. So that we have a case of what is sauce for the goose is sauce for the gander, we have to be careful in looking at the amendments.

Amendments 33 to 35, in the name of the noble Lord, Lord Kennedy, seek to make changes to the circumstances in which landlords and agents can retain a holding deposit. From the outset of this policy, landlords and letting agents have expressed concern that tenants speculating on multiple properties might be a side-effect of the ban. That is why we are allowing a landlord to ask for a holding deposit so that tenants can demonstrate that they are sincere in their application—as I am sure they are, in the vast majority of cases. It is a pledge from the tenant to a given property. This mitigates the risk of landlords and agents being out of pocket if a tenant registers an interest, only to withdraw if something better comes along. I therefore cannot agree to Amendment 35.

We also want to ensure that landlords do not take an overly cautious approach and preselect tenants that they perceive as the most likely to pass a reference check. Permitting landlords to retain holding deposits in circumstances where a tenant fails a right-to-rent check—which I referred to in discussion on the previous amendment, moved by my noble friend Lady Gardner of Parkes—is a key mitigation against such behaviour. I therefore cannot accept Amendment 33.

Amendment 34 suggests that a landlord or agent should refund the holding deposit only if the tenant “knowingly” provides false or misleading information. Again, I am afraid I cannot accept such an amendment, although I appreciate the spirit in which it was moved. Requiring the landlord to refund the holding deposit in these situations would be near-impossible because the landlord is unlikely to have the necessary evidence to prove whether a tenant has done something knowingly. It would simply be one party’s word against the other. Given that the landlord is liable for a significant financial fine, we believe that the inclusion of a “knowingly” test is more likely to lead to them taking a risk-averse approach, which would not help tenants. I firmly believe that the approach set out in the Bill with respect to holding deposits is the fairest to both landlords and tenants.

As I have said, I recognise the desire expressed by noble Lords for greater transparency regarding the treatment of holding deposits; I have previously indicated that I will look at that. I understand the rationale behind Amendments 36 and 37. Without a commitment on where we will end up, I am happy to look at this issue ahead of Report. I appreciate the valuable points made during the debate on these amendments and the importance for tenants of understanding how their holding deposit is handled and why it may not be returned. That seems entirely fair. I have listened to noble Lords’ concerns on these issues and will be happy to return to them on Report. I listened to the point made by the noble Lord, Lord Kennedy, and the points made by the noble Baroness, Lady Thornhill, on Amendment 37 in relation to sight of the agreement ahead of entering into it. Again, that seems to have some strength in it and I am happy to look at it.

I should say that we are making great progress; I believe that noble Lords who have looked at the guidance notes will acknowledge that. The notes, which will set out the procedures for, and the rights and obligations of, landlords and agents will provide great assistance in this area. That will support tenants in understanding how to seek appropriate redress if they are dissatisfied, including through provision of draft letters to help tenants raise concerns with their landlords and agents around the treatment of their holding deposit. As I have indicated, I am very happy that noble Lords from around the Committee should engage in this process with officials to help us to clarify points made in the guidance notes to improve them in the interests of landlords and tenants. I acknowledge that we have made some important strides in the process of making sure it is much more lucid and transparent, and less riddled with jargon.

Landlords and agents should give tenants sufficient time to understand the terms of any agreement before signing. I am clear on that. That is why the period before the deadline for agreement is there; it is intended to allow that. I will also ensure that a link to the consumer guidance on the Bill is included in the How to Rent guide. That will also help. Landlords are of course required by law to give their tenants these guides to help raise awareness. I hope those assurances enable the noble Lord and the noble Baroness not to press their amendments.

[Lord Kennedy of Southwark]

My Lords, I thank the noble Lord, Lord Bourne, for that thoughtful and helpful response to this short debate. I will happily withdraw my amendment shortly. Of my four amendments the most important was Amendment 36, which the noble Lord responded to in detail. I was pleased that he did so, because it is only right and fair that if your deposit is withheld you should understand why and how you can challenge that. I will certainly look at that and I hope to bring something back on Report. I thank him very much for that.

I also listened very carefully to the noble Baroness, Lady Thornhill. I thought she made a very strong case for her amendment. Again, I am very pleased that the noble Lord will look at that. I hope we will have something on Report that we can all agree on. At this stage, I am very happy to withdraw my amendment.

