Tenant Fees Bill

Kevin Hollinrake Excerpts

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

[Melanie Onn]

My hon. Friend makes a really important point. There is absolutely no point in this House taking through legislation, as good as it is, if it cannot be enforced because it holds no weight in law.

The inclusion of a one-week refundable holding deposit, on top of a month’s rent and six weeks’ tenant’s deposit, is allegedly designed to minimise instances of tenants securing multiples of properties at the same time before finally settling on their preferred property. There has been very little, if any, evidence that this is a regular practice. Additionally, the Government say that there are a number of exceptions to that deposit having to be refunded, including when the tenant provides false or misleading information. Again, although on the face of it, that is a sensible measure, there are no additional protections for tenants if the incorrect information is not their fault. For example, a reference that does not exactly match a tenant’s claims should not immediately mean that they lose that holding deposit. There is scope to develop a mechanism to test inaccuracy and establish the reasons behind it before immediately assuming information has been deliberately misleading.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I draw the House’s attention to my entry in the Register of Members’ Financial Interests. Despite the fact that I have been involved in this sector for most of my life, and am still involved, I am very supportive of the Bill and the drive to ban tenant fees. That said, on the hon. Lady’s point about holding deposits and the reference fees that tenants pay to the agent or landlord, does she not think it a reasonable concern that if we do not allow a letting agent or landlord to hold back a reasonable amount for referencing, they might be more likely to pick a better-off tenant than some of the lower-income tenants she is seeking, quite rightly, to protect? There are concerns about the commercial behaviour that could result if what she describes was to happen.

[Melanie Onn]

The point is that poorer tenants struggle the most. That is why we are trying to make the Bill as good as it can be. It comes back to reasonableness and whether there is sufficient rigour in the proposals to ensure that people are properly protected, and that goes for landlords as well.

The Government must bring back evidence during the remaining stages to convince us that this is a legitimate charge to make, rather than a simple amelioration of losses to agents and landlords. It is notable that the Government have opted to cap deposits at six weeks. The Minister should know that in practice this means all deposits will be six weeks, despite most rents being payable on a monthly basis. Shelter estimates that a six-week cap still means that London renters have to find on average a £1,800 deposit and that outside of London the figure is £1,100. Add to that one month’s rent and a week’s holding deposit, and people are looking at needing £3,750 just to secure a property in London and £2,290 elsewhere. That is a huge amount to save.

Wages are not keeping pace with rents and many people struggle to afford a decent place to live. Most low-paid workers are women. Will they be more disadvantaged by these measures than men, and what about those with disabilities, from black and minority ethnic communities or the lesbian, gay, bisexual and transgender community? The Government have not undertaken a formal equalities assessment of the Bill. Will the Minister explain why and commit to ensuring that an assessment of the proposals is undertaken before the Committee stage? There has been an informal but not a formal process on this matter.

As I said earlier, none of the measures in the Bill will matter without their ability to be enforced. There is direction in the Bill for responsibility to lie with local authorities and their trading standards teams. The Minister will be aware that trading standards teams are currently responsible for checking on age-restricted products, agriculture, animal health and welfare, fair trading, food and hygiene standards, counterfeiting, product safety and weights and measures, and they do this despite having endured a drop in funding from £213 million in 2010 to £124 million in 2016 and a halving of their staffing capability—more in some areas.

The Chartered Trading Standards Institute has previously expressed its concern that the public are being let down in respect of its current areas of responsibility, let alone additional responsibilities—particularly ones that will not pay for themselves through the imposition of fines, which are limited to a maximum of £30,000, whose rules are not enforceable because the drafting provides too much scope for interpretation and for which the Government only plan to provide guidance rather than issue regulation to support tenants and those seeking to enforce the measures in the Bill.

Those in the private rental sector are in desperate need of clear and positive action from the Government to protect their rights. I hope we will see a strengthening of resolve from the Government as the Bill goes forward. They must not miss the opportunity to make a good Bill a great Bill, and I urge them to take this chance to make real changes that could improve this sector of our country’s housing market.

Tenant Fees Bill

Kevin Hollinrake Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Wednesday 5th September 2018 Commons Chamber

[Rishi Sunak]

On that relatively unrelated point, it is worth pointing out that when similar legislation was introduced in Scotland, we did not see any greater increase in rents than we would have anticipated.

On the specific question asked by the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) about tenants’ ability to enforce and the ease of their doing so, it is worth bearing in mind that default fees are specifically required to be identified in the tenancy agreement. Up front, at the outset of a new tenancy agreement, the new tenant’s contract has to say exactly what default fees may be relevant under that contract—for example involving the loss of keys, late rent or the loss of an alarm fob. That has to be there in black and white; it is not as though the landlord can come up later on with something that they want to charge the tenant for. That will also be spelled out in the guidance, so it will be very easy for tenants to know whether the default fees they are being charged are appropriate.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Will the Minister give way?

[John Stevenson (Carlisle) (Con)]

Will the Minister give way?

[Rishi Sunak]

I am happy to give way to my constituency neighbour.

[Kevin Hollinrake]

May I take this opportunity to draw the House’s attention to my entry in the Register of Members’ Financial Interests?

On the point the Minister was making about redress for a tenant, does he agree that the vast majority of these problems are very easily solved by contacting the redress schemes, which are very effective at resolving any disputes that may arise? Will he clarify the point about cleaning? The cleaning of a property that a tenant has left in an inferior condition should still be the responsibility of the tenant, and that is a reasonable requirement to put into any tenancy agreement.

