Tenant Fees Bill

Lord Bourne of Aberystwyth Excerpts

2nd reading (Hansard): House of Lords
Wednesday 10th October 2018 Lords Chamber

Moved by

[Lord Bourne of Aberystwyth]

That the Bill be now read a second time.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, this Bill takes forward essential measures to promote fairness and affordability in the private lettings market by banning unfair fees charged to tenants and capping tenancy deposits—a significant move by the Government to protect consumers in the private rented sector and a commitment made in the Government’s manifesto.

It is a Bill that should be welcomed by all across this House. I echo the sentiments of the other place that it will make the market more transparent and will save tenants, especially young people and families, hundreds of pounds. Government amendments made in the other place reflect the debate there and have ensured that the Bill will firmly deliver on this intention.

The Bill’s measures have also been informed by consultation with the sector and through the scrutiny of the Housing, Communities and Local Government Select Committee. In line with the Secretary of State’s comments, I extend my thanks to all those who have made invaluable contributions to this process. We can all agree that this engagement has ensured that the Bill will be even more effective in delivering on its promise to protect tenants from unfair charges.

I am pleased that the Bill is now before the House. It is an integral part of the Government’s broader reform to create a housing market that works for everyone. I have been moved by the extensive support for banning unfair fees, and I am grateful for the work that the noble Baroness, Lady Grender, has done previously to raise this issue. That is why I am happy that we are taking the decisive action to bring forward this change.

The housing market is changing. The proportion of households living in privately rented homes has doubled over the past 20 years. This accounts for a fifth of all households in England—approximately 4.7 million households. While this has brought new challenges, we have been consistently clear that whether you rent or own your home, you deserve to have a safe, secure and affordable place to call your own. Banning unfair tenant fees and removing rogue operators is another step that the Government are taking to make this happen. It is abundantly clear that tenants need greater protection from such abuse and poor service. To that end, we have given local authorities greater tools to crack down on poor practice in the sector. In April, we introduced banning orders and a database of rogue landlords and agents. We are backing a Bill in the other place which will enable tenants to take their landlords to court if the properties that they rent do not meet minimum standards of fitness for human habitation. We have also committed to mandatory electrical safety checks every five years and are working to bring these regulations into force as soon as possible, subject to parliamentary timetabling.

However, we know that this is only part of the problem. We want to give tenants greater confidence that they can complain about problems with their home without the fear of eviction. In June, we published our new and updated “how to” guides, including for the first time a How to Let guide for landlords to help ensure that tenants and landlords alike are aware of their rights and responsibilities.

Today is World Homelessness Day. This offers an important opportunity to consider the insecurity facing some private renters. My department recently consulted on overcoming the barriers to landlords offering longer and more secure tenancies in the private rented sector. That consultation received more than 8,000 responses, which we are currently analysing and will respond to shortly. The volume of responses demonstrates the importance of a good quality and secure rented home, which the Government are committed to delivering.

We also know that we need to make housing more affordable. That is why my department is focused on building many more houses in the places where people want to live. Since 2010, we have delivered 378,000 affordable homes in England, including 273,000 for rent, and I am confident that the Government’s ambitious housebuilding programme will deliver the transformations required in the years to come. It is also important that we help people now. That is what the Tenant Fees Bill will help to achieve. It will ensure that tenants will no longer be stung by hidden costs, saving renters an estimated £240 million within the first year alone.

These costs include unfair letting fees, with tenants facing bills for hundreds of pounds for simple things such as reference checks. We know that such services can be acquired on the market for a small fee, but the Government’s 2017 consultation found that tenants have to pay an average of £137 for a reference check. Then they are hit by fees for drawing up a tenancy agreement, for inventory checks and even for just picking up keys for their property. This, I should underline, is all alongside their deposit and the first month’s rent up front. It does not stop there. There are fees on renewal, and fees when they leave the property. Tenants often have little choice but to pay excessive and unjustified charges time and time again. They are stripped of their power to negotiate these fees as agents are appointed by landlords, some of whom use tenant fees to subsidise artificially low rates charged to landlords or grossly exaggerate the market value of such services.

