Private Landlords and Letting and Managing Agents (Regulation) Bill

Debate between Andy Sawford and Philip Davies

Friday 25th October 2013 Commons Chamber

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

I am surprised that the hon. Gentleman cites the Residential Landlords Association as being against the measures. It clearly told the Communities and Local Government Committee in its written evidence, and supported it in its oral evidence—I was at the session—that it is very much in favour of compulsory control of letting agents. It said that it is concerned

“that the local authority landlord and letting accreditation schemes are extremely light-touch in terms of consumer protection”.

It praised the Welsh legislative proposals to regulate letting agents and landlords and urged the Committee to propose that to the Government. I am therefore very surprised at what the hon. Gentleman says.

[Philip Davies]

I can only suggest that the shadow Minister speaks to the association and clears up any misunderstanding. I can do no better than to quote its exact words, which I repeat so that there is no doubt:

“We remain unconvinced by calls for a national registration scheme since those landlords that genuinely cause the problems will not make themselves known under any system.”

That is a perfectly clear statement by the Residential Landlords Association. If he thinks that its view is different, then perhaps he should take that up with it to clarify its position. I do not speak for it and am not trying to do so; I am merely quoting what it has said.

The Select Committee’s recent report also dealt with the issue of alternatives to the current licensing regime. It referred to a case in Leeds, saying:

“Leeds City Council decided against further discretionary licensing and has introduced a neighbourhood approach which was ‘seen as more flexible than licensing’…This approach targeted ‘neighbourhoods on a street by street basis addressing the area as a whole and dealing with standards in the private rented sector’”.

That more flexible approach has a lot to commend it. You will know Leeds city council well, Mr Deputy Speaker. It is not my local authority, but I believe it is Labour-run, and that is what it believes works for it. The Committee’s report says that Blackpool council has developed a similar area-based approach.

When the previous Government consulted on this suggestion and reported back in early 2010, the main concerns were listed in the consultation document that contained all the responses. Those concerns were valid then and are still valid now. The first main concern was that a better understanding was needed of likely costs. In particular, it was thought that linking other services to the register would increase costs, and it was suggested that they should be deferred until the register was up and running smoothly. Given that the Bill makes no mention of what the costs would be, that uncertainty will still be a factor that people are concerned about.

The second main concern was the objective of the register; there was a lack of common understanding of its purpose. It was not clear whether it was a comprehensive list of private rented properties and landlords or an attempt to enforce better behaviour. The same doubts still apply today. What on earth is the point of the register and what use is it to anybody?

The other concern was enforcement. It was said that more detailed consideration was needed of how enforcement and policing of the register would work in practice, and linked to this there would need to be clear central guidance on the criteria and process for striking a landlord off the register.

The Bill does not seem to address the concern about how enforcement and policing of the register would work in practice. That takes us back to square one, without any progress having been made on the position under the previous Labour Government in early 2010.

Clause 1(3) does not make it clear whether private residential landlords are individuals or individuals representing a company. I am sure the hon. Member for Mansfield would not want his Bill to encourage people to set up a company, rather than be individual landlords, in order to get around any regulations. I do not know whether he has a view on landlords of commercial properties. Would this be a register for private landlords with residential properties, but not for those with commercial properties? That would be a strange state of affairs.

I am anxious that other Members may wish to contribute and I do not want to take up all the time myself. Even though so many parts of the Bill need to be queried, I feel I should leave some of the other concerns to other Members.

I think that foreign landlords who own properties in the UK are good for the UK. I like to see inward investment in the UK, which we should always encourage. I am not entirely sure how the Bill would affect foreign landlords or how they would be made accountable to it. Has the hon. Gentleman given any thought to the effect it would have on foreign landlords? The flat I rent in London has a foreign landlord, as far as I can recall from the tenancy agreement, and I am sure that such a situation is quite widespread in London.

Foreign landlords have capital that they can invest in any part of the world. They are not tied in any way to the United Kingdom. Many of them may not even live here and for all I know some may well never have visited the United Kingdom, but they have made an investment here. In such a scenario, more red tape, more regulation and less return for an investment may lead to foreign landlords going to other parts of the world where they feel they can get a better return on their investment. That is what capital does. It would be a shame if we were to turn investment from the UK as a result of Bills such as this. I do not see any upside to it and have lots of doubts about it.

[Philip Davies]

My hon. Friend makes a good point that I was hoping to come on to. How would somebody come off the register? How would a landlord pay? Does the hon. Member for Mansfield envisage a landlord paying his money out on a pro rata basis? Would it be based on the number of houses? Would it be the rental income that determined the fee? There are all sorts of different scenarios that would cause particular issues for people and that may be grotesquely unfair in individual cases.