[Rishi Sunak]

We are very lucky to have the insights today of my hon. Friend and constituency neighbour. He has been a successful business operator in this particular industry and I always listen to what he says with keen interest. I can tell him that he is absolutely right with regard to redress schemes. Our experience—we have heard this throughout the Bill process—is that they do work well and provide a very easy way to resolve most issues. Simply talking directly to the agent and the landlord in the first place is also a way to resolve the vast majority of issues without having to turn to a specific or formal redress scheme.

On the second point, of course a state of condition and an inventory may be attached to a tenancy, and such a cost would be recovered during the normal course of a deposit return. The tenant would obviously have obligations in that regard, and a breach of those terms would be considered damages in the normal way. However, there will not be a specific charging of fees at the outset of a tenancy; unless otherwise broadly agreed, that is covered by the damages provision in a contract.

I believe my hon. Friend the Member for Carlisle (John Stevenson) wanted to intervene.

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[Rishi Sunak]

As I mentioned previously, Newham is obviously ahead of the curve, and the Committee did hear evidence about that, but many other local authorities are now following suit. Liverpool, Camden and Torbay are examples of local authorities that are getting to grips with the new legislation and putting it into effect in good order. I am pleased to say that, as these are relatively new powers, over the summer recess my Department conducted an extensive engagement activity across five different events throughout the country, involving almost 200 different local authorities, to talk specifically about the enforcement of regulations in the sector. Those conversations have sparked a lot of interesting collaboration across local authorities as they contemplate using the existing regulations and the new legislation in future. As we go forward together, with greater awareness and collaboration and, indeed, the greater funding that will come as a result of the legislation, I am confident that we will see enhanced enforcement activity from local authorities, where required.

[Kevin Hollinrake]

The Minister is doing an excellent job at the Dispatch Box, as always. Does he agree that another method of sanctioning landlords and agents who will not comply with reasonable regulations is through the redress process? The requirement for agents to be members of a redress scheme was introduced by our Administration in 2014. It was a seminal moment in the raising of standards in the industry. The requirement to be a member of a redress scheme, with an agreement going across the other two redress schemes, means that a practitioner can in effect be banned from the sector because they are not allowed to be a member of a redress scheme. If that idea is expanded to landlords, we will have another method of excluding from the sector people who will not do the right thing in the right way.

[Rishi Sunak]

I thank my hon. Friend for that clear example of an activity that is already happening that enables redress to be found. He is absolutely right to highlight the potential extension of membership of redress schemes from agents to landlords, which would further improve tenants’ ability to seek redress when they need it and would more generally act as an incentive for good behaviour in the first place. He will know that the Government are conducting a broader conversation about the regulation of estate agents, about ensuring that the industry is properly regulated and that standards are high and about ensuring that the actions of a small minority do not jeopardise the health of the great majority of the sector. That is an ongoing piece of work, and I am sure that we will discuss it in the House in due course.

As we discussed in Committee, when a tenant has paid an unlawful fee, it is only fair that they should be given a say in how those fees are reimbursed, and the hon. Members for Great Grimsby (Melanie Onn) and for Croydon Central (Sarah Jones), whom I am pleased to see the in their places on the Front Bench, tabled an amendment to that specific effect. As I said I would in Committee, I have considered their amendment and agree that such a provision would be a worthwhile addition to the legislation. As such, amendments 9, 10, 12, 18, 19 and 43 will place a requirement on landlords and agents to seek consent if they wish to offset such a fee against a tenancy deposit or rent payment. I hope that those hon. Members will be happy with that incorporation.

I am pleased to say that our amendments go slightly further than the one proposed by the Opposition Front-Bench team, by also requiring agents and landlords to seek the tenant’s consent if they wish to offset the holding deposit from the tenancy deposit or a future rent payment. If the landlord or agent does not seek consent from the tenant or relevant person about how the prohibited payment or holding deposit should be refunded, they will be judged not to have fulfilled their obligation to repay the fee. That will leave the landlord or agent liable for a financial penalty and give the tenant the right to recover their fee through the relevant enforcement authority. It will also restrict the landlord’s ability to serve a section 21 eviction notice.

I have already explained why we do not support the amendment tabled by the hon. Member for Great Grimsby on the default fee provision and why our proposed alternative is fairer and more workable. I wish briefly to address amendment 1, which she also tabled and which would increase the financial penalty for a breach of the ban from £5,000 to £30,000, and explain why we do not support it. We want the fine to act as a serious deterrent to non-compliance. We have listened to feedback from across the sector, and we firmly believe that financial penalties provided in the Bill are the right ones. I think that most people would agree that a £30,000 fine for an initial breach of the ban, as proposed in the amendment, would be excessive. We do not want unfairly to penalise landlords and agents who may inadvertently breach the ban on fees. In particular, that might seriously financially hurt individual landlords who, for context, collect on average rent of around £8,000 from a single properly. A £30,000 fine is almost four multiples of that.

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[Melanie Onn (Great Grimsby) (Lab)]

I welcome the Government’s amendments. They go some way towards making the Bill much more meaningful, and we will support them. I remain, however, disappointed at the lack of movement on the requirement for deposits, which will stay at up to six weeks. I believe that that remains a significant financial barrier into the private rented sector for many people. Deposits are currently in the region of four weeks at a natural level. Allowing deposits of up to six weeks is likely to encourage more landlords or agents to increase their length and make it even harder for people to access the private rented sector.