We are not just talking about rogue landlords and agents here—we know that well-known high street chains are charging both tenants and landlords for the same services. These charges create a further financial barrier in a system which is stacked against tenants, many of whom are trying to save to buy their own home. It is a problem right across the country. That is why we must intervene to create a level playing field. A ban on unfair fees ensures that whoever contracts the service—in this case the landlord—pays for that service. This is integral to a fair market and, more plainly, it is common sense. Some agents and landlords already operate successful business models without charging fees to tenants. Under the ban, tenants will be better placed to shop around for a property that fits their budget, safe in the knowledge that the price they see is the price they will pay.

This Bill also protects tenants from paying unreasonably high deposits. We are capping deposits at six weeks’ rent. I should stress that this is an upper limit and not a recommendation. We expect landlords to find an appropriate level on a case-by-case basis and we will provide guidance to this effect. There has been no law on the maximum amount of a deposit previously. In Scotland, tenancy deposits are capped at eight weeks’ rent and there is no evidence to suggest that deposits have increased to meet this cap. A cap of six weeks’ rent offers a balance of greater protection to tenants while giving landlords the flexibility to accept higher risk tenants such as pet owners or those currently living abroad. It also gives landlords adequate financial security. This is vital to maintain investment and supply in the sector. More broadly, we want to ensure that tenancy deposits work for both tenants and landlords. That is why we have recently established a working group within the department looking at the merits of innovative and more affordable approaches to tenancy deposits—such as deposit passporting, where a deposit can be transferred from one tenancy to another. It is anticipated that this will report in the spring of 2019.

Let me be clear: this Bill is not an attack on good agents and landlords. We value the important services they provide. Letting agents who represent good value for money for landlords will continue to thrive because they will no longer be undercut by those who rely on overcharging and double-charging fees to sustain their business. We have also committed to regulation to improve standards in the sector and drive out rogue operators. At the moment, anyone can set themselves up as a property agent regardless of their background, skills or experience. Many agents take a professional approach and sign up to standards of practice through membership of a professional body. But others do not, and a lack of minimum standards has allowed unscrupulous agents to enter the sector—exploiting both tenants and landlords. We are committed to introducing minimum training standards and a code of practice. We are establishing a working group that will be chaired by the noble Lord, Lord Best, and we will provide further details on the membership and terms of reference of this group in the next few days. I will ensure that I write to noble Lords who are participating in the debate and place a copy in the Library.

We are also requiring agents to join a client money protection scheme, and I thank the noble Lord, Lord Palmer—who is not in his place at present—and the noble Baroness, Lady Hayter, for their considerable work in this area. Mandatory client money protection will ensure that each and every agent is providing landlords and tenants with the financial protection that they want and deserve.

The key provisions of the Bill apply to assured shorthold tenancies, tenancies of student accommodation and licences to occupy housing. Clauses 1 and 2 ban landlords and agents from requiring the tenants and licensees of privately rented housing in England, including persons acting on their behalf or guaranteeing their rent, to make any payments in connection with a tenancy. Some key exceptions to the ban, as detailed in Schedule 1, are classed as “permitted payments”. These include the payment of rent, a refundable deposit capped at six weeks’ rent, and a holding deposit capped at one week’s rent. Landlords and agents will also be able to charge a tenant for payments associated with early termination or varying a tenancy where these are requested by the tenant. Other permitted payments include any reasonable costs made in connection with the tenant defaulting on a requirement under the tenancy and payments in respect of utilities, communication services and council tax. 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. We have ensured that this protection extends to all stages of the lettings process so that tenants are not hit with hidden charges further down the line. We brought forward amendments to this effect in the Commons on Report.

We heard the concerns that the provision permitting landlords and agents to charge a fee in the event of a tenant’s default could, as previously drafted, represent a loophole. There was agreement to the principle that it is only right that agents and landlords should not have to foot the bill owing to a fault of the tenant. However, we also want to make sure that such a provision is not abused. The amendments made in the other place will ensure that landlords and agents will now be proactively required to demonstrate through written evidence that their charges are reasonable, such as in the form of receipts and invoices. We firmly believe that this increases the protections for tenants and minimises the risk of abuse.

