Renters' Rights Bill (Fourth sitting)

Jerome Mayhew Excerpts

Committee stage
Tuesday 29th October 2024 Public Bill Committees

[David Simmonds]

The amendments relate to the role of the tribunal and the tribunal process. One of the concerns that was extensively aired in debate, and about which we have heard a great deal of evidence, is the impact of a process whereby from a tenant’s point of view, going to tribunal is a no-lose situation because the only possible decision the tribunal can take is to reduce the rent they would pay. That would mean that it would essentially always be in the tenant’s interests to go to the tribunal, because it would at worst defer the point at which any higher rent took effect. We have very significant concerns about the tribunal’s capacity to absorb that level of work and about the fact that to be fair to landlords as well, we should not have a situation where a tribunal can operate in only one direction. By proposing these amendments, we seek to make it possible for changes in rent to be backdated.

[Jerome Mayhew (Broadland and Fakenham) (Con)]

We are talking about perverse incentives here. One way to tackle that would be through a costs regime associated with the tribunal. Is it my hon. Friend’s understanding that the current intention is that there would be no adverse costs orders awarded against a tenant, should they go through a tribunal process and not be successful in reducing the level of rent?

[David Simmonds]

My hon. Friend raises an extremely good point. As he outlined, this is very much about perverse incentives. We do not want to create a situation in the market where it is always in the interests of the tenant to push this to the tribunal. We need to make sure that that point is effectively addressed, and the amendments seek to do that.

[Matthew Pennycook]

Clause 8 amends section 14 of the Housing Act 1988, and the amended sections set out the circumstances in which a tenant can submit an application to the tribunal to challenge the rent amount either in the first six months of a tenancy or following a section 13 rent increase notice. Amendments 50 to 53 seek to alter the process for challenging initial rents and rent increases at the tribunal.

I must stress that, in the first instance, under this new system, the Government strongly encourage landlords and tenants to communicate early about what adjustments to rent are sustainable for both parties. Where an agreement cannot be reached, the Government are clear that tenants should submit an application to the tribunal only where they believe that a rent increase is above market rates. Such rises may represent an attempt by the landlord to exploit a tenant who simply wishes to remain in their home, or they may be an underhanded attempt to remove a tenant without pursuing the very clear possession grounds laid out in schedule 1. That is why we think clause 8 is so important.

[Jerome Mayhew]

I understand that the Government’s intention is that tenants should not go to the tribunal unless they are clear that the asked-for rent is too high, but what prevents them from gaming the system, as we discussed?

[Matthew Pennycook]

What I would say to the hon. Gentleman—I will expand upon my argument in due course—is that I think he underestimates how difficult it is to take a case to the tribunal. That is why we are seeing such low numbers of tenants going to the tribunal. It is an onerous process; we need to provide support and guidance about how to do it. I do not take his point that we will see a flood of tenants taking rent increase cases to tribunal.

To be very clear—I have said this on previous occasions—the Government want more tenants to take their cases to tribunal. We think the tribunal has an important role to play in setting the effective market rate for any given area, so we want to see a proportionate number of cases go through it—we obviously do not want to see it overwhelmed. However, I think the hon. Gentleman underestimates the onerous nature of taking a case to tribunal. It will not be as simple as the tenant deciding on a whim one day that they can do that, and that it is a no-lose situation, but I recognise the incentives at play on both sides. I will expand upon what I mean and why we have come to this decision in relation to this particular clause.

The shadow Minister proposes in his amendments that rent increases, where they are challenged at the tribunal, should be backdated to the date the landlord first proposed. That would mean tenants possibly facing significant arrears immediately after the tribunal hearing. That is an incentive in the other direction, which we fear would, if introduced, see no tenants taking their case to tribunal. We have just had an extensive discussion about the need to address the affordability pressures to ensure that landlords are not exploiting the system with large, completely unreasonable within-tenancy increases. We have to take that into account as well.

Tenants should not be thrust into debt simply for enforcing their rights. As such, the Bill proposes that rent increases should apply only at the beginning of the next period after the tribunal determination, or up to two months later, in limited cases of undue hardship.

[Jerome Mayhew]

Will the Minister give way?

[Matthew Pennycook]

If the hon. Gentleman would allow me to develop my argument after his intervention, I am sure I will get to his points.

[Jerome Mayhew]

I am grateful—I am not intervening for the sake of it; there is an important point here. The Minister says that it would be unfair on the tenant to have a significant increase in rent and a backlog after the determination of the tribunal, but that is rent that ought properly to have belonged to the landlord and has been unjustifiably denied them for the period of the process. Why is it fair for the landlord to be denied a just rent as a result of the delay in the process, yet it is for some reason not fair for the tenant?