[Kevin Hollinrake]

The hon. Lady makes a point about the length of deposits. Does she not acknowledge that there can be different circumstances? For example, a tenant with pets may damage a property more than a tenant without pets. If we do not allow some flexibility, people in those circumstances might not be able to rent a property at all. Scotland provides a basis for many of the measures in the proposed legislation, and the length of a deposit in Scotland can be up to two months. Does she therefore not agree that six weeks is actually fair and covers more circumstances than simply keeping it at a month?

[Melanie Onn]

I respectfully disagree with the hon. Gentleman’s perspective. Four weeks is an acceptable deposit. Introducing the possibility of an increase to a maximum of six weeks is unnecessary, and I urge the Government to look at that again.

Before I move on to amendments 3, 1 and 2, I would like to return to a number of important issues raised in Committee that have not been addressed in the Government’s amendments. I hope that the Minister will provide more clarification on them. Perhaps they could be considered as the Bill goes through its next stages.

It is about 12 weeks since we last discussed the Bill, which is something like the timeframe that I and many of us had in mind when the Minister said in Committee that its main provisions would come into force in “a few months” after the Bill had passed. However, on her YouTube channel, “Agent Rainmaker—Letting Agent Growth”, Sally Lawson, the former president of ARLA Propertymark, tells us that the measures in the Bill will not come into force until April next year. That seemed to be a fairly definite date. Can the Minister advise the House on whether that is simply speculation, or whether it is the very earliest the Government can manage to bring forward these very important measures?

I would like further clarification regarding erroneous right to rent decisions by the Home Office and their impact on the return of a holding deposit. Will the Minister confirm that, if the Home Office makes a mistake with a right to rent check and misinforms the landlord that a tenant has failed the check, the landlord will not be liable for a financial penalty? Will he confirm that the landlord will simply be required to return the holding deposit to the tenant, as recommended by the Housing, Communities and Local Government Committee?

Despite the need for further clarification on those issues, I am pleased that the Government have acceded to common sense on a number of issues that we in the Opposition raised in Committee. First, I welcome the Government’s acceptance of the amendment we tabled in Committee to give tenants who are owed money following a prohibited payment a choice over how it is repaid. The original wording could have caused problems for tenants in certain circumstances. More widely, it would have contravened the principle that the money belongs to the tenant and that it is for the tenant to decide what to do with it.

Secondly, after a lot of persuasion from the Opposition, the Government are taking steps in a positive direction on their description of a default fee. It is right that it includes the definition of “reasonable” in association with costs and that there will now be a requirement to produce audits or invoices of any costs levied. Those changes will add substantial benefits to the Government’s definition of default fees and help to prevent the very worst offenders from defining unreasonable costs as a loss.

Similarly, requiring landlords or agents to provide invoices for their costs will provide greater transparency for tenants and represents a substantial shift from the Government’s position in Committee. Giving tenants an invoice allows them to account for what they are being charged and provides a platform for an appropriate challenge when the fee is considered unreasonable or prohibited. I am reassured by the Government amendments that the Minister has heard the point that simply relying on guidance, which was the initial proposal, would not be enough to prevent the continuation of tenants being overcharged. The only way to end punitive default fees, which unfortunately have turned into a cash cow for some unscrupulous landlords and letting agents, is to spell out firmly in the Bill what is and is not acceptable, rather than to rely on guidance.

Less than half of renters in this country see their deposit agreement before handing over their money, and a third have signed a tenancy agreement without fully understanding it. The Bill provides a loophole for unscrupulous landlords and agents to exploit that by placing unfair terms in their tenancy agreements. That is why I ask all Members to support amendment 3. It would provide a clear list of acceptable payments that cover a loss to the landlord. It would allow for fees to be charged only when there was a clear and indisputable cost, and it would prevent the use of tenancy agreements as a device through which to include additional charges. Although we set out a limited set of terms for permitted payments in the amendment, it would not stop landlords claiming damages or taking money out of a deposit where needed. The amendment relates only to situations where there is no dispute and there is a real, additional or exceptional cost to the landlord that falls outside usual expected business costs, such as sending a letter or email to a tenant.

[Kevin Hollinrake]

Are the fair conditions in amendment 3 examples of charges that may be levied or a definitive list? One thing the hon. Lady has neglected to put in the amendment, for example, is what happens if a tenant breaks the terms of the agreement and wants to leave early or change the sharer. That can result in significant costs to a landlord or agent. Is she excluding that possibility with the amendment?

[Melanie Onn]

I accept what the hon. Gentleman says. The amendment would serve as an example. I would be happy for it to be adopted and then to be taken on further by the Lords. It sets out examples, rather than being a full definition of the circumstances in which a tenant could be charged.

In principle, putting in place a simple paragraph such as that in amendment 3 would make it far clearer to tenants when a breach had taken place. As it stands, the Bill will still be extremely confusing for any tenant trying to tell whether a breach has taken place. That, in turn, will inhibit the right and opportunity of a tenant to properly challenge a landlord or letting agent at a tribunal. Providing clarity on the face of the Bill would remove the ambiguity. Under amendment 3, it would be easy for a tenant to tell if they had been charged an unfair fee, and they would be better able to self-enforce their rights.

Such self-enforcement may be necessary. The Minister talked about it in very positive terms, but I am not sure it is so positive. It reinforces the point that the Bill does not carry the weight of enforcement behind it to take landlords and letting agents to task properly when they continue to break the law. For the Bill to succeed, it must be backed by sufficient enforcement power.

