Tenant Fees Bill

Baroness Hayter of Kentish Town Excerpts

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

[Baroness Hayter of Kentish Town (Lab)]

My Lords, the Government have been on a very welcome journey with regard to the private rented sector. First, and following pressure in this House, they required all letting agents to belong to an alternative dispute or ombudsman scheme. Then, again following pressure in your Lordships’ House, they moved on client money protection. That was followed, as the Minister reported, by compulsory five-yearly electrical checks in rented accommodation, something that we started pushing for in the Consumer Rights Bill. Now, albeit after a delay—but, again, following pressure in this House—they have banned dual fee charging by letting agents; in other words, tenants cannot be charged by an agent which already represents the landlord. Furthermore, I have only just heard—maybe I missed it before—the very welcome announcement of what we are going to put on the broad shoulders of the noble Lord, Lord Best: the requirement on letting agents for training and codes. We now need only the right to a habitable property and we might actually have a really good private rented sector.

The Bill is good in itself. It will save tenants hundreds of pounds just when they are trying to put together the money for a deposit and to move, which alone can cost up to £1,000. Although the average letting agent charge to tenants—in addition to what they have charged the landlord—is £300, one in seven pays up to £500. It is good that the Bill puts an end to that but it is also important for the housing market because any such money extracted unfairly as fees is lost to both the tenant and the landlord, sucking some £240 million a year out of the housing sector. That money could be better used by landlords to improve homes rather than spent by letting agents, which generate no new properties.

I am sad to see ARLA, which represents letting agents, still arguing against the Bill, claiming that it will harm the private rented sector. In fact, it will do the opposite, partly, as I have said, by keeping funds within housing, rather than with agents, but also, vitally, by increasing tenant trust in the private rented sector. David Cox, the chief executive of ARLA, really ought to know that distrust in agents is not just apocryphal. It is based on hard evidence. He should also recognise, as I have long argued to him and his members, that the inherent conflict of interest within tenant fees is unethical and unprofessional. No service provider should have both parties to a transaction as clients. It cannot owe a duty of care to both. Charging both for the same service—letting a property—gives letting agents a dual responsibility which they simply cannot meet. Arguing on behalf of the landlord that rent should go up, or be paid on a certain day, can hardly be done by the same person arguing on behalf of the tenant that until a bathroom is fixed the rent is not due. Who is the client at that point? This is particularly important following the Consumer Rights Act. We have to be clear: who is the consumer in the transaction and therefore who gets the rights contained in that Act?

When we argued for a ban on the fees charged to tenants in your Lordships’ House, Ministers claimed that making agents’ fees transparent would be sufficient to drive down prices, as consumers could shop around. We sought at that point to explain that in fact tenants cannot shop around; only landlords can. If a tenant wants a particular property, they have to deal with the agent selected by the landlord and have no negotiating power at all over the fees charged, nor the quality of service provided. They cannot swap agents. So I greatly welcome the Bill and wish it a speedy path on to the statute book for the sake of millions of tenants, about whom we have just heard from the noble Baroness, Lady Grender.

Changes will obviously be needed as the Bill goes through in Committee. But following the very constructive way that Ministers have dealt with us over those earlier issues, we have every confidence that the Government will accept our amendments in Committee, particularly on default fees which, without protection, could be exploited, as the noble Baroness, Lady Grender, has again just noted. There is also the issue of the size of the cap on deposits, as mentioned by the noble Baroness and my noble friend Lord Kennedy.

We will also seek reassurance that proper enforcement will take place, with more meaningful penalties for those who flout the law. As my noble friend Lord Kennedy said, trading standards departments are highly stretched at the moment, with far too few assets, so we will look to the Government to ensure that the penalties due back into the enforcement system will be sufficient to enable action to be taken wherever tenants are being ripped off. Sufficient levels of fines are anyway essential to act as a deterrent to bad behaviour.