The legislation also prevents tenants from being required to contract the services of a third party. Again, this has been included in the Bill to ensure that landlords and agents are not able to circumvent the ban by requiring tenants to pay fees by other means. However, we have ensured that tenants are free to contract agents and pay for additional support with setting up a tenancy should they choose to do so, provided that the agent does not also work on behalf of the landlord. This may be the case, for example, where they are relocating or live abroad.

The legislation proposes amendments to the transparency requirements in the Consumer Rights Act 2015 which require an agent to display information about their fees and membership of redress and client money protection schemes prominently in their office and on their website. The Bill will extend these transparency requirements to online property portals, since many tenants use them to find a home. The Bill will require letting agents to display the name of their client money protection scheme rather than simply whether they are a member of such a scheme. These amendments are vital to ensure that existing legislation remains fit for purpose in the context of today’s market. We intend to provide separate consumer guidance on how the ban will affect landlords and tenants. We are currently working with industry groups to get this right and will share a version with the House during the passage of the Bill. As soon as the guidance is available, I will ensure that it is placed in the Library and that noble Lords receive a copy.

The Bill proposes a number of enforcement measures that offer a strong deterrent to irresponsible agents and landlords, and in doing so, protect tenants. We introduced amendments in the Commons to further strengthen the enforcement provisions and ensure that where things go wrong, tenants will have proper access to redress. First and foremost, the Bill places a duty on trading standards authorities to enforce the ban. Trading standards authorities do a good job of enforcing current regulations on letting agents. With their existing local knowledge of the industry, they are the clear choice to enforce the ban on letting fees. District councils will also have the power to enforce the ban, if they choose to do so. We want to encourage joint working across different tiers of local authorities, bringing together local housing authorities’ experience of enforcing housing legislation and trading standards’ experience of enforcing fair trading.

The Bill makes provision for a lead enforcement authority to provide oversight, guidance and support with the enforcement of requirements on letting agents. This includes the ban on letting fees and related provisions. This approach is one that has worked well in the estate agency sector. The lead enforcement authority will be the Secretary of State or a local trading standards officer who is appointed to the role. The lead enforcement authority will be responsible for issuing guidance to which all local enforcement authorities must have regard when enforcing the legislation. This guidance is still being finalised to reflect ongoing engagement with local authorities and the journey of the Bill through this House. I will share a draft with noble Lords before Committee stage.

Secondly, the Bill makes provision to enable tenants and other relevant people to recover their unlawfully charged fees. The Bill will encourage this as a ban. which is much easier to understand than the existing transparency requirements. In addition, landlords will be prevented from recovering their property via the Section 21 Housing Act 1988 procedure until they have repaid any unlawfully charged fees or unlawfully retained holding deposits. In terms of sanctions, landlords and agents will be liable for a financial penalty or prosecution for each individual breach of the ban that they commit. An initial breach of the fees ban will usually be a civil offence with a financial penalty of up to £5,000. Where a further breach is committed within five years, this will amount to a criminal offence and be liable to a fine. In such a case, local authorities will have discretion whether to prosecute or impose a financial penalty. They may impose a financial penalty of up to £30,000 as an alternative to prosecution and the penalty. We consider that this will act as a serious deterrent to prolific offenders. Local authorities will be able to retain the funds raised through financial penalties, with that money reserved for future local housing enforcement.

We also intend to provide up to £500,000 additional funding in year one of the policy to support implementation and awareness raising. My department engaged with over 160 local authorities at five summer events better to understand their resourcing needs, including how they intend to enforce the Bill, and will use this knowledge to ensure that we make the best use of the additional funding.

These important measures are above all intended to promote fairness. This Government will always stand against injustice. We recognise the need to rebalance the relationship between tenants, landlords and agents. By banning fees for tenants and capping deposits, we are delivering on our commitment to make renting fairer, more transparent and more affordable. It will make a real difference to millions of tenants across the country, especially for young people and families, and to the millions who will call the private rented sector home in the future. I beg to move.

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[Baroness Gardner of Parkes (Con)]

My Lords, I declare my interests as listed in the register. I will say at the outset that I shall make a few comments that the noble Earl, Lord Lytton, passed on to me because he was not able to stay for this debate. He is very well informed on this subject, as all noble Lords will be aware.