That is why we propose amendments 1 and 2, the primary aim of which is to allow trading councils the freedom to apply higher fines to those who break the rules. That would improve the enforcement of the Bill twofold. First, it would deter landlords and letting agents from taking the chance of applying prohibited levels of fines towards tenants. Even with strong legislation, we know that tenants can often end up in illegal renting situations owing to a lack of knowledge, a lack of confidence to challenge an unfair decision or the fear that a complaint or relationship breakdown could leave them without a house and on the street. We can see this in the Citizens Advice report “Touch and go”, which highlighted the fact that 44% of tenants did not complain about a category 1 hazard in their house.

Secondly, the Opposition are worried that unscrupulous landlords and letting agents may still be tempted to charge prohibited fees in the belief that they will not be challenged until they have taken well over £5,000 in prohibited fees, and that as a result they will see those fines as a business cost. As the hon. Member for Harrow East (Bob Blackman) pointed out, it is just the cost of doing business, rather than the real deterrent it should be. I echo his point that some of the people who local authorities have been enforcing against are not genuine, upstanding, licensed and registered, above-board landlords and agents, but criminals and crooks, and the fine of £5,000 will simply not be enough to deter them.

The Minister had concerns about the £30,000 fine, but amendment 2 states only that it “must not exceed” £30,000. That need not necessarily be the first fine—that would be for the enforcement agency to determine, given the circumstances and an understanding of the situation. Still, to provide a full deterrent would certainly increase the odds against those who take the chance and charge prohibited fees.

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[Bob Blackman]

It is a pleasure to follow the hon. Member for Oxford East (Anneliese Dodds) and the passionate view of her constituents. May I draw the attention of the House to my entry in the Register of Members’ Financial Interests?

In the absence of the Chair of the Housing, Communities and Local Government Committee, I had the honour of chairing the Select Committee pre-inquiry into this legislation. We looked at a lot of the evidence that is now coming forward. I am delighted that the Minister has seen fit to make some changes during the passage of the Bill and to accept many of the Select Committee’s recommendations.

The hon. Member for Great Grimsby (Melanie Onn) raised the matter of how many weeks’ rent a deposit should be. It is a shame that she has not tabled an amendment to that issue on Report, because I think several Conservative Members would feel very sympathetic towards restoring what the Select Committee recommended, which was a compromise. There was an argument for four weeks and an argument for six weeks, and we took the view that five weeks was the appropriate compromise for two reasons. First, if the limit is four weeks’ rent, there is a risk that the tenant will just refuse to pay the last month’s rent at the end of a tenancy. Secondly, a deposit of six weeks’ rent would almost certainly become the norm for most landlords, and would therefore be inflationary on the amount of deposit that would be charged.

I gently remind the Minister that in the last Budget the Chancellor allocated some £20 million towards a national rental deposit scheme, following representations from me and several other colleagues to set one up. The Department has not yet set up that scheme, but by saying that the limit will now be six weeks, instead of four or five, the Minister is going to reduce straightaway the number of families that can be assisted under the national rental deposit scheme when the Department finally does bring it forward. I ask him to look at this figure again, because it will limit the number of people who could be assisted through this programme.

On the issue of enforcement, I welcome the changes proposed by the Minister. Many of the changes, which are very clear, go above and beyond those proposed by the Opposition. Having looked at the evidence in relation to this legislation, many of us will share concerns about the difference between what I would classify as true costs, and charges. In answer to my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski), the key question is, who does the letting agent work for? The letting agent works for the landlord, not the tenant. It is the responsibility of the letting agent to acquire tenants on behalf of their employer—namely, the landlord—and therefore there should not be two charges incurred. The letting agent should charge the landlord for their fees, not charge the tenant for acquiring.

However, there are costs associated with acquiring a tenant—for example, when there is a requirement for a credit check. If a prospective tenant were to fail that test, there is a cost that someone has to collect. If an applicant makes a request through a letting agent and a credit check is then undertaken that is failed by the prospective tenant, it is reasonable that the cost should be passed on to that individual, particularly if they were going to knowingly fail the credit check in the first place. That is an example of a true cost as opposed to a fee charge. My hon. Friend has set out a set of areas and then a limit on the charges that a letting agent may charge a tenant. I trust that he will not press his amendment to a vote, because that goes completely against the spirit of this Bill and what we are proposing.

[Kevin Hollinrake]

My hon. Friend is making an important point on referencing. Does he agree that it might be beneficial if the Bill were clarified so that everybody was clear about circumstances in which some of the holding deposit might be retained by the landlord or the agent in the case of somebody failing a reference check? If that were not the case, people on low incomes, for example, could be discriminated against when they apply to rent a property.

[Bob Blackman]

I thank my hon. Friend for that intervention. We clearly need to be more specific. I accept the principle set out by my hon. Friend the Minister that we should not put this in the Bill, but it should be put in regulations, because we can change regulations rather more easily and add things to them at an appropriate time without having to go through primary legislation once again. This is a question of detail that I ask my hon. Friend the Minister to look at again.

The other issue is charges for, for example, lost keys, cleaning or damage that may be done to a property. Those are reasonable costs that a tenant should incur. If that has to be set out in the tenancy agreement, it must be made crystal clear in what we lay out in regulations and guidance to landlords what is allowed and what is not allowed. In particular, things that are not allowed must be specified as being completely outwith the potential of the Bill, as opposed to being in the Bill.

I thank the Minister and his team for looking at and reflecting many of the recommendations that the Select Committee made on the draft Bill. With a few more tweaks, this can be an excellent Bill that we can all be very proud of.

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[Sir Christopher Chope]

No, I will not give way, because I want to allow hon. Members who have not yet spoken to get in.