I will make one further point about how the Bill demonstrates the value of regulation. I am afraid that I had to watch the coalition Government abolish the National Consumer Council, which took away a source of thoughtful advice on when regulation is necessary to protect consumers. I have also had to witness, whether in relation to Brexit or more generally, the endless mantra from this Government and some of their supporters that red tape or regulation is bad for business. Not only is that not true; it ignores the interest and well-being of consumers who, without appropriate protection, are vulnerable to shoddy goods, rip-off merchants and poor service. I particularly welcome the Bill’s acknowledgement that this large group of consumers, who we have heard about, need legal protection to get a fair deal.

I wish the Minister well with the Bill and all strength to his arm in persuading others back at the ranch—or up the food chain, which I think was the term just used—that he be given the freedom to respond positively to the amendments we will table. We will be happy to give him all the credit for the movement that he makes.

Tenant Fees Bill

Baroness Hayter of Kentish Town Excerpts

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

[Baroness Hayter of Kentish Town (Lab)]

My Lords, first, I thank the Minister for his sympathetic and speedy response to the issues that I, along with the noble Lord, Lord Palmer of Childs Hill, with the support of the noble Lord, Lord Best, who is in his place, and the noble Lord, Lord Deben, who is not in his place at the moment, raised in Committee about how the department was implementing these otherwise very welcome plans to introduce mandatory client money protection for letting agents. It was because the noble Lord, Lord Palmer, and I had worked very well with the Minister on that initiative that we were concerned that the whole thing was going a bit pear-shaped because of the introduction of unrealistic requirements on the main providers of CMP protection. But, thanks to the Minister—I have to thank him for that—the department moved very rapidly, as it is well able to, and responded to make the significant changes that the Minister has now introduced. We both thank and congratulate the people who drafted those changes. They will, of course, help ensure that both RICS and ARLA can continue to protect both landlords and tenants through their schemes.

There was just one area on which I sought clarification, which is indicated in the amendments to which the Minister has already responded. I know that these have been discussed with RICS, ARLA and officials. I am getting nods from the Box. The government amendments introduce a power, as has been said, for the Secretary of State to serve notice on scheme administrators, requiring them to amend their scheme rules in respect of the cover they may hold. We consider this a sensible addition because it ensures that appropriate cover will be in place and, importantly, it will prevent arbitrage between the different schemes. That is something that we had not thought of but we are very grateful that officials did so.

As has been noted, our concern is with the current wording, which we did not feel gave sufficient clarity on how such a scheme, where it proved necessary, could close in an orderly manner where the Secretary of State’s justified requirements proved unworkable. The amendments I tabled were therefore to clarify that schemes may alternatively close in an orderly manner in such a scenario, rather than leaving administrators open to a lot of uncertainty. I know that the Minister appreciates those points, as we have heard. It was a backstop—if I may say that—that we were looking for: something we hoped would never be needed but should be there in case. I think the Minister has given the reassurance needed about flexibility and the use of normal other legislation to ensure that such reasons are given, and in the right way. I am getting nods from other people on that point.

Although I tabled the amendments, they were clearly only a bit of final tidying up. We are very pleased and grateful that, as a result of what we raised in Committee, it has been possible to bring this forward in such a timely manner that we can go ahead on 1 April not just, unfortunately, to leave the European Union, but, perhaps a little more importantly, to have client money protection in place.

[Lord Flight (Con)]

My Lords, I refer to my interest as a modest landlord, as declared in the register. The new rules to protect rent paid by tenants to agents do not protect landlords fully. Letting agents will have to join the new government-approved client money protection insurance scheme, but changes proposed by the Government as to the level of insurance held by these schemes will not cover the full value of rental money held by agents. I cannot see the point of that. Is it not in the interests of all parties for the insurance effectively to cover all potential liabilities? The scheme will not pay out in some circumstances; it will be able to cap the amount it pays out. Surely it would be more sensible for the scheme to provide for full protection.