As my hon. Friend the Member for Bury North says, failure to register would be not just a civil offence, but a criminal offence: a person who is not on the register will have committed a criminal offence. Do we really want to use criminal law in that way? I would venture that it is not an appropriate use of the criminal law. There is much uncertainty about how the provision would be enforced and how people would know about it.

What about people who become landlords by accident when they inherit a property in which there is an existing tenant? Where would such a person stand? If their parent has died I am sure the hon. Member for Mansfield would accept that they would have an awful lot more on their mind than whether they were part of a registration scheme that they do not even know exists, because they have never been a landlord before. Is it really the hon. Gentleman’s intention that a person whose parent has just died and who is trying to deal with their affairs and organise a funeral should be found guilty of a criminal offence because they have not registered as a landlord on his register? I do not doubt the hon. Gentleman’s intentions or his sincerity, but I think the Bill is not only unworkable, but potentially unjust. To make such people criminals would be completely wrong.

[Andy Sawford]

I understand the hon. Gentleman’s point about the circumstances in which someone might find themselves if they ended up owning a property that used to belong to a deceased relative—most likely a parent—but it would only be at such a time as they felt able to turn their attention to letting out that property that they would then need to consider the appropriate steps they should take in order to be a responsible landlord. It is only then that they would be in a position to think about what to do with the property, not in the immediate aftermath of losing a family member. It is a scare suggestion to say that the measure would force them to take immediate steps.

[Philip Davies]

I think the shadow Minister and I are talking at cross-purposes. I am not referring to a person who decides to immediately rent out a house in which a deceased parent used to live. I totally accept the hon. Gentleman’s point about that. It is self-evident. I am referring to a person whose parent was a landlord of another property that the child inherits on their death and in which a tenant is already in place. If the landlord of the property is the person who must be registered, I do not know how people who have just died would get off the register. They can’t say, “I’ve just died,” to get themselves off it. How on earth could their child be expected to know that they had to register when they have never been involved in renting out properties before? They would find themselves, at an instant, the landlord of a property without knowing the circumstances involved. That is the sort of situation to which I am referring, which I think the hon. Gentleman would accept is slightly different from his suggestion.

[Andy Sawford]

I thank the hon. Gentleman for his clarification. I understand that he is making a slightly different point. Of course, many responsibilities fall to someone on losing a loved one and they can be very important, including thinking about the obligations they owe to people living in a rented property that they have inherited. The well-being of the tenants has to be their concern, even in a very difficult situation.

[Philip Davies]

Of course. The shadow Minister states the blindingly obvious. Who is to say, however, whether that person would have any ill will towards the people renting the property? Presumably, they would just carry on with the arrangements already in place, but without registering on a national register of landlords.

This is the difference between Government Members and the Opposition: they think that not registering on a state-sponsored register makes someone a bad landlord, but I do not accept that premise. I think that what makes someone a good landlord is whether they are treating their tenant well, irrespective of whether they are on a register. It is how they look after their tenant that determines whether they are a good landlord. Someone who is not on a register might be a very good landlord, but, equally, someone who is on the register might be a very bad landlord. The hon. Gentleman seems to be under the impression that being on the register would determine whether someone is a good landlord, but I am afraid I do not share that view. The hon. Gentleman seems to support a Bill that would criminalise people who had no idea about the obligation being thrust on them by the socialists opposite. We have to be careful about introducing legislation left, right and centre—in this case, left—and we must remind ourselves that laws have consequences. A criminal sanction is serious. We do not want decent people falling foul of the law by accident and receiving a criminal conviction. As I mentioned earlier, four-fifths of private landlords are part-time landlords, with just one or a small number of properties from which they earn less than a quarter of their income. We should tread carefully.

The Minister will outline the Government’s position, but my understanding, which he will either make clear or refute, is that they have concerns about the Bill. I am therefore delighted to find myself agreeing wholeheartedly —this is a red letter day for me—with the Government. I state with confidence that the Government are opposed to the Bill, because their website is clear about why they have chosen not to introduce further legislation:

“The private rented sector is already governed by a well-established legal framework and we will not introduce any further regulations. This will ensure the sector is free to grow in response to market conditions.”

The website goes on to state:

“In the past over-regulation drove landlords out of the rental market. We don't want to introduce any measures which would form a barrier to potential landlords considering renting out their properties. Over regulation would reduce the number of properties to rent and wouldn't help tenants or landlords.”