Why are we preventing letting agents from charging for credit reference searches, identity and passport checks, and all the rest? When one looks at the evidence in support of the Bill, it is quite clear that if the existing laws were properly enforced, the need for the Bill would not have arisen. I am extremely sceptical about the Government’s assertion that enforcement will be a lot more effective. If they really believe that, why do they not place a duty on local authorities to enforce the legislation, rather than leaving it as a mere power?

The legislation will have a lot of unintended consequences. It is already difficult enough for tenants to obtain rented accommodation if they have pets. It is very difficult for tenants on housing benefit to obtain accommodation. It is very difficult for tenants who do not have clear British citizenship to get rented accommodation. All those things will become a lot more difficult as a result of this additional burden on the private rented sector.

Some 30 years ago, I was a junior Housing Minister. I was much associated with deregulating the sector—introducing shortholds, getting rid of controlled tenancies and enabling the growth that has taken place in the private rented sector. I am disappointed to see my Government working in the opposite direction. I signed amendment 4, which was tabled by my hon. Friend the Member for Shrewsbury and Atcham. I understand that he has been bought off by the Government, so I will not press the matter to a vote. However, I think that there is too much crowd-pleasing on the part of the Government and not enough sensible regulation and recognition of the important work done by those in the private rented sector.

[Kevin Hollinrake]

This is the perfect opportunity for me to speak. I draw the House’s attention to my entry in the Register of Members’ Financial Interests, as a result of which I recused myself from the Select Committee’s pre-legislative scrutiny of the Bill. On the face of it, the Bill will cost my business more money than I wish to think about, and it is certainly keeping my finance director awake at night; we are talking about significant sums. Nevertheless, I disagree with my hon. Friend the Member for Christchurch (Sir Christopher Chope), because we do not have a free market here. I think that it is an entirely Conservative policy to make sure that we have free enterprise and a free market.

Tenants choose properties; they do not choose letting agents. Landlords choose letting agents. Despite the cost, we should be standing up for the values of free enterprise. The business I have mentioned, which I am still involved with today, could not have been built without the opportunities provided by free enterprise, so there is no way that I could not support the Bill. I appreciate the amendment tabled by my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski), but I think that even a cap is the wrong approach. We need to abolish these fees completely, as I have consistently argued to the industry.

I want to make a couple of points about free enterprise and the private rented sector. The shadow Minister, the hon. Member for Great Grimsby (Melanie Onn), said that the private rented sector had increased exponentially over the past few years. When I started 30 years ago in this business, I operated in York, where the lack of supply meant that anyone who wanted to rent a home would probably get a shabby, damp, dark terraced house. It is because of private sector investment that we now have such tremendous supply in this marketplace, generally at fair rents.

I am not sure where the hon. Member for Oxford East (Anneliese Dodds)—she is not in her place—got the figure of an 18% yield from, but that seems incredible. On that basis, there is probably a march of investors heading down the road to Oxford East to buy property. Generally, yields in the sector are very tight—about 4%, not 18%—because of the competitive nature of the market.

I support the Government amendments to ensure that any charges are clearly defined in a tenancy agreement.

[Dr Allin-Khan]

Will the hon. Gentleman give way?

[Kevin Hollinrake]

I am sorry; I cannot, because of the time. Many people have been here for the whole debate and want to speak.

I cannot support amendment 3, because it is restricted to two elements: a lost key, or a late rent payment. Tenants create many other costs for landlords and agents, and it is only fair that landlords and agents should be reimbursed. As an example, one tenant recently rang one of our offices late at night on the out-of-hours phone number and said that they had forgotten where they lived and asked whether we could go and pick them up and take them back home, because they had had a little bit too much to drink. That is not a typical scenario, but there are lots of different situations in which landlords and agents may incur costs. I am thinking particularly about the chasing of rent and a change of sharer, which represent significant costs to landlords. I would support a limited and fair list—and most agents will be fair.

Tenant Fees Bill

Kevin Hollinrake Excerpts

Ping Pong: House of Commons
Wednesday 23rd January 2019 Commons Chamber

[Mrs Wheeler]

I could not have put it better myself. We do not want to create a situation that encourages landlords to withdraw from the market or ask tenants for more rent in advance, thus decreasing the overall net benefit of the ban on unfair charges. Also, we do not want to legislate in a way that would disadvantage certain groups, including pet owners and those who have lived abroad or have a poor financial history.

The real risk, as we have heard throughout the parliamentary process, is that a cap of four or three weeks’ rent could encourage tenants to forgo their final month’s rent payment. The Housing, Communities and Local Government Committee and peers in all parts of the other House recognised that risk and agreed that a deposit of five weeks’ rent was the right compromise. Lords amendments 36 and 37 are the result of cross-party discussion and agreement. It is worth noting that the hon. Member for Great Grimsby publicly welcomed the five-week deposit cap when it was announced. With that in mind, I hope hon. Members recognise that the Government have already proposed the best solution to the tenancy deposit cap.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Is my hon. Friend aware of anywhere in the world, and certainly any part of the United Kingdom, where deposits are capped at three weeks’ rent? Indeed, as she knows, the cap in Scotland is eight weeks’ rent.

[Mrs Wheeler]

I thank my hon. Friend. He has great knowledge of these matters and it is always helpful to hear that. In Scotland, it is eight weeks. We are putting forward five weeks. No, I am not aware of a cap at three weeks.

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[Mrs Wheeler]

Yes, indeed. I thank the hon. Lady for her intervention. I will get on to that point later in my speech, so she will have to stay and listen to the end, I am afraid.

