Consumer Rights Bill

Earl Cathcart Excerpts

Monday 24th November 2014 Lords Chamber

[Baroness Hayter of Kentish Town]

My Lords, Amendment 44ZA seeks to bring some trust into the overheated housing market and to ensure that tenants are treated fairly. We start with the simple proposition that estate agents should not charge both buyers and sellers for the same service and that letting agents should not charge landlords and tenants for the same thing. That sounds obvious. An estate agent surely can have only the seller or the buyer as his client, not both. It is unethical, not simply being paid twice for the same job but to have a conflict of interest since the seller wants the highest price and the buyer the lowest. The estate agent is selected and paid by the seller to represent his interest. It is therefore indefensible to take money from the buyer and de facto have him also as a client and owe him a duty of care. The amendment would therefore outlaw a contract which allowed agents to charge both buyer and seller or indeed both landlord and tenant.

It is particularly important to deal with estate agents as they are not covered by the Government’s own amendments requiring letting agents to disclose their fees. Furthermore, with instances of estate agents charging buyers up to 2.5% of the house price, that is thousands of pounds not going into the housing market but to those who prey on its consumers. These rip-off charges—and there is no other word for them—which exploit buyers and tenants and breach the client relationship with a vendor or with a landlord must be stopped. We know that the Minister has serious concerns about double charging as she said so in Committee. However, instead of doing something about it, she worried about what she called “unjustified new burdens” and the risk of damaging this important industry. It was unclear whether she was referring to the estate agency industry or to housing. However, it can surely only help the housing market if agents are trusted and act ethically.

The second part of Amendment 44ZA would ban letting agents from taking a finder’s fee from tenants. This is a new and growing—and I think unacceptable—practice. Again, as we mentioned in the earlier amendments, letting agents are chosen by and work for landlords who are seeking tenants. The client is therefore the landlord to whom by contract and law obligations and duties are owed. The letting agent is paid by the landlord to find a tenant though often does other things such as collecting the deposit, handing over keys and collecting rent. It is done on behalf of the landlord who pays for the service. However, what we are now seeing, especially where young people are desperate to find somewhere to live, is that potential tenants are being charged by the letting agent to show them a flat. Alex Hilton, the director of Generation Rent, says that a ban on the “abusive practice” of charging fees to tenants is long overdue. He says:

“Tenants are being milked by agents taking advantage of a housing market that’s failing to provide enough homes”.

It is bad business where one person has a duty of care to both sides of a contract. Whose interests, after all, are they then representing? Traditionally, it has been the landlord, but once money has been taken from a potential tenant, there is surely an obligation to that tenant, who under the Bill will have rights because they have paid for a service. However, there is a clear conflict of interest for the agent. Under the Bill, tenants will get these new consumer rights if they pay an agent, so it is hard to see how the agent can square that with the obligation he has to his original client, the landlord.

We have no problem with letting agents charging tenants for an individual service, such as obtaining the credit reference for a landlord to accept them. However, letting agents should not be paid twice for the same work. Furthermore, just when we are keen for more landlords to enter this market and provide more accommodation—but where tenants, needless to say, have fixed amounts to spend on their housing—a chunk of money out that is going to neither the landlord nor the tenant is being leeched of the housing market if letting agents are charging this extra amount to the tenant.

Scotland made charges to tenants, other than for rent and deposits, illegal in 2012, so letting agents can no longer charge tenants, since when this Government have tried to argue that this meant increased rents in Scotland. One study, admittedly from an estate agent, purported to show this. However, that study by LSL Property Services, which claimed that a 2.3% a year increase in Scottish rents had proved that that was because of the ban on fees to tenants, did not actually prove that—partly because that figure was only marginally higher than that same organisation’s own figures for the increase in rents in England and Wales, but even more because the Scottish figure was lower than for the north-west of England. Furthermore, the Scottish increase started a whole year after the ban on fees to tenants, which suggests that other factors were at play.

Meanwhile, Shelter commissioned two independent reports, by Rettie & Co and by BDRC Continental, which found that landlords in Scotland were no more likely to have increased rents since 2012, when the ban on letting agents charging tenants was introduced, than landlords elsewhere in the UK. Indeed, fewer than one in five agents had increased their fees, even to landlords, while 70% of landlords had not noticed any increase in their fees paid to letting agents.

There is an issue of principle here. The renter is not the consumer of letting agents’ services and has no contractual relationship with the agent. The renter cannot shop around or negotiate on price. These fees must stop.