Amendment 33 withdrawn.

Tenant Fees Bill

Lord Kennedy of Southwark Excerpts

Report stage (Hansard): House of Lords
Tuesday 11th December 2018 Lords Chamber

[Lord Shipley (LD)]

My Lords, since we have begun Report I should declare my vice-presidency of the Local Government Association. I simply say that these are helpful and relevant amendments that have our support.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, as this is the first time that I have spoken on Report, I draw the House’s attention to my relevant interest as a vice-president of the Local Government Association, as the noble Lord, Lord Shipley, did. I thank the noble Lord, Lord Bourne of Aberystwyth, and his officials for a number of the amendments we will discuss, in this group and others. Generally they are very helpful and improve the Bill. That is good news for tenants, and I am genuinely very grateful for that. That is not to say that I agree with everything in the Bill, but I am pleased to say we are making progress. I am very happy to support these amendments and I concur with the noble Lord’s comments.

[Lord Bourne of Aberystwyth]

My Lords, I am very grateful for the noble Lords’ support. I beg to move.

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[Lord Bourne of Aberystwyth]

My Lords, I shall speak also to Amendments 51 and 53 to 57 in my name, and to Amendment 54, which is in my name and that of the noble Baroness, Lady Grender. These relate to payments made in the event of a default under Schedule 1 to the Bill.

As noble Lords will be aware, the Bill permits landlords and agents to charge default fees where a tenant fails to perform an obligation or discharge a liability arising under or in connection with the tenancy. This provision has been subject to much debate and discussion, and I have welcomed noble Lords’ valuable contributions on it—in particular, those from the noble Baroness, Lady Grender, and the noble Lord, Lord Kennedy.

I maintain that we should not seek to remove default fees provision from the Bill entirely and that landlords and agents should be able to recover certain costs sustained during the tenancy where the tenant is at fault. However, I have listened carefully to the representations that have been made and I appreciate the concern that landlords and agents might seek to use the default fees provision as a backdoor to charging tenant fees. This is certainly not something that we want to see happen and, although the Government have already taken considerable steps to minimise abuse, I agree that more can be done.

I believe that there are two main instances where tenants may be required to pay a default fee: if they lose their key or other security device giving access to the housing or if they fail to pay their rent on time. With that in mind, our amendments specify that these are the only circumstances under which a landlord or agent can charge a default fee. Amendment 54 will ensure that landlords and agents cannot write arbitrary default fees into tenancy agreements and makes very clear to tenants, landlords and agents where a default fee can be charged.

Landlords or agents will be able to require a default fee for the late payment of rent where the payment has been outstanding for 14 days or more. Amendment 56 sets out that landlords or agents will be able to charge interest at no more than an annual parentage rate of 3% above the Bank of England’s base rate for each day that the payment is outstanding. Any amount above this will not be permitted; it will be a prohibited payment.

With respect to the charging of a default fee to cover the costs associated with replacing a lost key or other security device, any such charge must not exceed the landlord’s or agent’s reasonable costs incurred and must be evidenced in writing to the person who is liable for the payment. The amount of any payment which exceeds the reasonable costs to the landlord or agent in respect of the default will be a prohibited payment. I believe that the risk of such a list being incomplete is mitigated by the provision in Clause 3 to bring forward amendments to the list of permitted payments through affirmative regulations, should this prove necessary.

I take this opportunity to speak to Amendment 52, tabled by the noble Lord, Lord Kennedy. This amendment seeks to provide that if one tenant loses their key or pays their rent late then other tenants in a joint tenancy cannot be held accountable. I am afraid that I cannot agree to such an amendment. Joint tenants are jointly and severally liable for the rent and for maintaining the property. That is the essence of a joint tenancy. If one joint tenant does not pay the rent, the landlord can seek repayment from all the other tenants. This is what tenants agree when they sign a joint tenancy and Amendment 52 would introduce a significant change as to how joint tenancies work in that regard. It would risk unfairly penalising landlords and unsettling the law in an established area.

With regard to a lost key, tenants will, again, be jointly responsible for the keys in the same way as they are all responsible for any damage to the property. Of course, tenants can make their own arrangements, and I am sure that the person who loses the key will generally be the one who makes any associated payment, but the tenants are all responsible to the landlord for the keys. It would be a significant change to alter this position and one that could be quite hard to enforce if there were disagreements between the tenants about who lost the key.