[Kevin Hollinrake]

I must draw the House’s attention to my entry in the Register of Members’ Financial Interests. The Minister talks about agents and landlords having reassurance about being able to make reasonable charges where their action or work is required through the fault of the tenant. The Bill does make provision for this in a situation with the loss of keys, but it makes no provision for the costs of chasing late rent, despite the fact that it may take several attempts to collect it. In effect, that means that charges would be increased on the landlord at the expense of good tenants, on the basis that some bad tenants who do not pay their rent on time create a lot more work for the agent or the landlord.

[Mrs Wheeler]

Again, I thank my hon. Friend for his intervention. He is so deeply imbued with knowledge of these issues that I take note of it. I think he will find that later in the Bill there is a clause that might be helpful to him.

There is also a power in clause 3 to amend the list of permitted payments, including the level of the deposit cap and types of default fees that can be charged, should this be required.

Lords amendment 48 clarifies that landlords and agents will still be able to charge for any damages for contractual breaches as they do now. On this point, the hon. Member for Great Grimsby has tabled an amendment seeking to ensure that, where a landlord or agent wishes to charge a payment for damages, they must provide evidence in writing to demonstrate that their costs are reasonable. I would like to reassure her, and other hon. Members, that that amendment is not necessary. It has never been the intention that the Bill affects a landlord or an agent’s right to recover damages for breach of contract under common law. That is why we brought forward Lords amendment 48 to clarify the position and to ensure that such payments will not be outlawed under the ban. I want to reassure hon. Members that this does not create a back door to charging fees. I repeat: it does not create a back door to charging fees. Damages are generally not meant to do anything more than put the innocent party back in the position they would have been in had the contract not been breached. No reasonableness test is therefore needed. There are already large amounts of case law that deal with what is appropriate in a damages case. If an agent or a landlord attempts to insert a clause that requires a payment—for example, saying, “If you do X, you must make a payment”—this will be prohibited under clause 1(6)(b) or clause 2(5)(b). Further, landlords or agents are required to go to court if they want to enforce a damages claim, or they could seek to recover them from the tenancy deposit. In both cases, they would need to provide evidence to substantiate any claim, and they would only be awarded any fair costs.

As such, the hon. Lady’s amendment is unnecessary. It would also not be appropriate for this Bill to start tweaking years of existing case law regarding damages payments. We are more likely to confuse the landscape than to clarify it. We are committed, on this matter, to working with Citizens Advice, Shelter and other industry groups to ensure that tenants fully understand their existing rights with regard to paying and challenging contractual damages. We have already taken steps to update our guidance to make this point clear. I hope that, with those reassurances, the hon. Lady feels able to withdraw her amendment.

Hon. Members will be aware that the Bill introduces a clear set of rules around holding deposits. This will improve transparency and provide assurances from both tenant and landlord around the commitment to entering into a tenancy agreement. To minimise the risk of abuse, Lords amendment 54 introduces a formal requirement for landlords and agents to set out in writing why they are retaining a deposit. This will empower tenants to challenge decisions that they believe to be unfair. It will also ensure that tenants do not continue to apply for properties and risk losing their holding deposit time and again without understanding why.

We also agree that it is not right that landlords and agents accept multiple holding deposits for the same property. That is why Lords amendment 41 ensures that a landlord or an agent can only take one holding deposit at any one time for a property, unless permitted to retain the earlier deposit. Lords amendment 50 will ensure that a tenant receives their holding deposit back when the tenancy agreement is entered into. Previously, it could have been the case that a landlord might have had grounds to retain the holding deposit, and done so but entered into the tenancy anyway. Further, Lords amendment 59 clarifies that a holding deposit must be refunded where a landlord or an agent imposes a requirement that breaches the ban or behaves in such a manner that it would be unreasonable to expect the tenant or relevant person to enter the tenancy. This will, for example, give tenants greater power to object where a landlord or agent has asked them to pay an unlawful fee or to enter into an agreement with unfair terms.

--- Later in debate ---

[Melanie Onn]

It is a busy day in other parts of the Palace of Westminster; we should give colleagues credit for the fact that they have other work to do. I shall come on to the detail of my amendment and the issue of five weeks. I think that the hon. Gentleman has misremembered the extent of my acceptance of the five-week period. It was a reluctant acceptance at the time, with a view to tabling a further amendment if we thought that necessary. Having heard the Minister’s explanation, I think that it is still necessary to press that point, and I shall address it further in my speech.

I am discussing the damages that landlords can claim if a tenancy agreement is breached, rather than the issue of deposits. I urge the hon. Gentleman to bear with me and allow me to finish making that point. The fact that this is the first reference in the Bill to claiming damages shows that the Government were confident until recently that the Bill as originally drafted would not interfere with the current system. Indeed, the Government’s draft guidance, which we received from the Minister on 5 November, said:

“The Act does not affect any entitlement to recover damages for breach of contract…If a tenancy agreement does not permit a landlord or agent to charge default fees, the landlord or agent may still be able to recover damages.”

It continued:

“What is the difference between a default fee and damages? A default fee is a payment that can be required by a landlord or agent under an express provision in the tenancy agreement and would therefore be permitted under the Tenant Fees Act.”

Finally, it said:

“Can a landlord or agent recover costs for damages if they didn’t write them into the tenancy agreement? Yes. The Act does not affect the landlord’s entitlement to recover damages”.

The draft guidance that we received from the Minister’s Department only two months ago indicated on multiple occasions that the Bill would not impact on a landlord’s ability to claim damages, and it spelt out the difference between a default and a deposit. There is therefore a concern, because what was seemingly settled has become unsettled as the result of an addition which, to all intents and purposes, and given the explanation that we received, does not need to be made. What is the purpose of that? However, the Minister’s assurance on the intention to reassure landlords and innocent parties that they are simply going to be in the position that they were in before any such harm was caused perhaps gives me reason to reconsider.