I think that there has to be an understanding. I strongly support the idea that no agent should be able to charge both sides and make a double killing; that is almost immoral, and it is certainly very much against the tenants if they have to pay twice. But the noble Earl made the point that not all tenants are pleasant, honest or good, and we must not be carried away with the idea that all landlords are bad and all tenants are good. That is not the way that things are. This is about a transaction between adults. These are the points that he was making.

The noble Earl says that there is a huge amount of advice available to renters. Funnily enough, I have not found that myself; I found that the amount of advice for renters is not perhaps as adequate as it could be. The inequalities in bargaining power and opportunities for exploitation are very high in areas of very high value or deprived locations, and they are not necessarily representative of the entire market. Checking out tenant credentials is a repetitive activity and, because of the significant liabilities in relation to some of these, such as the right to rent, they add to the cost, which needs to be met somehow. It is true that references have to be taken up and nationality has to be proved, along with the right to be in the country; quite a lot of things come up with that. I hope the noble Earl will join in at later stages of the Bill because I believe that he has a considerable part to play.

I know that everyone is well aware of the interest I have in short-term lettings—holiday lets—and the damage that that is doing to ordinary tenants. Recently the Mayor of London made a statement about the damage that it has done and how the huge loss of rental properties is very much against tenants’ interests. People want properties available to rent, and for them to be reasonable to live in and enjoy. I have quoted before about the block in which I have had an interest in properties for many years, with long-term tenants of over five years in one and four years in the other. I am lucky to have them, because we have had all these terrible tenancies, totally illegally. People have been letting on short holiday lets, although that is strictly banned in the leases they have. These people are terrorising others in the block. One particular lady in her 90s is abused all the time. Rotting food is left everywhere around the building.

It is quite incredible that it is so bad now because power has been taken away from local authorities. When I have asked Questions for Written Answer about whether the Government would encourage local authorities to apply to have control in these matters again, the answer has always been a definite no. The Government are just not interested. They should be interested, because if local authorities had a right to register properties, there would be a safer position for lots of people. I do not think that it is fair.

To mention in passing, because it has been a long battle and is another very important point regarding the landlords’ situation: you cannot really ask people to abide by a lease for short lets for Airbnb. I spoke to the Minister when he was going to have a meeting with Airbnb. He said it told him that it asks people whether they have a right to sublet. But I asked Airbnb the same question, and it told me it does not, although it had said yes to the Minister. What is the truth? Only by some external authority being able to take over, such as local authorities if they were willing, is there going to be anyone checking on these things. At long last, under the right to manage scheme, you can only obtain—what is the word? Reclaiming the property. I am sure that everyone knows the word.

[Lord Bourne of Aberystwyth]

Repossession.

[Baroness Gardner of Parkes]

That is it. I hope Hansard was able to take that down. You can only do that if you are the head lessee or the freeholder. If you have set up your right to manage, there is a legal link missing which does not authorise you to recover the property for compensation if it has been mishandled. The woman who owns the places that are being let illegally—three or four blocks, one is normally a brothel and the other three are Airbnbs or something similar—has had herself certified under the Mental Health Act, so during that time no one was able to repossess anything.

Now the Court of Protection has appointed someone to take over, and it is all under way. As soon as these people put out the illegal people, they smashed all the windows and external structures in the brothel, which is in the basement, and the other places are being attacked on other floors. This is very disturbing. If you were a tenant living in that flat, you would be very worried about your personal safety, and would think, “Is what I’m paying fair?”, for a place that is just being allowed to do whatever it wants because there are no suitable controls.

Again, I make a plea to the Minister that it should be possible for local authorities that wish to do so to be able to return to the short-let licensing which they had in the past. That would protect long-term residents in a block, and the Mayor of London is absolutely right to say that these short lets have reduced the number of properties available in London. It is therefore quite right that people should be checked in all these financial ways. However, I recall clearly when I used to let the basement of the first house I ever lived in and Harold Wilson’s Government brought in a complete freezing of rents. That was ineffective, and worked so badly that after a while it had to be removed again. When that happened, everything went through the ceiling overnight. So it is far better to have a housing market that develops in a more normal way and works out for people in a fair way on both sides. I commend the noble Baroness, Lady Grender, for what she has done on this. It is an important but small part of a huge problem that the Government should be allowing local authorities to get on with.