I could not have put it better myself. I find myself in total agreement with the Government website.

I am conscious that I am in danger of taking up more than my fair share of time. It would be unfair of me to dominate proceedings and I hope that Members do not think that I am doing so.

A report by Professor Michael Ball for the Property Ombudsman, entitled “Regulating Residential Letting Agents: the issues and the options” and published in October 2012, looked at the issue of the number of letting agents and the number that belong to a professional body. This is relevant to the Bill. The report states:

“The extent to which agents belong to the various professional bodies is unknown because there are no reliable figures on the size of the lettings industry. A government report in 2009 estimated that there were roughly 8,000 lettings agents…In the same year, the Office of Fair Trading offered a larger estimate of at least 15,000 letting agency businesses in the UK as a whole...In terms of the individual offices of member firms, The Property Ombudsman reported 9,523 registered lettings offices in September, 2012; as compared to 11,853 for sales…A recent survey found that 85% of agents belong to a professional body, which may indicate that the number of agents outside of the current voluntary schemes though significant is not overwhelmingly large compared to those participating.”

That information can only lead us to two conclusions.

First, the Government and their related authorities have absolutely no idea how many letting agency businesses there are. If we are to have a regulatory and registration system, a starting point might be to know how many there are. The gap between the Office of Fair Trading’s estimate, 15,000, and the Government’s estimate, 8,000, is a big one. How on earth are we going to enforce this great regime if we do not even know how many there are or where they are? At a stroke, the information presented by Professor Michael Ball makes the Bill unworkable.

Secondly, the survey found that 85% of agents—the ones that are known about—belonged to a professional body, indicating that there is not an issue in this sector that needs to be dealt with. They are already aligned to a professional body that insists on many of the standards that the hon. Member for Mansfield wants them to follow.

--- Later in debate ---

[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.

[Philip Davies]

Is the hon. Gentleman suggesting that having a register of everybody will in itself mean there will be no rogue landlords? Is it his view that wherever there is a register for an industry there are no rogue practitioners?

[Andy Sawford]

Sadly, I feel there will still be rogue practitioners in the industry, but we will take a great step forward today in protecting people if we support these measures; we will increasingly marginalise those rogue landlords. We will make those practices ever more unacceptable and I hope we can go further towards ensuring there are prosecutions and enforcement against rogue landlords.

Groceries Code Adjudicator Bill [Lords]

Debate between Andy Sawford and Philip Davies

Tuesday 26th February 2013 Commons Chamber

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

I am listening carefully to the hon. Gentleman’s point about the role of the courts. Does he accept that the reason why many Opposition Members believe the Bill is important and helpful to farmers, producers, consumers and, ultimately, supermarkets, is the imbalance in economic power and in the relationship between small suppliers and the supermarkets? That the resources available to large supermarkets are vastly disproportionate to those available to small suppliers would be demonstrated in a court process.

[Philip Davies]

This is a red letter day for me, because I now have another volunteer to support my new clause 1 and new clause 2, which I will come on to in a second. The hon. Gentleman may well not have read them and therefore may have intervened inadvertently, but when he actually finds out what is in new clause 1 and new clause 2—if I am ever allowed to get on to that—he will find that he agrees with the point I am making. I do not agree with the principle of the Bill; I am the first to make that clear, and that relates to the purpose of new clause 3. On new clause 1 and new clause 2, the Bill was sold on the premise articulated by the hon. Gentleman—we have big supermarkets that are in a vastly preferential situation to very small suppliers, and that the House should be looking after those very small suppliers where they face problems. That is the premise of the hon. Gentleman’s point, and that is what my hon. Friend the Member for Sherwood is indicating. That is how the purpose of the Bill was sold.

I believe the Bill is totally unnecessary, but I am the first to accept that that is a minority view and that it will go ahead. My new clauses seek to ensure that the Bill hits its given purpose—to look after the small suppliers that my hon. Friend the Member for Sherwood is rightly keen to look after. I do not disparage him for that. Currently, the Bill will not just look after the small suppliers that my hon. Friend and the hon. Member for Corby (Andy Sawford) are so concerned about; it will give an avenue for complaint to all suppliers of supermarkets, whatever their size. All I can do is reiterate the fact that the vast majority of suppliers to supermarkets are huge companies in their own right, and that some of them are bigger than the supermarkets they supply.

Let us make no bones about it. One way or another, the suppliers—whether in terms of special offers, deals or whatever—hope that ultimately the adjudicator will deliver a benefit to their bottom line. Suppliers hope, through whichever avenue, that this will ensure that they have a healthier bottom line.