Tenant Fees Bill

Earl of Lytton Excerpts

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

[Baroness Thornhill (LD)]

My Lords, I declare my interest as one of the happy band of vice-presidents of the Local Government Association. I agree with much of what the Minister has said, but with specific reference to Amendment 48 I thank the Government for listening and accepting our amendment, moved in Committee, regarding letting agents and landlords receiving multiple holding fees from several people for one property. The arguments for this were well made in previous stages of the passage of this Bill. It has been recognised by pressure groups, by the industry itself—interestingly enough —and now by the Government that taking financial advantage of prospective tenants is totally unacceptable and bad practice. This simple but significant amendment corrects an injustice and will help many for whom navigating the private rental market is already a stressful and expensive business. We look forward to a speedy implementation, which I believe will be in May 2019.

[The Earl of Lytton (CB)]

My Lords, I declare my interests as a vice-president of the LGA and also as a practising chartered surveyor and private rented sector landlord. Mercifully, I have managed to steer clear in a personal capacity of managing agents—at least for the last many years.

I have one query on the way in which the holding deposit arrangements are intended to function. I quite understand the geometry that sits behind this and the reason for it, so I will not go over it again. But let us suppose that a prospective tenant, having been provided with all the relevant information, pays a holding deposit and then, through some reason of default which would allow the agent to retain part or all of that deposit, there develops an argument as to what proportion—perhaps the whole—should be retained or not. That could take some while to resolve. Meanwhile, the agent is debarred from taking a holding deposit from anybody else, even though it may be clear beyond peradventure that the original deal with, and intention of, the tenant, whose holding deposit is still being hung on to, will not go ahead.

I can see that this could put an undesirable element of drag into the situation. I can also see that it might be the godmother of unforeseen consequences, in that the agent may feel that it is becoming a problem—a rather metropolitan problem, if I may say so; I think of zones 2, 3 and 4 of central London as the areas where a lot of this goes on, although I know it is not unique to there. The corollary to that is that the agent may say, “I’m not going to take a holding deposit at all. It is on a first-come, first-served basis. I have various people interested and the first who comes through my door with the relevant boxes ticked gets it”. That does not seem at all helpful either. That does not happen in my part of leafy Sussex, because we do not deal with things in that way and do not have that sort of high-pressure tenant demand. But I can certainly see it happening in zones 2 and 3 and I wonder what the Minister has to say about how he sees that working in practice, without having some perverse effects on the market.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Baroness, Lady Thornhill, and the noble Earl, Lord Lytton, for their contributions to the debate on this part of the Bill. I thank the noble Baroness very much for her comments and support.

I thank the noble Earl very much for his support and for raising the issue relating to holding deposits. First, as he will be aware, there is no obligation upon an agent or a landlord to operate a holding deposit system if they do not want to do so. It is optional. But where it applies and there is a dispute, if the two parties agree that there is no chance of pursuing the tenancy, it would obviously be open at that stage for the landlord or agent to take another holding deposit in relation to the land in question, as it were, where that matter is truly settled. If it is not settled, a lot will turn on the particular circumstances of the case. If the noble Earl feels that he would like to discuss this further, I will ensure that officials are available to discuss possible scenarios with him. It may be that he wishes to discuss a particular scenario, but in the meantime I commend these amendments to the House.

--- Later in debate ---

[Lord Shipley]

My Lords, if I might, I will intervene at this stage to speak to Amendment 43, which is what we are currently talking about. In the flurry of amendments not being moved, no debate took place, but the issue has now been raised by two noble Lords.

My name is attached to the amendment that refers to five weeks, and I think it is the right conclusion. I want to thank the Government for having agreed a change from six weeks to five. At Second Reading and in Committee, we went through every option: from the Scottish model of eight weeks to my probing amendment proposal of four weeks. As I recall, the Government at that stage said the figure would be between the four weeks we requested and the eight weeks that apply in Scotland.

