Private Landlords and Letting and Managing Agents (Regulation) Bill

Debate between Andy Sawford and David Nuttall

Friday 25th October 2013 Commons Chamber

[Andy Sawford (Corby) (Lab/Co-op)]

This has been an interesting debate, and I pay tribute to my hon. Friend the Member for Mansfield (Sir Alan Meale). He has introduced an incredibly important Bill which could help his constituents and mine, and those people around the country living in private rented accommodation who currently face problems. That will be welcomed by responsible landlords and letting agents across England.

The hon. Member for Shipley (Philip Davies) made—at some length—a point about current regulation, and I want to emphasise the conclusions reached by the Communities and Local Government Committee, which recently conducted an inquiry into the private rented sector. At that time I was a member of the Committee, and I believe we carried out a thorough inquiry and listened to a wide range of views. The Committee concluded that there must be better, simpler regulation. The hon. Gentleman is right to say there is a great deal of regulation in this area, but I reach a different conclusion: I believe that that is the problem, and a reason for trying to ensure simpler, better regulation.

The Committee stated:

“The Government should have a wide-ranging look at the legislation covering the sector and put in place a much simpler, more straightforward regulatory framework. Once it does this, it should launch a campaign to publicise this new framework, to ensure that all tenants and landlords are fully aware of their rights and responsibilities.”

I look forward to hearing what the Minister has to say about that, and I hope that he—like me—will welcome the Bill. I believe that it does much of that job for the Government, and meets the hopes of the Committee.

As we know, because my hon. Friend the Member for Mansfield powerfully set out the case, this country faces the biggest housing crisis in a generation. We have a rapidly growing private rented sector—we have heard some of the figures, and the Minister promises we will hear more—and too many people lack security and have to pay ever increasing rents that are now at a record high. Most worryingly for those of us who meet constituents and hear about their problems, or who go out and about talking to local residents on their doorsteps, in many cases people have to suffer poor-quality accommodation.

As a result of the growing housing crisis, more and more people are locked out of home ownership and living in the private rented sector, which is now bigger than the social sector. Last year, the private rented sector overtook the social rented sector for the first time in nearly half a century. Private renting is not just an issue for young professionals, as is sometimes thought, and there are now 3.6 million households in the private rented sector, including more than 1 million families with children. At a time when home ownership is falling, people are faced with record rents, and nearly 5 million people are on local authority waiting lists. Young people are waiting until their 30s before they can buy their own home. The Government should, of course, be building more homes—that is the real solution—but they should also be supporting renters and families.

The Bill sets out a series of measures that I believe will tackle the issues faced by private renters. It seeks to regulate residential lettings and managing agents, protecting tenants, landlords and the reputations of many responsible agents. It would end the confusing, inconsistent fees and charges regime, making fees easier to understand upfront and comparable across agents. It seeks to introduce a national register of landlords, to empower local authorities to improve standards and deal with rogue landlords, and to make written tenancy agreements mandatory. I will speak first briefly about the character of the private rented sector and landlords, and the role of letting agents, and I will then set out why I believe the measures in the Bill are to be welcomed and should be supported by the House.

The private rented sector is now a mainstream tenancy. Around 9 million people in England now rent privately, and nearly a third of all private rented sector households are families with children. Many of the new generation of renters are not there through choice, but because we as a country are simply not building enough homes. The gap between supply and need is ever-widening, and an increasing number of people are unable to buy a home or to access social housing.

The English housing survey suggests that about two thirds of all newly forming households enter the private rented sector because they have no other option. It has been predicted that, if the economy remains weak, 27% of low to middle-income families will be living in the private rented sector by 2025. Many young people are losing hope of ever being able to buy a home. By 2020, 1 million young people could be completely locked out of home ownership.

The private rented sector falls broadly—certainly as viewed in the Bill—into letting agents and individual landlords. There are now more than 4,000 managing and letting agents that are entirely unregulated. They do not even belong to voluntary bodies that encourage a responsible approach to letting and management practice. The hon. Member for Shipley spoke to us at length about the various national bodies that work with letting agents and operate in this sector. I have heard from those organisations—I have met them directly, and also heard them giving evidence to the Communities and Local Government Committee—but as with all self-regulation in all sectors and industries, there are problems.

[Mr Nuttall]

Does the shadow Minister not think that the Consumer Protection from Unfair Trading Regulations 2008 apply to this sector, which he claims is unregulated?

[Andy Sawford]

As I understand it, there are 70 laws that apply in some way to this sector, providing some form of protection. As I said at the outset, however, I fully agree with my hon. Friend the Member for Mansfield that we need to simplify existing regulation and provide better regulation. We should not be confused by the proliferation of regulation over time and think that it automatically provides protection. All the evidence from my surgeries and that presented to the Select Committee suggests that it simply does not provide protection.

As I say, there are now 4,000 managing and lettings agents that are entirely unregulated, and they do not even belong to voluntary bodies, so they are not encouraged to adopt the responsible approach to letting and management practice that, of course, characterises many letting agents. Although not all landlords use letting agents, nearly 1.4 million landlords and 3.6 million private rented sector households in England—huge numbers of tenants and landlords—are currently unprotected.