Finally, I turn to Amendment 50E in this group, which would help protect tenants against retaliatory eviction—that is, having made a complaint about their landlord, being evicted under a Section 21 notice, which does not require the landlord to give any reason. We do not seek to outlaw Section 21 altogether but to stop it being used to stop tenants getting necessary repairs done. Our amendment would require the Government to issue guidance on how tenants can be protected from such retaliatory evictions. Sadly, Citizens Advice and tenants cite far too many cases of retaliatory eviction or threats of it for this simply to be a rare occurrence. As the Observer reported yesterday, when a tenant told the landlord,

“our shower was dangerous, his response was to evict us”.

Shelter says that about 200,000 people a year—about 2% of renters—are subject to revenge evictions. In preparing its report on creating a better private rented sector, the all-party parliamentary group heard from witnesses of fears that inhibited tenants from expressing concerns, because these sorts of evictions, sadly, are not illegal.

The Government undertook to outlaw revenge evictions and ensure that tenants could not face losing their homes simply because they asked for essential repairs to be made. The Government have given their backing in principle to a Private Member’s Bill in the other House to stop rogue landlords who, rather than meet their legal duty to keep properties up to standard and get rid of safety hazards, instead evict tenants who complain. As the Communities Minister, Stephen Williams, acknowledged, there is a “minority of spiteful landlords”. He said that he wanted to ensure that hardworking tenants are,

“not afraid to ask for better standards in their homes”.

We concur with those views. If the Government want to see progress, Amendment 50E is a natural first step. I beg to move.

[Earl Cathcart (Con)]

My Lords, I will confine my remarks to Amendment 50E:

“Protection of tenants against retaliatory eviction”.

As a landlord in the private rented sector, I am firmly against any landlord who engages in such practices as retaliatory eviction. In my 30 years or so of being a landlord, I have never had to resort to issuing—or come close to issuing—a Section 21 notice.

I have three points to make. First, the definition of a retaliatory eviction in this amendment is too broad. It would create massive uncertainty about what is and what is not an unreasonable eviction. A much clearer definition is needed that makes it abundantly clear that it does not include failure to pay rent or committing frequent anti-social behaviour, to give just two examples.

Secondly, we are being asked to agree to this amendment without knowing the extent of the problem. Responding to a Question, my honourable friend Brandon Lewis, the Housing Minister, said that the Government did not hold data on the extent of the problem, and nor did anybody else. That was true until Shelter conducted a YouGov poll that found that just 1% of private sector tenants had been evicted or served with a notice to evict in the last year because they complained to their council about a problem with their home that was not their responsibility. Only 7% of tenancies are ended by landlords, mostly because they need to take possession in order to sell or to move into the property themselves or to undertake refurbishment—or because the tenants are not paying their rent or are committing frequent anti-social behaviour.

My third point is that there are already existing laws in place that give tenants all the protection that they need. In June, the Competition and Markets Authority issued guidance on the relationship between landlords and tenants. This guidance states that, under the terms of the Unfair Trading Regulations 2008, derived from the Consumer Protection Act, it is a breach of these in the case of,

“any commercial practice that, in the context of the particular circumstances, intimidates or exploits consumers such as to restrict (or be likely to restrict) their ability to make free or informed choices in relation to a product, and which cause or are likely to cause the average consumer to take a different transactional decision. These are known as aggressive practices”.

In the examples of what constitutes aggressive practices, the guidance includes,

“threatening the tenant with eviction to dissuade them from exercising rights they have under the tenancy agreement or in law, for example where they wish to make a complaint to a local authority about the condition of the property, or seek damages for disrepair”.

Likewise, evicting a tenant as a punishment for a complaint is unfair practice, as the Competition and Markets Authority recognises. In either case, a Section 21 notice should not be enforced by the courts.

What is needed is not more law, but better information for tenants to understand their rights. Simply put, there is already ample protection for tenants, as I have tried to explain. In too many cases, they do not know that it exists.

[Baroness Bakewell of Hardington Mandeville]

My Lords, I will speak in support of Amendment 44D. Like others before me, I have recently been engaged in trying to find alternative accommodation in London. I spent mornings going around the letting agencies looking for suitable properties. The difference in the range of fees and expectations of me were enormous, but it was only by asking that I found out what fees the agents would be charging and at which stage. Rarely was this information volunteered.

Once I had found a property that I thought would suit, I was told I would need to put down a holding deposit. Not having previously been involved in renting a flat, this was a new experience for me. Obviously those of us who hail from the country are not used to your London ways. I did some research and found that, unless I put down this deposit, I would be unlikely to secure the flat while the necessary references and checks on me were taking place. I was assured that on completion date the holding deposit would be deducted from the rental deposit required, but I did blanch somewhat at being asked for six weeks’ rent upfront in addition to the first month’s rent. However, this is how things are done and so I will be complying. I move at the beginning of December.