[Kevin Hollinrake]

Does the hon. Lady think that good tenants who comply should subsidise poor tenants who do not comply?

[Melanie Onn]

I think it is absolutely right that if a landlord experiences a breach of tenancy, those tenants are considered responsible for the situation. It should not rest on others who adhere to the tenancy agreement that they signed, so I concur with the hon. Gentleman.

I really do not see why Lords amendment 47 on default fees necessitates change, as the Government clearly defined damages as separate from defaults. I therefore wonder why Lords amendment 48 is necessary in the first place. Without it, would the Bill impede the current system? Would it prevent landlords from claiming damages through deposits or the courts? Can the Government reassure me—I would say that perhaps they have done so to some extent—that Lords amendment 48 will not create powers for landlords to bypass current systems and charge as they see fit? I certainly hope that the Minister believes that to be the case. If Lords amendment 48 is not necessary, perhaps it is in the Minister’s gift to reconsider the position and remove the provision, rather than adding confusion, as it is not necessary, and previous statements have made it clear that it is not necessary.

My amendment (a) to Lords amendment 48 would bring that into symmetry with powers in the Bill and add a requirement for charges brought under the amendment to be reasonable, and to be evidenced by invoices. That is just to ensure that no loophole is sought. Throughout the debate we have discussed the need for permitted payments in the Bill to be subject to rigorous checks and balances, to ensure that unscrupulous landlords and letting agents cannot continue to charge unjustified amounts for things such as a lost key. Thanks to the hard work in both Houses, we have closed a number of loopholes that could have been exploited to allow some landlords to profit from tenants by unfair and unjustified means.

Lords amendment 48 does not contain those protections and seemingly could allow for open-ended charges without mind to the cost to the landlord, and to whether the charges could be backed up by evidence. I do not intend to press the amendment to a Division, but I would welcome additional reassurances from the Government that the principles discussed throughout the Bill will not be undermined by the Lords amendment, and that it is not a new loophole that landlords and letting agents can exploit for profit.

--- Later in debate ---

[Melanie Onn]

Having served on that Committee with the hon. Gentleman previously, I absolutely support its work and congratulate it, but it is always in the interests of a Select Committee to achieve consensus whenever possible and to try to agree a report that has unanimous support. That is the purpose and intention, and this case is a demonstration of excellent chairmanship and co-operation.

I congratulate the hon. Gentleman on playing his part in that, but it is the Opposition’s role to speak up for tenants. If we can make the process better, and if there is an opportunity for the Government to go further in assisting tenants—tenants are hard-pressed and this is a very expensive period of their lives—it is right that we speak up for them. We should try to encourage the Government to accept that they can reduce the barrier of high deposits to assist people directly. I just cannot support the view that charging more will assist renters in any way.

The Minister mentioned that I welcomed the Government’s reduction. I am delighted that they have listened to common sense and reasonableness, and that they have reduced the cap to five weeks from six, which was far too high, but it is not enough. If the Government can go further, I believe they always should.

[Kevin Hollinrake]

rose—

[Richard Graham]

rose—

--- Later in debate ---

[Angela Crawley]

As the lonely Member on the SNP Benches, and given that the Bill applies solely to England, I will endeavour to keep my comments brief. The Government’s Bill is, however, welcome.

This Government are playing catch-up with the Scottish Government, who abolished tenant fees in 2011. The Scottish reforms gave tenants longer notice periods, indefinite security of tenure and limited rent rises, so it is most welcome that this Government are making changes here now. In Scotland, in many instances, money has gone back into the pockets of Scottish renters, but renters in England are currently losing out due to this Government’s inaction and failure to offer the same protections.

The Government have maintained the right-to-buy policy, but they must recognise that to give people the greatest choice and flexibility, they have to ensure that the opportunity of the right to buy is matched with an increase in home building and access to socially affordable housing. I am afraid the Government have not quite hit the mark on that yet, and people are simply being driven into the private rented sector, which limits their options and opportunities.

The Bill is very welcome. As we heard from Conservative Members, there remains the fear that this policy will mean that the costs of the abolished fees will be passed on to tenants in an underhand way, but that concern is unfounded. It has not happened in Scotland, where there has not been a significant spike in rents since the ban on fees, so I hope that the Government will take heed of that fact. Independent research commissioned by Shelter found that since 2012 landlords in Scotland had been no more likely to increase rents than landlords in other parts of the UK. Between 2012 and 2016, rents increased by 5% in Scotland, compared with 9% in England, so the abolition of tenant fees does not appear to have had a significant impact on costs.

That said, although such a policy has been shown to work in tenants’ favour, we must be vigilant about rent prices, so I hope that the Minister will outline how the Government will ensure that their policy puts tenants first. Landlords in Scotland can only increase rents with three months’ notice and no more than once a year, and tenants can contact a rent officer if they think that a rent increase is too high. I would be interested to know whether the Minister envisages similar protections and criteria for the policy in England. In Scotland, other than rent and a refundable deposit, which is capped at no more than two months’ rent, landlords cannot levy any additional charges, which means no holding deposits, administration fees, premiums or additional charges, whether refundable or not.

