Private Landlords and Letting and Managing Agents (Regulation) Bill Debate
Full Debate: Read Full DebateDavid Nuttall
Main Page: David Nuttall (Conservative - Bury North)Private Landlords and Letting and Managing Agents (Regulation) Bill
David Nuttall Excerpts
Sir Alan Meale
The hon. Gentleman will find that the concluding part of my speech considers precisely that issue. Having said that, lawyers—soliciting is the oldest profession in the world—make a lot of money out of everything they can. We should always be guided by such traits in the open market.
Unfortunately, the Government have recently stated that they do not intend to introduce regulation in this sector, pointing to the use of myriad ineffective consumer protection laws which, as I will show, have proved wholly inadequate at protecting either tenants or landlords. I feel obliged to say that the Government have recently moved slightly in that direction, after tabling an amendment to the Enterprise and Regulatory Reform Act 2013 that requires agents to sign up to a redress scheme. The amendment was tabled following pressure from the Labour Front Bench and the other place, particularly Baroness Hayter. Nevertheless I welcome that U-turn, which as I said at the time must be the first step and not the last word on the matter. Redress will allow tenants to seek help only after the fact, and will not prevent the unscrupulous actions of lettings and management agents in the first place.
There is much evidence of bad practice in this area. A report by Citizens Advice found that 73% of tenants are dissatisfied with the service provided by their letting agent, and reported that significant numbers of people have difficulty contacting agents and suffer delays in getting repairs to their property. Furthermore, a report by Which?, “Renting roulette”, shows that, shockingly, letting agencies are ranked second from bottom across 50 separate consumer markets. Indeed, there are many cases of agencies, even large and well-established businesses, running into difficulty because there is no client money protection, with the money of landlords and tenants being lost. Scandalously, in some instances that has not prevented the owners of companies which have gone out of business while holding their clients’ money from resuming their activities soon after the collapse, expressing a “no blame, no shame” culture. No safeguards are currently in place to protect tenants, landlords or reputable agents from being undercut by their unscrupulous counterparts.
To understand the scale of the problem on the high street we should consider the figures. It is estimated that in England alone there are more than 4,000 managing and letting agents who are entirely unregulated. It is still possible to set up a letting or management agency with no qualifications whatsoever. There is no need for them to conform to any requirements as to their conduct, or to provide mandatory safeguards for their customers, as no such formula or regulations exist. In other words, letting agents operate in the property market’s “wild west”, as the Royal Institution of Chartered Surveyors recently described it.
The problem is not only one of useless agents, as there are real problems across the industry, with rip-off and opaque fees charged by unscrupulous letting and management agents. A recent national survey found that 94% of agents imposed additional charges on top of the tenancy deposit and rent, or rent in advance.
Mr David Nuttall (Bury North) (Con)
The hon. Gentleman has referred once or twice to the fact that the sector contains 4,000 agents who are unregulated, but are they not covered by the general law? Many regulations will cover agents, regardless of whether they are members of a professional scheme.
Sir Alan Meale
I understand where the hon. Gentleman is coming from, but that is not the experience of people who have to deal with these matters, particularly local authorities, which say it is sometimes impossible even to get in touch with the landlords. They will not meet people or provide access; they will not do repairs when requested to do them; and they have to be given orders to the effect that local authorities will carry out repairs “unless”. I am not talking about making all this subject to a state scheme or anything like that. The Bill is about providing protection and lifting up the private rented sector to a level that will provide all our constituents with the opportunity to live decently.
I mentioned the 94% of landlords who imposed additional charges on tenants, and huge variations in the amount of costs have been found. By way of explanation, let me provide some facts. The charges levied for checking references ranged from £10 to £275, while charges for renewing a tenancy ranged from £12 to £220. In some cases, charges for a tenancy amounted to more than £600. According to Which?, some tenants are being charged up to £90 to renew a tenancy and up to £120 simply to check out the property. That is an incredible cost for people to pay; by and large, these people do not have much money. There is no reason for them to have to pay these charges. It should be easy to find out that information in today’s modern society; such large charges are really beyond the pale.
