Renters’ Rights Bill [HL]

Viscount Younger of Leckie Excerpts

Friday 10th June 2016 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Baroness, Lady Grender, for setting out the purpose of her Bill about the rights of renters. I know she is concerned about this issue and I congratulate her on bringing the Bill before this House.

The noble Baroness may not be surprised to hear that the Government have some reservations about the Bill, some of which have been raised already by noble Lords, and I would like to explain these for the benefit of the House. I have listened carefully to the debate. Of course, many of these issues were discussed at some length during the passage of the Housing and Planning Act, as the noble Lord, Lord Kennedy, has stated. I welcome the opportunity to debate these issues further and offer clarification where I am able to do so, and of course to answer a number of questions that have been raised.

The Housing and Planning Act 2016, recently before this House, introduces a strong package of measures that will enable local authorities to do more to improve standards in the sector and ensure that rogue landlords are forced to either improve or leave the sector. Measures include establishing a database of rogue landlords and property agents, for the first time introducing banning orders for the most prolific offenders, as well as enabling powers on electrical safety and client money protection.

The Bill before us contains five clauses, although for the sake of avoiding too much bureaucracy I shall leave out the fifth clause on the Short Title at the end. The first clause provides for tenants to have access to the database of rogue landlords and property agents. As the Government explained when introducing provisions for the database in the Housing and Planning Act, the purpose of the database is to allow local authorities to use the information to protect tenants, targeting enforcement action and promoting compliance. Giving tenants or potential tenants access to the database might be fine if the purpose of the database was to blacklist landlords and drive them out of business. However, that is not the purpose of the database. Where a landlord should not be in business, the local authority should apply for a banning order.

The proposed database is primarily for the purpose of ensuring that those landlords and property agents who have committed banning order offences can be monitored by local authorities to ensure future compliance with the law. It also ensures that where necessary those authorities can target enforcement against them. The database will help local authorities to drive up standards in their areas and ensure that those landlords entered on to it raise their game, so that their properties are safe and well managed for the benefit of tenants.

My noble friend Lady Evans, who is not in her place today, made a good analogy during the Report stage of the Housing and Planning Act that I should like to use. Rather similar to penalty points on a driving licence, a person will remain on the database for a specified period—a minimum of two years. Also like someone who has incurred penalty points, continuing to breach the law may result in a ban. While it is important that people who commit banning order offences should be liable to be monitored through their entry on to the database, this does not mean that the public at large should have a right to know about those offences, especially if they are not so serious as to warrant the local authority immediately seeking a banning order. Again there is an analogy with driving offences because there is no right for the public at large to know whether a person has received penalty points on their licence. The information on the database will relate to criminal records and is highly sensitive. Releasing this information to tenants or prospective tenants could jeopardise individuals’ rights to privacy and cause unnecessary anguish. I have heard noble Lords’ strength of feeling about this, but it is right that a tribunal should consider the evidence and decide whether a ban is appropriate. A tribunal will look at the seriousness of the offence, which can vary considerably, as noble Lords will be aware, as well as evidence of the likelihood of reoffending. This is the appropriate route for a ban, not effectively blacklisting landlords by publicising their convictions.

I move on to Clause 2, to which most of the comments of the noble Baroness, Lady Grender, were addressed. This concerns banning letting agent fees. The Government are clear that the vast majority of letting agents provide a good service to tenants and landlords and that most fees charged reflect genuine business costs. I note that the noble Baroness did acknowledge this briefly in her comments. I do not believe that a blanket ban on letting agent fees is the answer to tackling the small minority of rogue letting agents who exploit their customers by imposing inflated fees for their service. However, I did listen carefully because several examples were highlighted by the noble Baroness. It is true that there are such examples around and I do not want to dismiss them.