Finally, it has never been the intention that the Bill should affect a landlord’s or agent’s right to recover damages for breach of contract. Amendment 57 clarifies this position and ensures that such payments will not be outlawed under the ban. I am aware that there has been some concern about this provision and would like to provide reassurances now, as well as explaining why I cannot accept Amendment 58. Given that we are now listing default fees in the Bill, it is important that we include the provision permitting charging for damages. Otherwise it could be interpreted that we are prohibiting contractual damages. This would not be fair and would be a significant and substantial change to existing law.

Amendment 58 has no substantive effect. I believe that the intent of the noble Lord is to ensure that any damages payments are reasonable and evidenced in writing. It is not necessary to provide an amendment to this effect. In general, damages are meant to put the innocent party back in the position they would have been in had the contract not been breached—nothing further. No reasonableness test is therefore needed, nor appropriate. Similarly, to enforce a damages claim landlords or agents are required to go to court or to seek to recover them from the tenancy deposit. In both cases, they need to provide evidence to substantiate any claim. There is already a large amount of case law dealing with what is appropriate in a contractual damages case. I assure noble Lords that the inclusion of the damages provision is not a back door to default charges, as was suggested by the recent Citizens Advice briefing. Its analysis of this situation is inaccurate.

Regardless of whether an amount is specified, Clauses 1(6)(b) and 2(5)(b) prohibit an agent or landlord attempting to insert a clause requiring a payment—for example, saying that if you do X, you must make a payment—except in so far as this is permitted by paragraph 4 of Schedule 1, as amended. Both the examples of types of damages given in the Citizens Advice briefing do this and would therefore be banned under the Tenant Fees Bill. I appreciate the concerns raised by the noble Lord and seek to reassure him about this. I believe we had sought to agree that I could give reassurance on this at Third Reading, but I understand that we have not been able to come to any agreement about not voting. Perhaps the noble Lord will be able to give that reassurance shortly, or am I getting inaccurate information?

[Lord Kennedy of Southwark]

Absolutely inaccurate.

[Lord Bourne of Aberystwyth]

Right. Perhaps the noble Lord will be able to cover that.

As I have said, long-standing case law supports the courts not enforcing clauses that have no relation to the loss actually sustained, which in most cases would constitute an unfair contract term under applicable consumer law. The amendment proposed by Citizens Advice in its briefing would have no substantive effect. It is already the case in the Bill as drafted that the relevant person may recover the amount, or part, of damages where a claim for damages has been determined by the court or settled by agreement between the parties.

I believe the amendments in my name will help protect tenants from spurious charges by making it very clear when a default fee can be charged. I also remind noble Lords that we have made a number of significant amendments to respond to all the key concerns raised to date. I believe the amendments proposed in my name provide a fair compromise. I hope noble Lords agree with this, and I know it is in our interests to proceed with this vital legislation. I beg to move.

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[Lord Bourne of Aberystwyth]

My Lords, it might be helpful to the House if I deal with the rental issue first. If anyone wants to speak on that, I suggest they do so now. I apologise that we glossed over it earlier.

If there are no other points on the rental, I shall deal with the issues raised by my noble friends Lady Gardner of Parkes and Lord Flight, the noble Lord, Lord Shipley, and the noble Earl, Lord Lytton.

On the point that we have moved significantly from six weeks to five weeks, yes, it is a movement, but it is scarcely, as the noble Lord suggests, a fundamental shift. It is not as if we are moving from 10 weeks to one week. Perhaps I may provide some reassurance. All the evidence is that most people currently take deposits of between four or five weeks. It is not therefore massively inconsistent with current practice.

At the top end of the market we are retaining the six-week limit for the most expensive properties where the fittings and fixtures may be more costly. It will remain at six weeks where the annual rental is more than £50,000. I hope that provides some reassurance to those noble Lords who have raised the concern.

These are not issues of principle so much as matters of judgment. It is the judgment of Solomon and there will always be some people who disagree with where we are. However, as I say, we have looked at current practice, listened to what outside organisations have said and on that basis we have fixed it at five weeks for most people, but at the top end of the market we have retained the six weeks.

