Tenant Fees Bill

Debate between Lord Kennedy of Southwark and Baroness Grender

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

[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.

Homes (Fitness for Human Habitation) Bill

Debate between Lord Kennedy of Southwark and Baroness Grender

2nd reading (Hansard): House of Lords
Friday 23rd November 2018 Lords Chamber

[Lord Kennedy of Southwark]

I am certainly not talking about exemplary damages, but what if a landlord has been prosecuted and has to pay some compensation? Those are not exemplary damages.

[Baroness Grender]

What we were looking at when I tabled the amendment in Committee was compensation for expenses but, in addition, some kind of incentive, especially for people who are not on high incomes, to take the case forward. However, I am sure we will explore this further.

Tenant Fees Bill

Debate between Lord Kennedy of Southwark and Baroness Grender

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.

Tenant Fees Bill

Debate between Lord Kennedy of Southwark and Baroness Grender

Monday 5th November 2018 Grand Committee

[Baroness Grender]

I thank the Minister, especially for agreeing to take a look at multiple holdings. I look forward to working with him and his team on the guidance. There is some guidance, and the noble Earl, Lord Lytton, will be very relieved to hear that there is a suggestion in it that a tenant might produce a typo, but no suggestion that any landlord would do so. I am using a small example of something I have spotted already in the drafting. I very much appreciate that the guidance is a draft at the moment, and therefore I thank the noble Lord for the opportunity to sit down and work through the guidance to make sure that there is parity between tenants and landlords. There seem to be one or two disparities that I have already picked up from my brief reading of it over the weekend. That, in a way, is why I still want to pursue—and I am very happy to discuss with officials and the Minister—the possibility of getting some regulations to introduce transparency in holding deposits. I look forward to those discussions, but it may be that we will need to pursue this further on Report, depending on those discussions. With that, I beg leave to withdraw this amendment.

[Lord Kennedy of Southwark]

On the guidance, I accept the noble Lord’s point that it is a question of judgment and that he can point to other legislation where guidance is provided for in regulations. But does he accept that if it is guidance rather than regulations, that guidance is weaker because it does not have statutory back-up? That is the point I am making. The Bill addresses tenants’ fees, which we all agree are a problem. If the Government continue with the choice they are making at the moment, what they are offering people is weaker than if it was put in regulations. My other point is that if something does not happen on deposit fees—perhaps in regulations—this will be totally ignored.

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[Lord Kennedy of Southwark]

I think the Minister will find that, in other areas, people can be fined and be required to pay compensation as well, so I do not see the logic. Clearly, if it is an issue of amounts, that can be looked at. We are not going to agree on this, clearly. The principle that you can be fined and be required to pay compensation clearly is the case elsewhere. It is very unfair that the tenant—the victim, the person who has been out of pocket, ripped off and treated badly—should be thankful just to get their money back. It does not seem to be a very good place. Clearly, we are not going to agree on that at this stage.

[Baroness Grender]

I thank the Minister for his response, kind of. I gave four examples where, in industry, the Government do this already. It happens. I believe there is some merit in exploring it a bit further. If it is about the drafting, and one rules out the other, I am happy to look at how it is applied to the four existing examples where people are compensated and organisations are fined that I gave to the Committee. I would be very happy to look at that and work with officials before Report.

[Lord Kennedy of Southwark]

On my Amendment 8, if somebody has gone to a tribunal and the landlord has won then fair enough, they should be protected, but I am trying to get to an example where someone has enforced their rights. This poor tenant cannot get compensation but they get their money back, then the next day a Section 21 notice is served on them. That is the issue I want to deal with. It is really unfair for the tenants in these situations—proved right in a court of law, then given a notice to leave the next day. Without this, that could still happen.

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[Lord Kennedy of Southwark]

Clearly, this must be a result of my poor drafting, as that was not my intention, which I hope I have explained. I am worried about the people who have been proved right in a court of law. I thank the Minister for his comments, but I hope that this can be looked at, as there is an issue. Someone who has enforced their rights should have some protection, even for a limited period—they should not be able to be evicted the next day through a notice being served. I thank the Minister for his offer.

[Baroness Grender]

I thank the Minister for his olive branch, which I happily and heartily accept. I look forward to at least trying to work in this area. I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Kennedy of Southwark]

In moving Amendment 13 I shall speak also to Amendment 14, which is tabled in my name. Both amendments seek to highlight what is often, unfortunately, a recurring theme: the time it can take to make progress on important issues.

Under Clause 28, it will be a whole year after the Act comes into force before landlords will be subject to the consequences of the law if they make a tenant pay a prohibited payment. To be clear, that is not a year after the Act becomes law because Section 1 will not come into force until the Secretary of State decides by regulation when it should do so. We actually have no idea when it will come into force, if ever. It will certainly be some time after the Bill is enacted, and that is totally unacceptable. That is why I tabled Amendment 14, as it would bring the Act into force on the day it becomes law. Can the Minister please tell the Grand Committee when he thinks this legislation will come into force if he is not minded to agree to my amendment?