Mr Nuttall
Clause 3 deals with the transparency of fees, but there is no enforcement mechanism in it to have these fees reduced.
Sir Alan Meale
If the hon. Gentleman will let me get on with my speech, I will be able to answer that question. I still have quite a way to go.
Far too many Members have heard time and again in their surgeries that there is a problem with rogue landlords and poor standards. It is true that the majority of private landlords are responsible people who treat their tenants very well, but it is also true that there are too many rogue landlords who undermine responsible behaviour and prey on vulnerable tenants. This is a small but dangerous minority of rogue landlords who, frankly, make people’s lives an absolute misery. They are condemning their tenants—who are, after all, our constituents, and we were elected to come here and serve them—to live in run-down, unsafe and often greatly overcrowded properties. What is more, they regularly intimidate those who speak out, and regularly threaten them with eviction.
Needless to say, despite an increase in the number of prosecutions against rogue landlords, the problem is getting considerably worse. We recently saw press coverage of a health care assistant who was paying £350 a week for the pleasure of living in a shed in Newham. Then there is the case of the 11 young models described in this week’s Evening Standard having to pay £400 a week each to stay in a small Victorian house. One of them even had to share a bed with a stranger because another bed could not be fitted into the property. There should be no place for such rogue landlords; indeed, the time has come to drive them out.
Unfortunately, the problem is not just one of criminal landlords, because a large number of amateur landlords can cause similar problems. They may have purchased a cheap property, inherited a property or secured one by other means. They may often be well-meaning people, but they are unaware of their rights and responsibilities in letting out a property as a home for another person. A recently published case illustrates the severity of this particular problem. A young mother of two, just 33 years of age, had realised her dream of moving to a private rented home in Cornwall. Six days later, she was found dead by her young daughter. She had been electrocuted because of a faulty heater—a very serious situation. Faulty wiring was responsible; that wiring had not been checked for 32 years! An amateur landlord should protect their tenants rather than put them in such a situation.
Mr Nuttall
Does not that case demonstrate the problem with this place simply making rules and regulations? Regulations are already in place to prevent that sort of thing from happening.
Sir Alan Meale
The object is to protect people from falling into situations like that, rather than to say that there are already regulations that might or could possibly deal with them. We want proper regulations to lift up the whole sector so that people do not have to live in those circumstances.
Sadly, the death of this poor young lady is no surprise because 35% of our private rented sector homes in England are currently classified as non-decent. The reality is, furthermore, that nearly 15% of private rented homes lack minimal heat in the winter. Imagine, Mr Speaker, being unable to heat your home even for minimal warmth, especially if you were a mother with young children. I know where the hon. Member for Bury North (Mr Nuttall) is coming from when he says that current law is available to deal with these matters, but the problem is that it is not working. These things are not being dealt with: they happen day after day, week after week, month after month and year after year—and nobody seems able to do anything about them.
Let me remind the Minister that poor housing has wider costs, too, not only to the renter, but to the taxpayer. Indeed, it has recently been established that the annual costs of poor housing alone to our national health service have increased by £2.5 billion.
We must be clear, then, that rogue landlords undermine the good reputation of the majority of landlords and that there is no place for them in modern Britain. It is important that the majority of well-meaning landlords are made aware of their rights and their responsibilities. That is why my Bill proposes three specific measures.
First, the Bill proposes a mandatory national register of private landlords. This should be a light-touch register requiring all private landlords to sign up. It would be contrast with a licence-based approach and it would as a rule reveal that the vast majority of landlords were able to offer a good service to their tenants. The Minister will be pleased to know that such a national register would not cost any public money whatsoever and would be self-funded by a small annual fee from landlords.
The register would assist and improve private renting in two particular ways. It would assist local authorities in managing the housing market in their areas and offer greater transparency and information that would enable them to target enforcement action in the places most in need of it. Another advantage is that the register would enable the Government and local authorities to communicate with the majority of well-meaning amateur landlords. As I have said, many of those landlords are not aware of their rights and responsibilities and would welcome such communication. Indeed, many have said that they would welcome this new information, welcome some kind of mechanism to advise them and welcome greater liaison with the local authorities in their area.
