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.

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[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.

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[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—

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[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.