Letting Agent Fees (Tenants)

Debate between Kevin Hollinrake and Albert Owen

Wednesday 6th September 2017 Westminster Hall

[Sandy Martin]

The hon. Gentleman talks about the delivery of rented sector housing in the free market. Does he accept that there is a big difference between a normal market and the housing market—a market for a service of primary importance to the continuation of human life, with a massive gap between demand and supply? That has put the tenants in an impossible position vis-à-vis the agents. In any normal market, such as groceries, demand meets supply. Someone who goes into a supermarket does not get charged its advertising and transport costs on top of the price of the groceries. The customer knows what they are paying, and we need the same in the lettings market.

[Albert Owen (in the Chair)]

Order. Interventions need to be slightly shorter.

[Kevin Hollinrake]

The hon. Gentleman makes some good points. In the main I support them, though I do not agree with them all. I have made it clear that there is an issue here that we need to deal with.

I have a couple of further points on unintended consequences. It is welcome that holding deposits will remain, and that if a tenant offers false documentation, the letting agent can retain it. I wonder who adjudicates on whether that process is fair; I think it is part of the redress schemes that apply to letting agents. There are also exemptions for tenants’ actions, so that tenants can be charged if they lose keys or break a contract. Again, I believe that that is fair.

The consultation suggests limiting security deposits to one month’s rent. The difficulty with that is that a number of tenants will try to use their security deposit as their last month’s rent. We know that around 50% of tenancies end with condition issues and work required. Limiting the security deposit to only a month’s rent raises the possibility of leaving the landlord out of pocket, because it is very difficult to chase a tenant for a debt once they have left. One month may be too short a limit; we need to look at that.

We really need to consider enforcement. The consultation proposes that local authorities enforce and oversee the regulations, but we know that most local authorities simply do not have the time to do that effectively. We need proper enforcement to ensure that we deliver a level playing field for all companies, in which rogue agents cannot continue to charge while good agents do not. In a recent survey, 45% of local authorities said that they took a “reactive only” approach to regulation in the sector.

The rules will also apply to landlords who let directly to tenants. England is the only part of the UK that does not have a central register of landlords. Who will monitor landlords to ensure that letting agent fees are not simply being transferred to direct charges from landlords? Who will regulate that area? There is a chance that more landlords will self-let after the changes.

There is a simple solution: extending the redress schemes, which have been very effective in raising standards, to landlords, so that tenants who rent directly from landlords have somewhere to press a claim for unfair treatment, rather than going to their local authority. That would be a light-touch way of regulating the sector. It would also have the benefit of improving rental standards, to which the hon. Member for Ealing Central and Acton (Dr Huq) referred. Redress schemes could apply a national rental standard and oversee it to ensure that we raise standards. The Government have been proactive in raising standards, having introduced measures on smoke alarms, carbon monoxide detectors, electrical checks and client money protection.