Secondly, I propose mandatory written tenancy agreements for all new tenancies and renewals. This proposal would help to professionalise the market and allow both tenant and landlord to know exactly where they stand on their rights and responsibilities.
Finally, the Bill is designed to grant local authorities greater freedom to introduce local licensing schemes where they deem that they might improve the housing market and, of course, reduce the particular problem of antisocial behaviour in their areas. Such changes would assist more councils—such as leading local authorities like Newham, Oxford, Blackpool and now Liverpool, which are already using such powers granted to them by the last Government—to tackle some of the appalling abuse caused by some of the worst landlords in England.
The intention of the Bill and the need for it are very clear indeed. The private rented sector has, and will continue to have, an important role to play in meeting housing need, but it should not be based on the current terms. With 9 million people, including over 1 million families with children, privately renting, it is clear that the needs of people in this sector have significantly changed. So far, however, the market has not been responsive to such changes, so the Government must act to ensure that renting works for all.
I say that because, despite evidence and reports from Citizens Advice, the Resolution Foundation, Which?, the Office of Fair Trading and others, and despite calls for action and support for change from millions of tenants and landlords and the industry itself, including the Association of Residential Letting Agents and the Royal Institution of Chartered Surveyors, the Government have so far unfortunately been unmoved. That is why now is the time for action. That is why I call on Members to support my private Member’s Bill to tackle the scandal of rip-off fees, to regulate unscrupulous letting agents and management agents, to tackle rogue landlords and to help professionalise the private rented sector so that it works for all. Let us do that so our constituents and their children living in this sector in future will be protected and allowed to live a decent life. After all, we were elected to this place for one purpose only: to represent our constituents’ need and wish to lead a decent life and to have shelter—shelter for their children, and shelter for themselves while they are working or when they have reached old age.
We are talking about not a majority, but a small minority of people who have taken command of an industry and are abusing it terribly. However, we currently have no way of controlling those people. As I have said, I am not trying to extend the state sector; I am merely saying to these rogue landlords, “There is no place for you in a modern British society.” Our job here is to protect ordinary men and women and their children, and that is what we will do if we pass this Bill.
Philip Davies
I understand that the bodies concerned have that view, and there may be a reason why they hold that view, but if Opposition Members think 100 pieces of statutory legislation and 400 regulations amount to a wild-west situation, I shudder to think what they have in mind for proper regulation of the sector, because it seems to me to be excessive as it is.
In a report for the Residential Landlords Association, Professor Ball noted:
“Housing in general and landlord-tenant relations specifically are subject to a wide-variety of housing, health and safety, planning, social policy, and environmental legislation. This has all developed in a haphazard, uncoordinated manner over many decades. Once in place, repeal is rare. Moreover, the cost-effectiveness of many requirements was never assessed when the measures were implemented nor have recent ones been reassessed after several years in place.”
That goes to the heart of the subject. The sector’s wide-ranging set of rules, regulations and legislation, which has developed in a piecemeal and haphazard fashion, is difficult for landlords to deal with, and a much more simplified set of regulations may well be better.
The Communities and Local Government Committee did a report on the private rented sector recently and its very first recommendation was entitled “Simplifying Regulation”. It said:
“We recommend that the Government conduct a wide-ranging review to consolidate legislation…with the aim of producing a much simpler and more straightforward set of regulations that landlords and tenants can easily understand.”
That seems to me to be a sensible suggestion. What it recommends flies in the face of what the hon. Member for Mansfield is seeking to do, which is make things more onerous, more complicated and add yet another layer of regulations on landlords.
Mr Nuttall
While I think the Government are generally on the right track in respect of regulating the private rented sector, in their response to that report they have indicated that they are not sympathetic to the idea of simplifying the regulations that govern the sector. Is my hon. Friend as disappointed as I am about that?
Philip Davies
My hon. Friend makes a good point, and we look forward to hearing from the Minister where the Government stand on all this—which side of the fence they are on, and whether they merely wish to maintain the status quo.