It is a peculiarity of current policy that although estate agents, who hold very little money on behalf of their clients, are regulated, letting agents, who hold significant sums on behalf of landlords and tenants, are not. There are very low satisfaction levels and very few safeguards in the sector. Citizens Advice found that 73% of the tenants it surveyed were dissatisfied with the service provided by their letting agents and reported that a significant number of people have difficulties contacting agents and saw serious delays in getting repairs. Although it is good to hear about the near nirvana that exists in Shipley, I have to say that that is not the experience across the country, and it is certainly not the experience of my constituents or, indeed, those of my hon. Friend the Member for Hammersmith (Mr Slaughter).

The report “Renting roulette” by Which? saw letting agents ranked second from bottom across 50 consumer markets. There are cases of agencies, even large and well-established businesses, running into difficulties because they have no client money protection, with both landlords’ and tenants’ money being lost. In some instances, this has not prevented owners of companies that have gone out of business while holding their clients’ money from subsequently resuming their activities—often as phoenix companies, as the Select Committee heard.

Few safeguards are in place to protect tenants, landlords or reputable agents from being undercut by unscrupulous counterparts. That is why I agree with some of the conclusions reached by the Office of Fair Trading that this market is not working properly. It is still possible to set up a letting or management agency with no qualifications whatever. There is no need to conform to requirements as to conduct or to provide mandatory safeguards for the consumer, and the Government have only recently moved—it is a welcome move, under pressure from the Labour party—to oblige letting agents to register with a redress scheme, whereby awards can be made against agents for quantifiable financial loss to clients.

Let me now deal with the issue of rip-off fees and variable charges, which have rightly been highlighted and which I hope the Bill will do something to address. A survey of letting agents found that 94% imposed charges on tenants in addition to the tenancy deposit and rent, or rent in advance. It also found a huge variation in the size of the charges. The charge for checking references ranged from £10 to £275. The charge for renewing a tenancy ranged from £12 to £220. In some cases, additional charges for a tenancy amounted to more than £600.

According to a survey conducted by Which? in October last year, the average holding deposit was one week’s rent amounting to £400, the average administration fee was between £120 and £420, and the average deposit administration fee was up to £29. The deposit could be anything between one month’s and six weeks’ rent. On average, one month’s rent was payable in advance. Credit reference checks were charged at between £43 and £90, and check-in fees were up to £60. That is a huge variation. How can it be justifiable for one letting agent to charge £220 to check references, when another can do it for £10? Surely that should not be presented as a separate fee. Other countries, even including Scotland, provide much clearer protections and stronger regulation to deal with such variable and unfair fees.

Some tenants are being charged up to £29 to renew a tenancy, and up to £120 just to check out of a property. It is clearly an absolute rip-off, and not to support the welcome and important measures in the Bill would be to allow that rip-off to continue. I cannot support the laissez-faire attitude that has been advocated by the hon. Member for Shipley. Indeed, it seems to me not just to be laissez-faire, but to represent a lack of care for all the people who are being grossly ripped off all over the country.

There are three principal areas of concern when it comes to rip-off fees and charges levied by unscrupulous letting agencies. As I have said, there is a substantial disparity between the fees charged by different agents for similar services, with no apparent difference in the quality of the services received. I have challenged organisations, even those that seek to extol good practice in the sector, to justify the charging of such variable fees by their members, and they have been unable to provide any such justification. That is why an increasing number of them now support measures such as those contained in the Bill.

For middle-income households moving into the private rented sector, fees and charges often constitute a significant up-front cost. At a time when the country is experiencing a huge cost-of-living crisis, caused in Downing street—living standards have fallen in 39 of the 40 months for which the Prime Minister has been in office—it is a huge ask, and often very difficult, for families to meet such costs. Too often, the charges are hidden in the small print. People are exploited by unfair fees that they were unaware that they would face. Letting agents should be required to publish information about their fees, properly and fairly, up front and very clearly, so that tenants know what they are getting into, and landlords know what they will be asked to pay to the letting agency.

Let me now say something about individual landlords, and those who hold a number of properties directly rather than through letting agencies. Of course there are many responsible landlords, and many of them are members of the organisations that have been mentioned today. I have interacted with those organisations, and I know that they seek to do a good job in ensuring that standards are met. They are aware that trying to ensure that tenants in the private rented sector are treated fairly is not only morally right, but good business. It must be acknowledged, however, that there are also many rogue landlords out there, and that they undermine responsible landlords by preying on vulnerable tenants. The reputation of the many responsible landlords and the good service that they provide are undermined by a large number of landlords who fail to offer good standards to their tenants, and by a small number of criminal landlords who deliberately prey on the vulnerable and exploit the current lack of proper, fair, effective regulation.

Shelter found that more than 85,000 complaints were made against landlords in 2011-12. Clearly none of them were made in Shipley, but I am sure that many were made in every other constituency in the country. Some 62% of them related to serious and life-threatening hazards, such as dangerous gas and electrics and severe damp, and of course while the measures would impose some burdens on individuals who might, for example, find themselves to be accidental landlords, we have to balance our consideration for the circumstances in which people find themselves as landlords against those very serious complaints from around the country, many thousands of them relating to serious and life-threatening hazards.