I remind the Minister and the Committee that it will be nearly two and a half years since the Government announced their intention to ban fees. Shelter has highlighted that that means spring next year at the earliest, and perhaps later. It will have taken longer to design and implement the ban on letting agent fees than the Government have taken to negotiate the Brexit deal. We will still have to wait with bated breath to see whether we end up with the final 5%, but that puts in context how long we have been waiting for this, and we still will not get there.

The delay in implementing the ban does not come without a price. We have already seen examples of some agents hiking fees in anticipation of the ban and, as a result, many tenants are currently facing even higher up-front costs than before the ban was announced. This waiting period is causing people real problems. The average letting fee among those who have paid fees appears to have risen significantly over the past two years. A survey of private renters shows that the average letting fee is £246, which is a significant rise compared with the average of £182 just a couple of years ago. The Government must recognise the price that people who rent are paying while waiting for these policies to be put into practice, and they must ensure that the Act comes into force on the day it is passed, as my amendment seeks.

The letting industry has known for many years that this ban would be coming and it has had sufficient time to adapt its business models. This delay is very disappointing and I hope that the Minister and his department will be able to respond positively. We need a fixed date and to get this legislation implemented as soon as is reasonably possible. We have waited far too long. I beg to move.

[Baroness Grender]

My Lords, I support these amendments. I have already raised my considerable concern about the timings. As the noble Lord, Lord Kennedy, said, the Government announced this measure in the autumn of 2016, at the same time as my Private Member’s Bill was progressing through the House, and I was absolutely delighted at their announcement. However, it feels as though it is taking a very long time. I know that the Ministers concerned are not responsible for that—they have worked very hard to push this through.

When the Government first started consulting on this issue, they rightly changed their mind and agreed to take a look at it. The consultation showed that the poorest tenants are being ripped off time and again, and that will not stop. If anything, it will get worse in the intervening period before this legislation is introduced. I am hugely in support of the legislation being introduced as quickly as possible. Generation Rent was talking to me about this only this morning. It is receiving evidence that letting agents are becoming more assertive over their administration fees to make up for what they believe to be a shortfall.

As I said at Second Reading, other organisations are playing a significant role in this matter. OpenRent, which I will mention in later arguments, started in 2012 and is now the largest letting agent in England and Wales. It has made a profitable model on the basis of never charging fees to tenants. Therefore, it is perfectly possible for an industry to be ahead of the legislation. However, with the exceptions that I have described, this particular industry is not ahead of the legislation, although it has been warned again and again. There has been working group after working group on this issue.

I was absolutely delighted that the Government decided, very wisely, in the Autumn Budget Statement of 2016 to flex their muscles and get on with this, but we need to do it. I would find any further delay, or suggestion of it, in the Bill extremely worrying, which is why I support the amendment.

[Lord Young of Cookham]

I am grateful to noble Lords for taking part in the debate. They have made their impatience over the date of commencement absolutely clear. We agree that we want this legislation to come into force as soon as possible, not least to protect the tenants referred to by noble Lords.

However, we need to strike a fair balance between protecting tenants and allowing landlords and letting agents time to become compliant with the legislation. The ban is not about unfairly penalising landlords and letting agents or driving them out of business. We have said that implementation will not be before April 2019; we intend it to be as soon as possible after that. Of course, at the moment we do not know when it might get Royal Assent. I understand that but we believe that there needs to be a reasonable gap between it reaching the statute book and it being implemented.

Turning to Amendment 13, the transitional provisions in Clause 28 provide that for the period of a year, the ban will not apply to tenancies whose terms were agreed prior to commencement. Similar transitional provisions are made for agents’ agreements with tenants. The amendment moved by the noble Lord, Lord Kennedy, seeks to reduce the period in which a landlord or agent could accept a payment prohibited by Clause 1 from one year to six months. We have already sought to give tenants greater clarity and protection with respect to the commencement date. Crucially, we have revised our position from that in the draft Bill, where there was no end date by which fees could be charged in pre-commencement tenancies. There has been a considerable shift towards protecting those who have already signed their contracts.

The noble Lord, Lord Kennedy, recognised that a transition period is necessary—his amendment proposes a slightly shorter one—because although most fees are charged at the outset of a tenancy, some landlords and agents will have agreed that tenants should pay other fees, such as a check-out inventory fee, at a later stage. Tenants will have signed contracts accordingly; we need to allow time for landlords and agents to renegotiate them to ensure that the legislation does not have a significant retrospective effect.

Our view is that 12 months is fair for the transition period. Data from the English Housing Survey shows that 45% of tenants had an initial tenancy of 12 months and 36% had one of six months. Reducing the period in which a landlord or agent could accept a payment prohibited by Clause 1 would mean that more landlords and agents with pre-commencement tenancies would be at risk of not being able to renegotiate their contracts and would not receive fees that the tenant had previously agreed to pay. Again, we do not believe that this would be fair.

We recognise the importance of having a clear point where the fees ban applies to all tenancies. As drafted, the transitional provisions mean that all tenants will receive the benefits of the fees ban one year after it comes into force; as I said earlier, initially there was no such arrangement. Unlike the proposed amendment, the provisions ensure that agents and landlords will not be significantly impacted on financially and will have the opportunity to review their contracts during the transitional year. I hope that the noble Lord will feel able to withdraw his amendment against the background of that explanation.