I should say that I welcome the Minister to his position—it was a terrible oversight that I did not do so at the start of my speech. We congratulate him and we all have extremely high hopes for him. He might not be on my particular wing of the coalition but he is a good man and we have not given up hope in him yet. We hope he is going to prove his mettle today with a robust libertarian speech—we can but hope. [Interruption.] He says “liberal” but in my experience the Liberal Democrats is one of the most illiberal parties in Parliament. We have high hopes that he will prove us wrong today, however. My hon. Friend the Member for Bury North (Mr Nuttall) is right, and I hope the Minister will be able to offer him some comfort.
Professor Ball also made the point that much simplification could be achieved without legislation through the encouragement of common and overlapping positive practices among local authorities and through the setting up of websites dedicated to simplifying the burden of compliance, and that improving the performance of regulatory agents in achieving commonly agreed goals is as important as less bureaucracy.
As Professor Ball makes clear, therefore, an awful lot can be done to improve what we have in place at the moment. When regulation that is in place fails, the conclusion that many draw, particularly on the other side of the House, is that more regulation is needed. Actually, when regulation has been introduced and it has failed, that is an argument against more regulation, and it offers up the possibility that we should be doing something different.
The Select Committee report also states:
“The first step towards promoting awareness and understanding”
of the rights and responsibilities of parties in the private rented sector
“must be to have in place a clear and easy-to-understand regulatory framework…Professor Martin Partington, a former Law Commissioner, stated that housing law was ‘but one example of many policies being developed over decades, being implemented through myriad legislative enactments, leaving a mass of often unnecessary, certainly over complex legislation that does not work efficiently’.
The complexity of the regulation led some of those providing evidence to call for a simplification of the law.”
That evidence from a variety of sources is pretty striking, yet this Bill seeks to go in exactly the opposite direction. It proposes more laws and regulation, which will only make the problems that the Select Committee identified even worse.
I do not know about the hon. Member for Mansfield—or you, Mr Speaker—but the people with housing concerns who come to my surgery rarely complain about the private rented sector. Almost everybody who comes to my advice surgery to complain about housing is complaining —time after time—about social housing providers. In terms of the experience of tenants, that is where the biggest problem lies.
Philip Davies
I have the disadvantage in this debate of not being a lawyer. Some people might say that it was an advantage not to be a lawyer in this place, but on this narrow point it may well be a disadvantage. I certainly concede the hon. Gentleman’s expertise in this field, but as a layman, I am not aware that written agreements are always clear or that there is no need for solicitors or lawyers to be involved in anything covered by a written agreement. Virtually every written agreement at some point leads to some kind of confusion and dispute, and the lawyers are there, as ever, to pick up the pieces. I do not accept the hon. Gentleman’s assertion that just because we have a written agreement, we do not need any lawyers to be involved. It is quite the reverse, I often find.
Mr Nuttall
One of the objectives of the Bill is to try to create a regime that protects tenants. An unintended consequence of a requirement for every tenancy agreement to be in writing is that there is a danger of an increase in sham tenancy agreements, where unscrupulous landlords may require the tenant to sign a written agreement which sets out less onerous obligations on the landlord than would be required under law.
Philip Davies
My hon. Friend makes a very good point. People who are itching to get on with such regulation ought to bear it in mind that that may have unintended consequences which end up leaving those they are trying to help in a worse position than they would otherwise be in. We should all bear that in mind.
My hon. Friend also hits on a more general point. When regulations and legislation are imposed on landlords, it is the good ones who tend to be penalised. Good landlords seek to do everything that is expected of them and go out of their way to meet all their obligations, no matter how onerous. They are not the ones causing a problem, whereas landlords who do not have the same moral scruples are encouraged to operate outside the law. They have already shown that they are not keen on doing the right thing. Why would they all of a sudden be keen on doing something because the Labour party has insisted that they do it? The world does not work like that. We could end up with tenants being in a far worse position.