[Lord Kennedy of Southwark]

My Lords, we have jumped around these groups of amendments today. There appears to be an issue with the printing of the Whip’s sheet.

I wish to address my remarks largely to Amendments 50 to 58. Generally, I am happy with what I have heard from the Government today on most amendments, particularly those in this group. The exception is Amendment 57, to which I will address most of my remarks.

Members of this House discuss amendments to Bills all the time, but most are never voted on: they are probing and have been tabled to get answers from the Government. We go backwards and forwards as we seek to improve the legislation. My Amendment 58 is very much in that vein. The Government have put down Amendment 57, which I fully accept deals with damages and makes it clear that if there are any issues, the terms can be clarified in the future. Somehow, damages are being turned into prohibited payments, and I do not want to do that either, so I am with the Government on this issue.

However, on looking at Amendment 57, we were concerned about the heading, “Payment of damages”. We went to the Public Bill Office and talked to colleagues. We are concerned that, as written, it could be deduced—obviously, it is open to argument—that the reasonableness and fairness of such a payment cannot be questioned. It is not so much about going to court, but what happens when people are drawing up agreements and so on. We should remember that we are dealing with tenants and landlords, and the relationship between the two is not always one of equals.

For that reason, I have proposed, as an amendment to Amendment 57, my Amendment 58, which would simply remove the three words of the heading: “Payment of damages”. The provision would be retained but the heading would go. Removing the heading would, in effect, add the provision to the previous group, where a protection is provided: actions have to be reasonable, and reference is made to “evidence”. That is all my amendment is intended to do. I do not know if this is the right way to do it, but it has certainly enabled us to have this discussion today.

I tried to get an assurance from the Government that they would come back at Third Reading and discuss this issue further. It may be that people cleverer than me can come back with a better amendment. All I am trying to do is ensure that tenants are treated fairly and properly. I was happy to come back to this issue at Third Reading, and gave an assurance that we would not vote on it. I have the text message to prove it on my phone; I do not know what else I can say. To then be told that I did not give such an assurance—that is just not the case. I am really upset about this.

All I want to do is get this right. I do not want the Bill to become law and in a year’s time, we find the Government saying, “Oh, we made a mistake. We will change it when parliamentary time allows. We should have this on the rogue landlords’ database. We did not listen to you last time, Lord Kennedy, but of course you are right. When parliamentary time allows, of course we will put it right”. My intention is to get this right today. I have given that commitment and I have the text message, so I cannot see what the problem is in coming back at Third Reading in a few weeks’ time and getting it right. We are not going to vote on it, but I think the position should be clarified.

[Baroness Grender]

My Lords, I will come on to damages in a moment, but first perhaps I may take us back to the celebratory moment on this group of amendments: the fact that there has been a significant change on default. This has been welcomed loudly and clearly by those who lobby most for tenants. This is an extremely significant change which this House has introduced through a government amendment to which I have added my name. It specifies what a default fee is: it is now going to be for a key or a security device or for late payment on interest for rent.

I know that we are trying to sort out the damages issue, but I want to thank the Minister and in particular his Bill team. I am sure that they will read this tomorrow in the Official Report. I also thank Rhea Newman and Poppy Terry at Shelter, Hannah Slater and Dan Wilson Craw at Generation Rent and Caroline Aliwell at Citizens Advice. We have all been working extremely hard behind the scenes with many meetings, for which I thank the Minister and the Bill team, to get to a very good place with regard to default. Our original intention was to get it out of the Bill altogether, but the fact that the wording has been greatly tightened and is now so specific is a very big leap forward. It goes back to the original intention that many of us had when we wanted to propose this Bill in the first place.

Before we go back to the controversial issue of whether a loophole has now been introduced as regards damages, I would like to take a moment to remind us of what has now gone and was going to be charged by landlords, some of whose tenants are on an extremely low income or even no income. One of my favourites is £45 for the procurement of a dustpan and brush. Another is £500 for a reference and credit check, £200 to remove a new set of saucepans that had been left for the next tenant—a lovely example—and £100 for cobweb removal. Those are some examples of things that will no longer be a threat as a result of a loophole, thanks to the extremely welcome change of default.