Tenants are secure when landlords can end a tenancy only on strict eviction grounds. The Scottish National party commends the work of charities and campaigners who secured additional renters’ rights from the Government in the House of Lords, and both Shelter UK and Generation Rent are happy for the Bill to pass with the Lords amendments. These rights include a short definitive list limiting default fees to charges for chasing late rents and for replacing lost keys or equivalent security devices. I noted the comments made by the hon. Member for Thirsk and Malton (Kevin Hollinrake) and I hope he is reassured that welcome mechanisms are in place. The provision closes the default fee loophole so that landlords will no longer be able to charge for a whole host of spurious defaults. It is also clear to landlords that they can continue to recover damages as they do now.

I welcomed the comments of the hon. Member for Harrow East (Bob Blackman), who, when comparing the position with the cap set in Scotland, rightly mentioned the greater availability of social housing in Scotland. He observed that a five-week cap was welcome, especially given that rents in England and Wales can be two to three times higher than those in Scotland. A five-week deposit cap is reasonable and will help renters to meet the initial fees needed to secure a home. Although Shelter originally argued for a lower cap, even it has said that it is

“pleased that the government didn’t stick at 6 weeks and we believe the 5-week cap will be a big improvement”.

That takes heed of the fact that costs are substantially higher in England, meaning that a five-week cap is much more reasonable.

Holding deposits are now illegal in Scotland, and that ought to be the case in England as well. Under the Lords amendments, if a tenancy does not go ahead, landlords or letting agents will be required to set out in writing the reasons why—they will also be required to give reasons for withholding some of a deposit—and they will have to do so within seven days of the decision not to progress with the tenancy. That will give tenants some clarity on exactly what happened to their money and ensure that there is a paper trail, which will make challenging unfair practices easier. Ultimately, both the landlord and the tenant will have more protection.

The ban on tenants fees in Scotland has made the rental sector fairer and easier to access. While I congratulate the Government on taking this positive step in the interests of people in rented accommodation, I urge the Minister to consider my points about abolishing tenant fees, while balancing protections for landlords with the rights of renters. The Bill will protect renters, many of whom do not have the luxury of owning their own home, and that ultimately is what we all want.

[Kevin Hollinrake]

I will try to keep my comments brief—apparently time is pressing—although there is much I would like to say about the Bill. I draw the House’s attention yet again to my entry in the Register of Members’ Financial Interests.

I am in principle and in practice very supportive of the Bill—I have been right from the start—despite my business interests and despite the extreme consternation within the industry at my support. It is absolutely right that there be a firewall around a tenant’s ability to shop around when they have found a house or flat they want to rent. We are right to believe in free and competitive markets. This was not a free and competitive market, and it is right that we act in this area. It is right that landlords pay for their own tenancy agreements, inventories and referencing. I support all those things. I also want to put on the record my support for the Minister. She has done a great job on the Bill and engaged with me and other colleagues who have had concerns about some of its provisions.

I would like to touch on two things: deposits and default fees. I will begin with Lords amendments 36 and 37. To say that three weeks would be an appropriate deposit length, as the hon. Member for Great Grimsby (Melanie Onn) has done, shows a complete misunderstanding of the issues. She is absolutely right to want to protect tenants—everyone in this place wants to protect tenants—but to do that we must be fair to landlords as well. She asked how a longer deposit period would help tenants. It would not help tenants not to be able to find properties to rent. If we deterred landlords from entering the marketplace, as a three-week cap would do, that would not help tenants.

I speak as somebody who has been in this business for 30 years. When I started, the only thing I could find in the marketplace was a shabby, damp, dark terraced house in the middle of York. It was not like today’s marketplace; tenants now have a breadth of choice, and that is because landlords have invested because they are treated fairly. The hon. Lady wants to treat tenants fairly, as I do, but we would not be treating them fairly if our policies resulted in their being refused tenancies by landlords worried about not getting their rent, not regaining possession of a property that had had significant damage done to it or not having enough deposit left for the remedial work. Her proposals would potentially put landlords in that situation, given that many tenants use their deposit as the last month’s rent, meaning there would be nothing left.

I still have concerns about restricting the deposit length to five weeks. As we know, it is eight weeks in Scotland. The average deposit in London is five and a half to six weeks, and in the rest of England it is not far below that, so the Bill will mean a change for many landlords, and we will have to keep this under review to make sure it does not have adverse consequences for tenants—that is the principle. Landlords are happy as long as they keep their properties well maintained and the rent is paid. If that is not the case, landlords will exit the market, which is not good for the tenants the hon. Lady looks to protect.

[Bob Blackman]

Does my hon. Friend recall that, during the Select Committee process, one of our considerations was that, if we set a six-week deposit limit, every landlord would rapidly move to six weeks from the current UK average of between four and a half and five and a half weeks?

[Kevin Hollinrake]

No, I do not agree with that because at the moment we have some flexibility. Under the Bill, we have no flexibility above five weeks. The trouble with that is this. I could charge a tenant five weeks, but what if they have a pet or certain other circumstances that make me less likely to want to rent it to them? I, as a landlord, will be less likely to rent to that person, under this measure, whereas with six weeks I would have some flexibility. We must make sure that this does not deter landlords from renting properties to people with pets. We do not want that, but it could happen. The Minister has promised to keep this measure under review, and I am absolutely sure that she will.

I want to touch on default fees and amendments 42 to 47. I welcome the clarification from the Minister in the letter she sent me a couple of days ago. She assured me that landlords and agents would still be able to charge for things above and beyond their existing obligations, and that is absolutely right, but the Bill itself only makes a couple of provisions on default fees, and one of those is for the replacement of keys. It sounds like a simple process, but it is possible to spend hours and hours chasing the tenant, chasing the keys, and then chasing the tenant to come and collect the keys. Someone has to pay for that work. It is not a question of the keys themselves; it is a question of the time and labour involved in their delivery.