Philip Davies
I am quite happy to be sidelined by the hon. Lady on that point. As it happens, I am very sceptical about that measure in the Immigration Bill. We are talking about what should and should not be the responsibility of landlords, and I have grave concerns that we are effectively making them the United Kingdom’s border police force. If the Government got their finger out and had proper border controls in this country, we would not have to put the onus on landlords, so I have a great deal of sympathy with what she says. I see that one of our distinguished Government Whips is in his place, so I will make it clear now, if I have not already—I probably have—that with regard to that particular provision my support cannot be guaranteed. That probably does not come as a great surprise, but I make that declaration now. I am grateful to the hon. Lady for allowing me to make the Whips Office aware of my reservations about that measure in the Immigration Bill, which is otherwise excellent.
Efforts were made during the course of the 20th century to stimulate the private rented sector by restricting rent control, for example through the Leasehold Reform Act 1967, which allowed previously controlled rents to be based on gross property values; through the Rent Act 1965, which introduced regulated tenancies; and through the Housing Act 1988, which deregulated rents on new lettings after 15 January 1989. Those measures were all designed to encourage investment in the private rented sector by increasing potential returns from rental income. That is because successive Governments—some of those Acts were passed by Labour Governments—realised that the best way to stimulate the private rented sector was by creating an environment in which landlords were likely to get a better return on their investment. It seems blindingly obvious to me.
The hon. Member for Mansfield said in his speech that he understood that the private rented sector was very important and that he supported it, but history shows that making terms and conditions too onerous leads to a reduction in the sector. It is only by making renting out properties more attractive to landlords that we can increase provision. There is a shortage of suitable housing in this country, so we ought to be making it easier to rent out properties to people who want them. That must be one of the solutions to our housing problems. The Bill would only make a bad situation even worse.
Mr Nuttall
We have heard a lot already this morning about the increase in the number of complaints arising from the private rented sector, which is one of the rationales behind the Bill, but given the enormous explosion in the number of people in the private rented sector over the past 15 years—from around 2 million in 1999 to 3.843 million in 2011-12—is it any wonder there has been an increase in the number of complaints?
Philip Davies
My hon. Friend is absolutely right. It is obvious that the larger the sector, the more complaints will be generated. I argue that the increase in the sector is a good thing. That might be one point on which we and Opposition Members have a difference of opinion; I see the increase in the private rented sector as a force for good, not bad.
A 2010 survey that looked at the number and type of people who are private landlords found that 89% were private individual landlords, 5% were company landlords and 6% were other organisation landlords. Those landlords were responsible for 71%, 15% and 14% respectively of all dwellings in the private rented sector. More than three quarters—78%—of all landlords owned only a single dwelling for rent, comprising 40% of the total private rented housing stock. It found that 22% of those landlords had let properties for three years or less, and two thirds—69%—had let properties for less than 10 years. Almost four fifths of all landlords in the sector earned less than a quarter of their income from letting properties in the private rented sector, and only 8% were full-time landlords.
Those statistics are important, because this kind of Bill seems to be of the opinion that the landlords we are talking about are all massive corporations that are effectively building massive profits by being bad landlords. That does not fit the facts. People in the sector may have ended up renting out property for accidental reasons; they are trying to do their best and do not expect to be bogged down with pages and pages of regulation. As we have heard, most—almost four fifths—have full-time jobs as well. A number of them may well not be making any money from renting out their property anyway.
There is a misconception behind the Bill and all the similar Bills that we have seen this year from Labour Members. It is that there are huge numbers of people making vast profits at the expense of their tenants. That does not fit the facts.
Philip Davies
I am pleased with that clarification of how it would work. The hon. Gentleman clearly has far more trust in the Government than I do in believing they would come up with a scheme that would be acceptable. I would not wish to give them that kind of unlimited power and have no control over how they then used it.
There are already existing bodies in place, including the National Landlords Association and the Residential Landlords Association. The NLA advocates landlords accreditation as an alternative to licensing. It says:
“Accreditation is a practical solution to improving the private rented sector. Landlords provide a service to tenants and should be evaluated about what they know about the sector.”