--- Later in debate ---

[Matthew Pennycook]

Many of the 11 million people living in the private rented sector would love to own a pet but have difficulty finding a property that allows them to do so. We want tenants in the private rented sector to enjoy the joys of pet ownership, just as homeowners do. We know the benefits of pet ownership for mental and physical wellbeing. I declare an interest: I have a dog named Clem, who I referenced in the debate on the previous Government’s Bill, and he is, as I know to be the case for many pets across the country, a valued member of the family.

We have heard the calls from animal groups for more protection for pets living in rented homes. In its written evidence to the Committee, the Royal Society for the Prevention of Cruelty to Animals highlighted the plight of renters forced to give up their pets because they cannot find a home that will allow pets. I am delighted that the RSPCA, as well as the Dogs Trust, Battersea, and Cats Protection, support the action the Bill takes in this area.

On how we support pet ownership in the private rented sector, clause 10 introduces a new implied term that allows tenants to make a request to keep a pet, which landlords cannot unreasonably refuse. That stops landlords utilising a blanket “no pets” approach and ensures that each request is considered on its merits. We understand that not all properties or situations will be appropriate for pets. Landlords will not have to accept their tenant’s request where it is unreasonable, such as where housemates have allergies and might be detrimentally affected by pet ownership.

The clause makes it clear that landlords will always be justified in refusing a request if their own superior tenancy agreement prohibits pets. That will ensure that the law is consistent and that landlords will not be put in a position where they are forced to breach the terms of their own superior lease. However, to ensure that the provisions have teeth, tenants will have the right to challenge refusals they think are unreasonable via the new private rented sector landlord ombudsman or in court. The ombudsman or court will be able to take an unbiased view on whether the landlord has reasonably refused a request.

Clause 10 also gives landlords an ample 28 days to respond to requests, with an additional seven-day window if the landlord requests more information from the tenant within the initial 28-day timeframe. I make that point because the previous Government’s Renters (Reform) Bill proposed a 42-day response window. The animal welfare charities I mentioned were concerned about that duration, especially as it would mean tenants finding it hard to adopt a pet or the charities needing to keep animals for a long time while landlords made a decision. I share those concerns and I am pleased to say that we have made an improvement by bringing down the timeframe in this Bill.

Finally, clause 10 provides reassurance to landlords by allowing them to require pet damage insurance, either by charging the tenant for it or by asking the tenant to take out an appropriate insurance policy. These measures encourage responsible pet ownership in the private rented sector while providing landlords with assurance.

Turning to clause 11, although it is right that tenants can make the house they rent their home by having a pet, I understand that some landlords will be concerned by potential damage caused by pets to their property. The Committee has discussed the joys of pet ownership, but we all know that many pets can be active and at times destructive. That is one of the joys of pet ownership, but also one of the realities, particularly when it comes to some types of animals.

Clause 11 builds on changes made by clause 10 and amends the Tenant Fees Act 2019 to permit landlords to require tenants to take out an insurance policy to cover any potential damage caused by a pet or to charge the tenant the cost of such a policy. When granting consent, the landlord will be able to decide which insurance option best meets their needs. That underscores our commitment to ensuring that the private rented sector provides secure and stable housing. We recognise that pet ownership plays a crucial role in achieving that mission.

I thank the hon. Member for Ruislip, Northwood and Pinner for amendment 55, which seeks to ensure that suitable insurance products are available before landlords are allowed to mandate that their tenants purchase them to cover pet damage. We know that one of the reasons landlords are hesitant to take on tenants with pets is a fear that those pets could cause damage to their properties, which the tenants’ deposits might not be sufficient to cover.

I recognise that not a lot of insurance companies currently offer products designed to cover damage from pets. It is understandable that in the current climate, in which landlords have discretion over whether to accept or refuse pets, there is no demand for insurance and therefore the market is limited. We believe, however, that by creating an enabling environment for the industry, the Bill will cause the insurance market to adapt. I am sure that, as firm believers in the free market, the hon. Members for Ruislip, Northwood and Pinner and for Broadland and Fakenham share that view.

I hope the hon. Member for Ruislip, Northwood and Pinner will also be reassured that my Department has already had discussions with the insurance industry regarding such products. The discussions have been promising and I am aware that there are products in development to meet his concerns.

[Jerome Mayhew]

The Minister is quite right; I am a believer in the free market and I am sure the market will respond. Does he have an indication from his discussions with the insurance industry of the kind of price and the surcharge that will be required to fit the need?

[Matthew Pennycook]

We have not considered extensively the range of prices in the Department’s discussions, but I am sure the market will respond. I do not see any particular concern that companies will charge excessive rates for pet insurance, but that is something we will monitor as we bring the relevant parts of the Bill into force.

In the light of those points, I hope the shadow Minister will consider not pressing amendment 55 to a vote.