While landlords and letting agents are free to set their own charges, under existing consumer protection legislation they are prohibited from setting unfair terms or fees. The noble Lord, Lord Palmer of Childs Hill, went into more detail on this, for which I am grateful. However, we have gone further through the Consumer Rights Act 2015 by requiring letting agents to publicise a full tariff of their fees, and by saying whether or not they are a member of a client money protection scheme and of which redress scheme they are a member. These details must be displayed prominently in their offices and on their websites, and for the first time a fine of up to £5,000 has been introduced for agents who fail to do this.

I have taken note of the comments raised by the noble Baroness, Lady Grender, and the noble Lord, Lord Foster, and in particular by the right reverend Prelate the Bishop of Derby, all of whom alluded to the experience in Scotland. As mentioned, the Scottish Government clarified rent laws a little while ago in 2012, banning any letting agents’ fees beyond rent and a refundable deposit. I believe this was raised by the right reverend Prelate, but the research conducted by Shelter since this clarification suggests that only 18% of letting agency managers believe that the enforcement or penalty measures for non-compliance were robust enough. In August 2015, Shelter Scotland reported that around 1,500 people have tried to reclaim nearly £250,000 since the law was clarified. Its research suggests that around 10% of letting agencies do not comply with the ban. We should take note of that. The right reverend Prelate suggested that the fee should be predictable and ideally moderate. I acknowledge that. He also suggested the possibility of a fixed fee and the House should take note of that. My overall conclusion, however, is that the Scottish experience may not be a panacea for the way forward.

The Government want to strengthen the hand of consumers to tackle the minority of agents who offer a poor service and engage in unacceptable practices. Since 1 October 2014, it has been a legal requirement for letting and managing agents in England to belong to one of the three government-approved redress schemes, which offer a clear route for landlords and tenants to pursue complaints, to weed out the so-called cowboys who give agents a bad name, and, of course, to drive up standards, which we all want.

Banning letting agent fees would not make renting any cheaper for tenants. Tenants would still end up paying, but through higher rents. That is why the Government believe that ensuring full transparency is the best approach, by requiring letting agents to publicise a full tariff of their fees, giving consumers the information that they want and supporting the majority of reputable letting agents. Such transparency will help to deter double charging by letting agents—my noble friend Lady Gardner alluded to this issue—and enable tenants and landlords to shop around, encouraging agents to offer competitive fees. I also took note of the comments made by my noble friend Lady Gardner about the Australian experience. If I read her correctly, this is the opportunity for consumers to go and buy a generic agreement in an Australian post office. I thought the costs rather high, but my maths might be bad in trying to convert Australian dollars to the UK. I hope my noble friend will forgive me. However, and this might help answer the question raised by the noble Lord, Lord Foster, we still believe that it is too early to say how successful these measures are. They need time to bed in and the Government have committed to reviewing the impact of letting agent fee transparency later this year.

Clause 3 is an important clause on electrical safety. After listening to the strength of support from the sector, and in this House during the passage of the Housing and Planning Act, the Government now have an enabling power to allow and enforce requirements to protect private sector tenants from electrical hazards in the home. I remind noble Lords that this is secondary legislation subject to the affirmative procedure. This is a very important issue and the Government are committed to ensuring that private sector tenants are protected. However, it is also a highly technical area and we need more time to explore appropriate options with the relevant experts in the sector to test the most effective approach. We plan to conclude further research as soon as possible, but we must ensure we take sufficient time to work with the sector so that any requirements are properly assessed. However, we are mindful of the need to ensure any requirements are beneficial and strike that important balance between protecting tenants and not overburdening the sector.

I took note of the comments raised by the noble Lord, Lord Palmer of Childs Hill, and I thank the noble Baroness, Lady Grender, for writing to me on electrical safety in advance of the debate. I reassure the House that officials have spoken to Electrical Safety First, following a letter written by my noble friend Lady Williams of Trafford. We will be in touch in due course. In other words, there is something happening, but we want to involve industry experts in ensuring detailed options. Electrical Safety First is one of the key stakeholders we will involve.