I have one comment about the Written Answer I received the other day. The latest problem is commercial waste. People who come on holiday lets put out rubbish at the end, on any old day they feel like. The Answer I received said that this was commercial waste. If it is commercial, only the council can arrange to collect it—but how can it arrange to collect the rubbish fee if it has no idea who is to pay it, and when that person has vanished? This is a new problem, and apparently it is occurring all over London; waste is building up because it is just thrown out on any old day you happen to leave the place. I have said more than enough; I just wanted to give noble Lords a feeling of my views. I will look to see if there is anywhere I can add a little to the Bill.

--- Later in debate ---

[Lord Bourne of Aberystwyth]

My Lords, we have had a very valuable debate and I am grateful for noble Lords’ contributions, which have taken us round the circuit to look at the main provisions of the Bill, possible lacunae in the Bill and, in some cases, things that are extraneous to the Bill, which I will try to deal with. I will take the contributions in the order they were made and will try to provide answers. If I am unable to—some very technical issues were raised, quite rightly—I will ensure that a write-round letter goes to all Peers who participated in the debate and a copy is left in the Library.

I thank our partners who have helped in framing the legislation and discussing relevant issues. Again, I thank the noble Baroness, Lady Grender, for her role and—she should take a double bow here, really—in relation to Shelter, which has been valuable; I also thank Generation Rent, Citizens Advice and of course the LGA, which is close on much of the detail of this, as your Lordships would expect. I will try to pick that up as I go along.

First, I thank the noble Lord, Lord Kennedy, for his general support. I agree that—it was a recurring theme—most landlords and agents act appropriately and we are dealing with the exception. That does not make it any less important but it is vital that we indicate that the issues that need looking at are in relation to only a minority. The noble Lord raised issues about the level of deposit, which I appreciate is something we will want to look at ahead of Committee. I am happy to give a commitment to look at the issues that were raised. Comments were made by at least one Member about Committee stage being in Grand Committee. I understand from speaking to my Whips and Whips in other parties that it is not unusual for Committee stage to be taken in Grand Committee because votes in Committee are very rare; it would be more unusual, certainly, on Report. That is the point. This was done through the usual channels, as noble Lords will appreciate.

The noble Lord, Lord Kennedy, asked about the novation provisions in Schedule 1. Again, only reasonable costs can be covered in relation to that. That is true also in relation to the cost of default fees. As I said, that was added as an amendment in the other place. I appreciate from comments made by noble Lords that we will want to look at that ahead of Committee to see how we can improve it. The noble Lord also raised the interaction between district councils and trading standards, which is the relevant authority that has been designated. Regulations can be made, I believe, by the Secretary of State under Clause 7, which governs that issue.

The noble Lord, Lord Kennedy, asked about compensation in relation to recovery of a deposit that is improperly held. I think that would be unusual. This is somebody suing for a debt. If there is a loss that emanates from the lease under normal contractual principles, either the tenant or the landlord would be able to sue for that compensation. Compensation is only in relation to a loss. If it is a matter under the lease, that should be subject to normal contractual principles. The noble Lord asked, quite rightly, about transparency and for that to be given a prominent role in relation to the naming of the agent. I can confirm that the legislation requires this to be prominently displayed. This is something that we would want as well, so I thank him for raising that.

I thank also the noble Baroness, Lady Grender, for her supportive comments and for her work on this. I share with her the view that there is no evidence of rent increases in Scotland, where this is operational, being any different from the rest of the country. So far as one can see, they are broadly in line. I also share with her the need to keep the beneficiaries of the Bill much in mind. I agree that openrent.co.uk is a successful business model, which is worth looking at. It is also notable that most landlords support the legislation, which is reassuring. We will no doubt return to the issue of default fees.

The intention here, as I think all Peers appreciate, is to cover situations where something is taken up by the agency on behalf of a tenant: the key is the classic example and in normal circumstances, that would be paid for once the receipt is given. Nevertheless, there may be such cases and I do not want to damage a possible situation by outlawing them totally and then finding that that disturbs a perfectly good relationship, where it may be easier for the agent to recover it if the tenant is working away from home and unable to do that sort of thing. Let us come back to that ahead of Committee. I think we all want the same things; it is about ensuring that we have that.

