Tenant Fees Bill

Jim Cunningham Excerpts

2nd reading: House of Commons
Monday 21st May 2018 Commons Chamber

[James Brokenshire]

My hon. Friend makes an important point. Let me be clear: the Bill is not an attack on good agents and landlords. We value the important services that they provide, but it will ensure a fair playing field for reputable agents by making it harder for rogues to operate. Letting agents and landlords who represent good value for money will continue to thrive, while those who rely on charging unfair and unjustifiable fees will have to reconsider their business models. We have also committed to regulation to prevent reputable agents from being undercut or undermined by rogues.

My hon. Friend makes her point very sincerely. The interesting point about some of the experience in Scotland is that the number of letting agents in Scotland, according to Companies House, has increased since 2012, when the ban on tenant fees was clarified there. That demonstrates that innovative and good agents can continue to thrive.

[Mr Jim Cunningham (Coventry South) (Lab)]

I welcome some of the measures that the Secretary of State is taking. Nobody wants to attack good landlords. We still have bad landlords and that is who the Bill is directed at. There is a problem with commitments that landlords make, then break. I have had cases where they have refused to carry out repairs or said, “Take me to court” and that sort of thing. The Secretary of State and I know that ordinary individuals, mainly young people in rented accommodation, cannot always afford to do that. How does the Bill deal with those sorts of issues?

[James Brokenshire]

The Bill seeks to address the application of unfair fees by, in essence, banning all of them unless they are then reapplied back by the terms of the Bill itself. This is an important step to provide reassurance and to deal with the rogue practices that the hon. Gentleman highlights. In that context it is important to stress some of the other steps that have already been taken in relation to rogue landlords and the abuses in the sector that need to be tackled. This is a further measure to address them.

Turning to the key provisions of the Bill, which apply to assured shorthold tenancies, tenancies of student accommodation, and licences to occupy, these will ban landlords and their agents from requiring tenants and licensees of privately rented housing in England, and persons acting on their behalf or guaranteeing their rent, to make any payments in connection with a tenancy, with some key exceptions: the rent; a refundable tenancy deposit capped at six weeks’ rent; a refundable holding deposit to reserve a property, capped at one week’s rent; a capped payment for changing a tenancy agreement when requested by the tenant; payments associated with early termination of the tenancy, when requested by the tenant; payments in respect of utilities and council tax; and payments in the event of a default by the tenant, such as replacing a lost key or late rent payment fine, capped at the level of the landlord’s loss.

In the Bill, the term “in connection” with a tenancy refers to any payments required by the landlord or agent throughout a tenancy. This is an important point, as we want to ensure that landlords and agents do not just transfer their fees to another stage of the tenancy, such as exit. The proposed legislation will also prevent tenants from being required to contract the services of a third party.

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[Melanie Onn]

Labour absolutely recognises the—[Interruption.] Before the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Rossendale and Darwen (Jake Berry) leaps on me—before I am able to make myself clear—Labour absolutely recognises the issue of the amount that people are paying in rent and recognises that there could be restrictions on the percentage of increases in rent, not a rent cap.

The pressure in the housing market is rapidly producing new forms of exploitation. For example, an alternative letting agency-cum-landlord service called Lifestyle Club London markets itself as a membership club. Tenants or members pay an annual fee instead of rent. Club staff are entitled to inspect rooms unannounced at any time and fines can be given for anything even as minor as dirty dishes. This is a fast-moving area. We can see that there are wildly differing practices in the world of private rental and that tenants have had difficulty in getting the treatment that they deserve, which is why groups such as Generation Rent and Marks Out of Tenancy have emerged to give a collective voice to private renters on matters of not only policy but practice.

Although the Bill is satisfactory in many respects, it still provides the opportunity for the continuation of an exploitative approach. For example, clauses 1 and 2 detail the prohibitions on landlords and agents applying fees in many circumstances. The cap of £50 for any of those charges is very welcome, but the explanatory notes go on to say

“or reasonable costs incurred if higher”.

That is a clear opportunity for a coach and horses to be driven through this otherwise very good Bill. We know that some letting agencies and landlords will push these grey areas, and without directly spelling out what charges are permissible and what “reasonable costs” are, there is undeniably room for incorrect interpretation.

The Government have so far given an indication that they will provide guidance on these and other issues, but how can that be enforced? If I speak to Shelter about how a renter can take a case against a banned fee being levied against them, the question then becomes a test of reasonableness. Whether or not such charges are reasonable, I know that it will say that if the Government want to genuinely give tenants additional powers, regulation is required to ensure that they are enforceable and meaningful.

The same goes for default fees, which are to be capped at the level of the landlord’s loss. At first glance, this seems eminently reasonable. A landlord should not be required to pay for a banking or other fine due to a tenant making a payment late or the replacement of a lost key or entry fob. However, the Minister must be aware of the scope for this to become a nice little earner for agents or landlords who would seek to unfairly penalise their tenants for minor errors.

[Mr Jim Cunningham]

I agree with my hon. Friend that there should be some form of adjudication or regulator, whichever way we want to put that argument. The weakness in the Bill, which is a good Bill by the way, is on enforcement, because as most people know, trading standards departments up and down the country in local authorities are totally underfunded.

[Melanie Onn]

My hon. Friend makes a very important point and I will come on to trading standards shortly.

There is no definition of what a landlord can include as a loss. If this includes the use of agents and agents opt to charge for their time—to replace a key or make some phone calls—charges may amount to far more than Government ever intended them to. This is one of the issues that we have seen with the scandal around excessive charges to private leaseholders: without a specified cap, there is scope for the unscrupulous to run riot.