Before I address some questions that were raised, I turn to Clause 4 on the licensing of houses in multiple occupancy, so-called HMOs. Local authorities fully consider the past behaviour of landlords and agents who apply for a licence for an HMO. A local authority is already required to have regard to a range of factors when deciding whether to grant a licence under the Housing Act 2004. These include: whether the applicant has committed any offence involving fraud or other dishonesty, violence or drugs, or certain serious sexual offences; whether they have practised unlawful discrimination; or whether they have contravened any provision of the law relating to housing or of landlord and tenant law. These factors would be likely to include all the offences leading to inclusion in the database.

The database will be a key source of information for local authorities when taking decisions on whether to grant a licence. These safeguards are important as it is clearly essential that the local authority can be confident that a licence is granted only to a landlord or agent who is a fit and proper person to operate a house in multiple occupancy, or a property subject to selective licensing, and will not pose a risk to the health and safety of their tenants, many of whom may be vulnerable. That issue was raised earlier in the debate. It is right that local authorities use the information on the database and other evidence to take a decision that reflects all the individual circumstances, rather than requiring a blanket ban. A blanket ban might have unintended consequences. For instance, it could mean that local authorities include landlords on the database for a shorter period, reducing its longer-term effectiveness.

Focusing on that issue of vulnerable tenants, the noble Baroness, Lady Grender, may like to note—this is not any form of complacency on our part; it is just a fact to present to her—that 82% of private renters are satisfied in their accommodation and 78% of private renters moving in the last three years ended their tenancies due to their wish to move, not for any other particular reason. Clearly there is more to do but that is just of interest.

The noble Lord, Lord Palmer of Childs Hill, raised briefly the issue of the definition of a rogue landlord. Anticipating that this question might crop up, I reverted to Hansard because my noble friend Lady Williams was asked this as a Written Question. I can only repeat what she said, which to me sounds quite plausible. She said:

“The term ‘rogue landlord’ is widely understood in the lettings industry to describe a landlord who knowingly flouts their obligations by renting out unsafe and substandard accommodation to tenants, many of whom may be vulnerable”.

That is not the definition but it is a definition, and I hope it can be built upon.

The noble Lord also asked what we think about mandatory electrical safety checks, which comes to the core of Clause 3. Any regulations introduced must balance protecting tenants with not overburdening the sector. That is why we are taking time to explore the appropriate options with experts in the sector. It would not be appropriate to pre-empt the results of our planned further research. That takes account of what the noble Lord said earlier on whether electrical checks should take place every five years. Maybe that should be four or three, but these issues take time to work through. We realise that we should expedite this as soon as we can. He also asked when the work on introducing regulations would start. We are already making arrangements to set up a working group to explore the appropriate options with experts in the sector. That group is expected to meet later this summer.

My noble friend Lady Gardner of Parkes and the noble Lord, Lord Foster, asked about the cost of the database. Local authorities will be able to keep charges for civil penalties and use them for housing-related purposes. We are working with the stakeholders to develop this database on that basis. We have said that we will keep this under review. We will keep in touch with the noble Lord, Lord Foster, on that particular point.

The noble Lord also raised the issue of letting agent transparency, some of which I perhaps covered earlier, and the fact that the fees legislation is simply not working, as he put it rather succinctly. The regulations are enforced by local authorities, which are able to recoup fines from successful prosecutions and can use them to carry out their housing functions. We think this acts as an incentive to enforce the regulations. The maximum fine is set, as I said earlier, at £5,000.

I hope that I have covered all, or nearly all, the questions that were raised. If not, I will be very happy to write to noble Lords. In closing, I applaud the principles behind the Bill. I have much appreciated discussing these matters further so soon after the passage of the Housing and Planning Act. However, as noble Lords will expect, I express my reservations given the measures recently passed by this House during the passage of that Act. We need to allow time for many of these measures to bed in and take effect.