The noble Baroness, Lady Grender, also asked about the percentage of deposits being reduced—I think that was the relevant phrase—and the evidence that the citizens advice bureaux brought forward. The figure we have from our impact assessment is of 14% of deposits being reduced rather than the CABs’ 8%, so we differ on that.

I also thank the noble Baroness, Lady Hayter, for the role that she has played in this general area. She talked about £240 million being taken out of the housing market overall. Of course, a lot of that will be in the reduction of charges paid for by tenants so it will be desirable to that extent. I understand her point but it is not as if this is not doing some good when it clearly is. I agree with her on one very telling phrase: one cannot owe a duty of care to two parties in a contractual relationship such as this. That point was well made and, while we do not always agree on everything, I certainly agree with her on the value of regulated markets. I do not need convincing of this and, as she rightly said, I am low down in the food chain so any support I can be given on that is certainly warmly welcomed by me. I thank her very much for her contribution.

The noble Lord, Lord Best, in declaring his interests, demonstrated why, when you want something doing, you ask a busy man or woman. I am very grateful that he is taking on the role that I outlined in the letter sent to Peers. It is welcome in relation to training for letting agents and generally ensuring that they are up to standard. I repeat: the majority are doing a good job. In his useful contribution, the noble Lord looked at the nature of the problem that we face and the possibility of side-effects. Again, I share the view that he put forward, which was also put forward by the noble Baroness, Lady Grender. I do not foresee side-effects—other than good ones, as it were.

My noble friend Lady Gardner of Parkes then made a contribution and I thank her for her general warm welcome for the legislation and her comments on it. I appreciate that she has particular issues in relation to short-term lettings. Many of these matters, if they are against the lease, should be taken up by the landlord. It sounded as if some other issues she referred to should certainly be taken up by the landlord. If, for example, there is a brothel, local authorities certainly have the power to act. No doubt we will continue the discussion on these issues.

The noble Lord, Lord Strasburger, perhaps came to it from a different direction with his experience in this area. I do not need telling that he is an ethical landlord; I am sure he is and I agree that a happy tenant is a good tenant—hence in many ways this legislation, which I am sure will help. But he is right to talk of the need to appreciate that we are trying to strike a balance between the interests of the landlord and the tenant regarding the deposit. That is something to focus on. I appreciate that there is a tendency to say that this is a particular problem for London and the south-east but the rents and the value of property are of course higher there, so in so far as we are trying to strike that balance, we need to do so throughout the country. The question is therefore about trying to get that right.

I thank my noble friend Lady Jenkin for highlighting the problem of home share and Shared Lives. I agree with her. We are aware of this issue and are engaging with Shared Lives to see how we can move forward on this. She underlined how important home share is and the great value of the work. That is something we should support in seeking to combat loneliness. That is happening on a global basis and is something we should applaud. She is right that it covers licensees. This point was also raised by the noble Baroness, Lady McDonagh. The Tenant Fees Bill applies not just to tenancies but to licences and student accommodation as well.

I shall flash forward to the point made by the noble Lord, Lord Beecham, about student accommodation. It may be the answer to some of those points about shared utilities, TV licences and so on. We will double check that and cover it in the letter, but I suspect that that may be the answer. We are trying to cover the relatively small percentage of incidents where this happens. Noble Lords will appreciate that starting off with an outright ban, which I think is the right thing, and making exceptions means that we would have to have a pretty exhaustive list of exceptions. So I will pick up those points in the write-round letter.

I thank the noble Baroness, Lady McDonagh, for her generally warm welcome for the legislation. I think I have dealt with the points on the Grand Committee and licences. I agree that there are issues to look at on the holding deposit, although the key point there is that there are only certain grounds on which it can be retained by the letting agent. We just need to nail that down. We can try to do that ahead of Committee, but I think that I will be able to give the reassurance sought that it is a very limited set of circumstances.

I once again thank the noble Lord, Lord Shipley, for his broad support and I agree with his comments and his point on bringing forward local authority incentive payments for preventing homelessness. That point was echoed by the noble Lord, Lord Beecham. We are aware of the issue and we are seeking to bring forward an amendment that we think is probably necessary to allow that. I hope that we can keep in touch on that issue.