The association requires all landlords to complete a certain level of development and to keep their knowledge of the sector up to date to remain accredited. Accreditation is backed up by a complaints process that tenants can use if they feel that their landlord is not abiding by the law. That offers a clear distinction whereby a landlord understands his or obligations. It already works with 32 local authorities as exclusive accreditation partners, and all bar three authorities in England and Wales recognise its scheme. In 2012, there were 28 complaints about members of the NLA, but no complaints about its accredited members. If the hon. Gentleman wants to go down this route, perhaps he could look at what is already in place and build on the existing work that is being done by the NLA, which seems to be working well.
Mr Nuttall
Does my hon. Friend share my concern that if a national registration and regulation scheme were introduced, all the individual schemes that the various landlords associations have would wither on the vine and we would just have a nationalised system rather than a system of several very good schemes?
Philip Davies
My hon. Friend is absolutely right. There would be no point in still being part of those schemes. Who is to say that the nationalised scheme, as he puts it, would be any better than them anyway? The numbers suggest that they seem to be working particularly well, and we should be encouraging them rather than discouraging them.
The hon. Gentleman may well say that accreditation is no substitute for proper enforcement against rogue operators, and I think the National Landlords Association would say the same, but we should reflect on the work that it does. We also have the Residential Landlords Association, which says:
“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.”
We should bear that in mind. It continues:
“A policy is therefore needed which ensures that local authorities are freed up to search for and ban from the sector those operating under the radar whilst enabling the majority of good landlords to operate under an industry run accreditation scheme.”
That is the nub of where the hon. Gentleman and I disagree. He is trying to impose something on everybody to deal with a small number of people who are causing a problem; in my view, we should focus on the small number of people who are causing the problem and tackle them under all the existing laws and regulations. If he wants to enhance those powers, he can come back and put the case for that, but let us not target absolutely everybody with this scheme.
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.
Mr Nuttall
Is my hon. Friend as concerned as I am about the potential risk of a foreign landlord falling foul of the Bill and finding themselves with a criminal record if they fail to register, because they would then be liable to a fine?
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.
Philip Davies
I am grateful to the Minister. I apologise if I do not get to hear his speech—as I said, I may have to leave early—but I will certainly read it in Hansard. The figures I quoted were from his Department in 2009—I am not casting aspersions on him or the current Administration—and showed a gap of 7,000. The Minister’s figures still show a gap of 5,000, and that makes this scheme unworkable. I am grateful to him for sharing the level of uncertainty concerning the number of firms that would be involved.
There are other bodies that offer schemes, not just the ones I have mentioned. The UK Association of Letting Agents’ scheme is, like others, wide ranging and covers market appraisal, instructions, terms of business fees, charges and termination of client agreements, marketing and advertising, viewing and access to premises, offers, letting tenancy agreements, rent collection, property management, all that is expected of the tenant and landlord, and termination of tenancies. All those things are in place. As my hon. Friend the Member for North East Somerset said, why reinvent the wheel when such schemes are working well? Let us try to get more competition into the marketplace to encourage more landlords to sign up to such schemes. That is bound to have more success than a state-imposed solution.
When the last Government consulted on regulating letting agents, many concerns were raised about how a letting and management agent would be defined. I am not sure what view other Members have on that. Some landlords manage properties for other landlords. Sometimes family members manage properties. Those people are not official letting agents, but they are, in effect, operating as letting and managing agents. Would they be covered by this regulation? Would the consequence of the Bill be to send some of that work underground? People might not employ a professional body or registered company, but get other people to do these things under the radar. They might get friends from around the corner—perhaps even unsavoury people from around the corner—to operate things on their behalf to get around the regulatory system.
Another concern that was raised when the last Government considered this matter was what property condition standards would be used to decide whether somewhere was a decent home. Category 1 and category 2 hazards are already enshrined in legislation. Does the hon. Member for Mansfield have something different in mind? Who will determine what is an acceptable standard of property to be let? Which regulatory body will offer its expertise on what definition should be used?