There is a lot of money at stake here for tenants. Having heard from the perspective of landlords, I would like to speak on behalf of tenants. For a large number of poorer people, a change from five to six weeks could make finding that level of deposit a strain. Anything that can be done to minimise that strain is a good thing. The figure was described as being “up to” six weeks, but the fact that it is now five weeks will be of benefit to a large number of tenants. Because it covers the difficulty that, in some months, four weeks may not be a month and many people operate tenancy agreements on a monthly not weekly basis, it is legitimate for the Government to propose that we go to five weeks. I want to express our support for the Government’s decision.

[The Earl of Lytton]

My Lords, I beg to differ slightly from the conclusions of the noble Lord, Lord Shipley, although I well understand that this involves a cash-flow issue for tenants. I pay tribute to the noble Baroness, Lady Gardner, for bringing us back to this set of amendments. The Minister himself defended the Government’s long-standing line that a six-week deposit was fair. However, as the noble Lord, Lord Flight, said, we seem to have moved away from that without apparent pause for breath.

I declare a non-interest here, as I do not charge deposits for tenants and have not done for a number of years due to special personal circumstances. The industry standard has been six weeks for a considerable time. In my part of Sussex, six weeks’ rent represents a figure between £1,200 and £1,800 in general terms. That does not go a long way if, in addition to non-payment of rent—bear in mind that defaults tend to have many heads—the tenant also leaves the property in a damaged condition, including damage to carpeting, kitchen units and electrical wiring.

Given that situation, can the Minister explain why it is now five weeks? If you strip out non-payment of the last month’s rent, under this proposal you are left with a single week’s rent to cover any other form of loss. Does that represent a fair balance? I am not sure that it does.

[Baroness Grender (LD)]

Perhaps I may ask for clarification: are we now talking about five weeks, or about default?

--- Later in debate ---

[Baroness Grender]

My Lords, there is an expression about having your cake and eating it, and this is my attempt to get a little extra icing on the top. It is a modest amendment which would ensure a £50 cap when there is a change of tenancy and the sharers recruit the new tenant. I wrote to the Minister yesterday to explain my rationale for this. In Committee, we attempted to change a bit more with regard to this cap, which is a floor rather than a ceiling at the moment; we would like it to be a ceiling rather than a floor. But I have now pared it down to have one single purpose.

In a home of multiple occupation—HMO—where people are sharing, when one of the tenants drops out and a new person comes in, they will be charged a sum. Let me give you an example from Generation Rent:

“Each tenant swap included a massive fee for a new tenant of £250”.


To us that may sound modest, but when young people are sharing and counting the pennies, it is a heck of a lot. The case study continues,

“hence making it difficult for us to find people to move in. We had to do everything, advertise and do 9 interviews”.

Students were not accepted,

“as they did not fulfil agent’s criteria to move in unless they have a UK based guarantor”.

The fee of £250,

“did not even include a reference check of £90”,

or £180 with a guarantor. The case study concludes the fees were,

“£430 in total for a new sharer”.

The sharers do the vast majority of the work—people do not want to share with someone they know nothing about, without checking them out, and checking they can pay the rent—and then have to pay for the pleasure of it. This is a tiny, modest amendment, but it recognises that when people share a place and they do the donkey work, there should be a £50 cap on the charge for the change in sharer.

[The Earl of Lytton]

My Lords, the noble Baroness, Lady Grender, may be pleasantly surprised by the fact that I agree with the vast majority of what she says. She does not need to express too much surprise. However, she will need to define the term “suitable” further. To give her a clue, in commercial landlord and tenant agreements, there is very often an assignment, or something similar, and there is usually a formula of words about an incoming tenant or the assignee being of no lesser standing legally than the outgoing tenant. There will need to be some formula of words there.

The noble Baroness is absolutely right about this issue. I support her on the principle of this because I have children who have rented accommodation in London and I know exactly what goes on, so I can relate to it. But we need a formula that can be defined in law and determined in some way. It should be determined pretty promptly; it is no good if this goes into some sort of arbitration situation for weeks on end. These things need to be sorted out quickly in the interests of everybody.

That is the only reservation I have: the term “suitable” needs better clarification and definition. The question of suitability to whom and in whose eyes needs to be capable of some sort of resolution.