The noble Lord, Lord Shipley, referred to the growth of the private rented sector. That is true. It presents fresh challenges, hence the increased need for this legislation. I thank him for his support on the general point about self-financing with the fines paying the costs of setting up this system. There is a set-up cost. I have been asked to justify it. I do not have the figures to hand so I will do that in a write-round letter. I take the point that we have to look closely to make sure that that is what is happening.

The noble Lord, Lord Beecham, asked what will happen if there is a shortfall. There may be a shortfall in one year and an excess in the next year, and we would not be claiming back the excess. I think he will appreciate that there has to be some sort of smoothing mechanism; you could not look at one year in isolation. I will look at that point and pick it up in the write-round letter. It will be a long letter. I am sure noble Lords will appreciate that it will be better than a short letter that does not cover the many points that have been raised.

On electrical safety checks, the noble Lord, Lord Shipley, asked about “when parliamentary time permits”. That is a saving provision. Any Government, including even the coalition Government, will always say that. The intention is to bring this forward as quickly as possible. If I can give more information on that I will certainly do so.

There were many detailed points from the noble Lord, Lord Beecham, who also has a lawyer’s eye. I do not have the answer to many of the points that he raised but I will certainly make sure that they are covered in the letter, and I am grateful for his acquiescence on that point.

This has been a very valuable debate. As noble Lords will know, I am very keen to take this forward as far as we can on a consensual basis, because I think we all want to kick in the same direction and achieve the same things—but there is work to be done on that. With that, I beg to move that the Bill be read a second time.

Bill read a second time and committed to a Grand Committee.

Tenant Fees Bill

Lord Bourne of Aberystwyth Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 20th November 2018 Lords Chamber

[Lord Shipley]

My Lords, I agree with the noble Lord, Lord Best. It is important that we are able to discuss this matter through the amendment moved by the noble Baroness, Lady Gardner of Parkes, but there is an issue of principle here, which is that it should be a charge not on the tenant but on the landlord and the letting agent, who is not mentioned in the amendment.

The principle is that, if a service is contracted for formally between a tenant and a landlord, a payment can be required. However, that should not be required for either reference checks or identity checks, where the responsibility lies with the landlord or the letting agent. The basic problem here is that the Bill attempts to eliminate up-front tenants’ fees but the amendment might reinstate some tenants’ fees that would not be justified as a charge on the tenant.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

I thank noble Lords very much and particularly my noble friend Lady Gardner for bringing forward this amendment. She does much work in this area.

I cannot accept the amendment because, as the noble Lord, Lord Shipley, has just indicated, it would fundamentally undermine the policy intention of the Bill, which is to ban letting fees paid by tenants and to ensure that the party that contracts a service pays for that service.

This issue was dealt with under Section 22 of the Immigration Act 2014. It was very clear then that this was to be a liability for the landlord, not the tenant, to discharge. Therefore, the amendment would effectively drive a coach and horses through the intention of that legislation. I am not sure what the collective term for a coach and horses would be. It would probably be a stampede or possibly a cavalcade of coaches and horses, but it is clearly not the intention.

Despite the very good arguments put forward by my noble friend and the noble Earl, Lord Lytton, on this point, I very much agree with the noble Lords, Lord Best and Lord Shipley. A landlord should be responsible for the costs associated with these checks. As I have indicated, they are required under the Immigration Act to undertake these checks to verify that a tenant has the legal right to reside in the United Kingdom before progressing with any tenancy agreement.

The Home Office produces detailed guidance for landlords and agents carrying out these checks, and I will certainly ensure that it is circulated to my noble friend and the noble Earl, and indeed to everybody who has participated in the debate.

Although the onus is on the landlord to verify a tenant’s right to rent, we have made provision in the Bill that, where a holding deposit is sought and a tenant fails a right-to-rent check, landlords and agents will not be unfairly penalised if the tenant is at fault. I hope that that gives some comfort to my noble friend and the noble Earl. With those assurances, I respectfully ask my noble friend to withdraw her amendment.

[Baroness Gardner of Parkes]

My Lords, I was very interested in the comments that were made and I will certainly take them on board. I heard people talking about how easy it is to get the right of abode and that is exactly what I have had here for 40 years. Every time my passport comes up for renewal, I have to send in the original documents, which after 40 years are beginning to disintegrate. Why can the Home Office not keep a record of these things? I have only one marriage certificate; it is turning into a bit of old rubbish now because it is getting so worn out although I have always valued it.