The former Under-Secretary of State, Department for Communities and Local Government, Baroness Hanham, stated in reply to a parliamentary question from Lord Browne of Ladyton:
“Letting and managing agents are already subject to consumer protection legislation. Consumer protection legislation covers issues such as giving false or misleading information, not acting with the standard of care and skill that is in accordance with honest market practice and claiming falsely to be a member of a professional body or approved redress scheme. For tenants or landlords who are charged unfair or unreasonable fees by an agent, this means that they are able to report this to their local trading standards officer or to the Office of Fair Trading which has both civil and criminal enforcement powers… Disproportionate regulation on the private rented sector would push up rents and reduce the choice and availability of accommodation on offer to tenants.”—[Official Report, House of Lords, 15 October 2012; Vol. 739, c. WA444-45.]
That sums up the situation perfectly. The Bill would have a negative impact on the private rented sector and reduce the number of houses being let. It would bring no benefit because there is ample legislation in place to deal with the concerns.
The hon. Member for Mansfield mentioned Shelter. Even Shelter’s website provides plenty of advice on what people should do if they want to complain about a letting agent. I will not go through all that advice now, because that would take up time unnecessarily, which I do not want to do, but I urge people to look at the website. There is one section entitled “Complaining to the letting agent”, which gives detailed information on how to complain to a letting agent. It is an excellent document. There is also a section on “Complaining to the Property Ombudsman”, which explains how to do that.
We have not talked much about the property ombudsman, but I hope other Members will do so. The website states that that scheme
“provides a free, independent service for resolving disputes between letting agents and their customers. Many letting agents are members; those that are must display the ombudsman’s logo on windows, advertising and stationery.”
That brings us back to the point that was made by my hon. Friend the Member for North East Somerset. We should encourage more letting agents to sign up to that scheme and encourage people to rent from letting agents that are part of it.
Mr Nuttall
The property ombudsman’s annual report for 2012 made it clear that the number of offices that were registered for lettings, as opposed to sales, was 9,748. Almost 10,000 offices across the country are covered by that scheme.
Philip Davies
My hon. Friend makes a good point. That just goes to show that an awful lot of good work is being done in this sector. Perhaps a good starting point for us would be to encourage more of that good work and to make people more aware of the schemes that are in place. I confess that before I looked at the Bill, I was not aware of some of the schemes that are in place to help my constituents, should they have a problem. If nothing else, I am extremely grateful to the hon. Member for Mansfield for forcing me to look at this area to see what is in place. I hope that as a result I will be able to offer my constituents a better service and make them aware of the situation. On that basis alone, we should be grateful to him for drawing our attention to what is already happening, sometimes without any fanfare or advertisement.
As I said earlier, if I am wrong I hope the hon. Gentleman will correct me, but it seems that the Bill would not apply to landlords who sub-let a room in their property. That poses the question why they would be exempt when nobody else would be. What do he and the Labour party think about such landlords? Do they believe they tend to be good or bad landlords? Is there any evidence either way?
I will come to a conclusion, because I am anxious that I may be taking up time that other Members wish to use, and I am sure others have better points to make than me. As with so much proposed legislation, the Bill is full of more bureaucracy and more interference by politicians, and it provides more evidence of the need to be seen to be doing something, which is the prevailing culture in politics at the moment. I always say that if a politician is faced with a problem, their solution will always incorporate two ingredients, the first of which is being seen to be doing something. I long for the day when a Minister will stand up and say, “That’s got nothing to do with us, it’s for people to sort out for themselves”, but so far I have been disappointed.
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.
Mr David Nuttall (Bury North) (Con)
I draw the attention of Members to my entry in the Register of Members’ Financial Interests. I own a residential property that I let out, and I am a tenant in the flat I reside in when I am in London, so I have an interest on both sides.
I congratulate the hon. Member for Mansfield (Sir Alan Meale) on his success in the private Members’ Bills ballot—I think he said that he came sixth. Having been an MP for more than a quarter of a century, he will be well aware of the difficulties faced by a private Member’s Bill, particularly one as interesting as this one, which raises concern and dispute across the Chamber.