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[Lord Bourne of Aberystwyth]

My Lords, it may be convenient for me to say that I regret any misunderstanding. I too thought that we had an agreement on this matter. Perhaps I may say two things. First, I propose to accept the amendment in the name of the noble Lord, Lord Kennedy. Secondly, I will be very happy to engage in discussions on this issue ahead of Third Reading. As the noble Baroness, Lady Grender, suggested, I am convinced that there is no reason for the noble Lord to be concerned—but I know that he is and so I will be happy to engage in discussion ahead of Third Reading. I hope that that is helpful.

[Lord Kennedy of Southwark]

I am absolutely delighted. I thank noble Lords for that. There was obviously some confusion, but I am sure that we can get this sorted out by Third Reading. I thank the Minister very much.

Amendment 50 agreed.

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Moved by

[Lord Kennedy of Southwark]

58: Schedule 1, in the heading, leave out “Payment of damages”

Tenant Fees Bill

Lord Kennedy of Southwark Excerpts

3rd reading (Hansard): House of Lords
Tuesday 15th January 2019 Lords Chamber

[Lord Kennedy of Southwark (Lab Co-op)]

I look forward to hearing the Minister’s response to my noble friend. I accept that these amendments are minor and technical and I am happy to support them.

[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords for their contributions concerning these amendments. I will say more at the final stage of the Bill—the passage, I hope—about the points the noble Baroness, Lady Grender, raised, but I thank her very much indeed. As always, I thank the most reverend Primate very much indeed for his positive contributions and engagement, and his most kind comments. He is extremely gracious. As always, the noble Lord, Lord Foulkes, asks a question that goes straight for the middle stump. I will write to him, if I may, on that issue because I do not want to mislead him.

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[Lord Shipley (LD)]

My Lords, I thank the Minister for his statement. He said that the Bill would improve the lives of millions of tenants, and he is absolutely right. It is a much better Bill as a consequence of the close cross-party co-operation it has undergone in your Lordships’ House.

I thank the Minister for his willingness to give a great deal of time, meeting regularly with us to identify outstanding issues. From these Benches, I thank my noble friend Lady Grender, whose assiduous campaign over a substantial period has led to fruition in this Bill, which is indeed a significant milestone in the support of tenants’ rights. I also thank Sarah Pughe, in the Liberal Democrat Whips’ Office, for her help. I also extend my thanks to the Bill team and all the officials who gave us a great deal of time in recent weeks while the detail of the changes that were being made in your Lordships’ House was finalised.

We lowered the level of the deposit cap to five weeks’ rent, listed default fees on the face of the Bill, introduced greater transparency around holding deposits, removed local authorities—I declare that I am a vice-president of the Local Government Association—and those acting on behalf of local authorities from the definition of a “relevant person”, and we addressed deficiencies in the client money protection scheme, among a number of other changes. Some of those changes are very important, and enable the Minister to say that the Bill will indeed help financially a large number of tenants.

I thank the Minister for his co-operation throughout this process. The last few weeks have been very productive, making sure that the Bill will stand the test of its application.

[Lord Kennedy of Southwark]

My Lords, the Bill before us leaves this House in a much better state than when it arrived. It has had a positive consideration across the House, and I thank every Member who has contributed to our debates and discussions, bringing their expertise and ideas. We have made a real difference and, as the noble Lord, Lord Shipley, outlined, some improvements to the Bill, so we have made progress. We have certainly made a positive contribution to the rights of tenants in the private sector, and it is important that we do that. I also thank the Bill team from the department, who have been courteous, helpful and informative, and have engaged with me and my noble friend Lord Beecham at any time. I am very grateful to them for that.

I thank the noble Lord, Lord Bourne, for whom I have great respect. We spend a lot of time on these Benches batting things back and forwards, and I have always found him courteous, friendly and engaging, and always willing to talk to me both inside and outside the Chamber. I also thank my noble friend Lord Beecham for his support and hard work, and I thank Rhian Jones from the opposition office. She has supported me with research and draft amendments and has helped me to understand the Bill—she understands it much better than I ever would—sending me out to battle with the right papers at the right time, fully briefed, so that I can raise things here. I am very grateful for all the work she does for us in our office, and I thank her very much for that. I am delighted that the Bill is where it is today, in a much better place.

Bill passed and sent to the Commons with amendments.