I have listened and waited patiently for more than four and a half hours and I am grateful to have caught your eye, Madam Deputy Speaker. I thank my hon. Friend the Member for Brentford and Isleworth (Mary Macleod) for kindly agreeing to speak after me, because I have to leave in a few minutes. I apologise to the House for not being able to stay to the end. In the interests of saving taxpayers’ money, I am taking an earlier train. I am sure that all hon. Members would agree with that.
I have time only to read the headings of the speech I would have delivered if I had been called earlier, but we have had a thorough debate and covered all the issues. My hon. Friend the Member for Shipley (Philip Davies) filleted the Bill, covering many points I would have raised, and I agree with almost everything he said.
If just one thing has come to light this morning, it is that there is no doubt, despite the sector being referred to on a number occasions as unregulated, that there is a plethora of Acts, delegated legislation, rules and regulations that in one way or another have an impact on the private rented sector. Reference has been made to the first report on the private rented sector from the Select Committee on Communities and Local Government. Professor Martin Partington, a former Law Commissioner, said in giving evidence to the Committee that housing law was
“but one example of many policies being developed over decades, being implemented through myriad legislative enactments, leaving a mass of often unnecessary, certainly over complex legislation that does not work efficiently.”
If I may repeat my plea, there is one thing that the Government should do in response to that substantial report: reconsider the decision not to follow the recommendation to carry out a consolidation of legislation in this field. A consolidation and simplification of all rules and regulations covering landlords and tenants, so that they were together in one place and more easily understandable, would be a reform that benefited both landlords and tenants. That would be a great service to the nation, particularly to landlords and tenants, who would be able to look in one place rather than hundreds of places, as is currently the case.
As time restricts what I can say, I will consider just one element of the well-named Private Landlords and Letting and Managing Agents (Regulation) Bill. I note that there is wide cross-party representation among the sponsors of the Bill. They include four Government Members, including one Liberal Democrat Member, three Members from the same party as the hon. Member for Mansfield, and Members from the DUP, the Green party, the SDLP and the Alliance party. It is worth noting that one third of the sponsors represent constituencies that would not be affected by the Bill, because it relates only to England.
Problems would be caused by setting up the body that is referred to in clause 1(4), which states:
“There shall be established a body to administer the Register as prescribed in regulations by the Secretary of State”.
A new quango would be born. We know from experience what happens when a quango is born. It starts off as a fairly modest affair with just a few members and a small staff, but before long it grows like Topsy. There are plenty of examples of that.
As has been mentioned, there are 1 million landlords in the private rented sector. That seems like an extraordinarily high number. I understand, having looked into it, that it includes landlords who rent out just a room. To be fair, such landlords would be excluded from the scheme. Nevertheless, even if one excludes the estimated three quarters of landlords who are in that category, that leaves a quarter of a million landlords who would be included on the register.
I do not know what the quango would be called. It could be called the office for the regulation of the private rented sector, Often, Ofland or even Oftenland. Whatever it was called, it would no doubt be a new retirement berth for politicians. We have no idea what the members of the quango would be paid. However, given that there are hundreds of thousands of landlords to manage, one can only begin to imagine the size of the bureaucratic monster that the Bill would spawn.
Before long, the quango would no doubt need a separate department to collect the fees that were payable and an enforcement department to deal with the small minority who were falling foul of the rules. It would no doubt need a huge advertising budget so that all tenants and landlords were aware of its existence. Public affairs consultants would have to be employed. It would, of course, need its own human resources department to deal with all its staff, and its own administration department. Before long, it would need regional offices. Before we knew it, there would be a staff of thousands. The cost of that would not disappear into the ether; it would be borne, ultimately, by the tenants. This is a tax on tenants—Members should have no doubt about it. I submit that we have enough rules and regulations for this sector.
We have already heard from the Minister that the Government are doing a lot to try to improve the operation of the growing private rented sector, and there is already a plethora of rules and regulations that need to be simplified. The imposition of a new quango and more regulations would simply add to the burden on landlords and inevitably lead to higher rents. For those reasons, I oppose the Bill and urge the House to vote against its Second Reading.