I am sure noble Lords know about the Member of your Lordships’ House who made the mistake of employing someone who had no right to be in this country. It is not a light remark to say, “They will just produce that”. You have to reproduce things every time you get a new passport and, as I said, the original documents are insisted on. It is a pretty major thing and I will face it again next year.

The position in this House is that you can be here provided that you are deemed domiciled; you have to prove that you are paying full taxes, which is one of the big factors. But a lot of people may not be aware that you have to have any proof of who you are at all in anything. If the time comes when people want to rent a place and are asked, “How can you prove that you are entitled to be here?”, they will not have the documentation, whereas they would if that requirement were set out in the guidance.

The Minister said that this issue is included in immigration law, but it needs to be mentioned in some way in this legislation, which affects people’s lives on an everyday basis. When they want somewhere to live and find a place they like, they do not suddenly want to lose it because it takes so long to get the correct papers. That should be in a guidance document prior to wishing to rent something. It should not be part of the rental process.

Doing this yourself, as has been suggested, presumably means meeting the costs yourself as well. This whole thing seems to be a little muddled. I do not accept the view of the noble Lord, Lord Best, that we should not burden ordinary people with these things—perhaps I am wrong in asserting that—when they are burdened by them every day in their own living standards. But I appreciate the Minister has given a good answer and I beg leave to withdraw the amendment.

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[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords for their contributions and the noble Lord, Lord Kennedy, for moving his amendment.

This set of amendments deals with the treatment of holding deposits under Schedule 2 to the Bill. As I have set out on previous occasions, the purpose of a holding deposit is to enable both the landlord and the tenant to demonstrate their commitment to entering into a tenancy agreement while reference checks are undertaken. It is important that there is earnest from both parties to the agreement. As I have said on a previous occasion, it must be wrong for a landlord to have more than one agreement with a tenant; there can be only one on both sides. So that we have a case of what is sauce for the goose is sauce for the gander, we have to be careful in looking at the amendments.

Amendments 33 to 35, in the name of the noble Lord, Lord Kennedy, seek to make changes to the circumstances in which landlords and agents can retain a holding deposit. From the outset of this policy, landlords and letting agents have expressed concern that tenants speculating on multiple properties might be a side-effect of the ban. That is why we are allowing a landlord to ask for a holding deposit so that tenants can demonstrate that they are sincere in their application—as I am sure they are, in the vast majority of cases. It is a pledge from the tenant to a given property. This mitigates the risk of landlords and agents being out of pocket if a tenant registers an interest, only to withdraw if something better comes along. I therefore cannot agree to Amendment 35.

We also want to ensure that landlords do not take an overly cautious approach and preselect tenants that they perceive as the most likely to pass a reference check. Permitting landlords to retain holding deposits in circumstances where a tenant fails a right-to-rent check—which I referred to in discussion on the previous amendment, moved by my noble friend Lady Gardner of Parkes—is a key mitigation against such behaviour. I therefore cannot accept Amendment 33.

Amendment 34 suggests that a landlord or agent should refund the holding deposit only if the tenant “knowingly” provides false or misleading information. Again, I am afraid I cannot accept such an amendment, although I appreciate the spirit in which it was moved. Requiring the landlord to refund the holding deposit in these situations would be near-impossible because the landlord is unlikely to have the necessary evidence to prove whether a tenant has done something knowingly. It would simply be one party’s word against the other. Given that the landlord is liable for a significant financial fine, we believe that the inclusion of a “knowingly” test is more likely to lead to them taking a risk-averse approach, which would not help tenants. I firmly believe that the approach set out in the Bill with respect to holding deposits is the fairest to both landlords and tenants.

As I have said, I recognise the desire expressed by noble Lords for greater transparency regarding the treatment of holding deposits; I have previously indicated that I will look at that. I understand the rationale behind Amendments 36 and 37. Without a commitment on where we will end up, I am happy to look at this issue ahead of Report. I appreciate the valuable points made during the debate on these amendments and the importance for tenants of understanding how their holding deposit is handled and why it may not be returned. That seems entirely fair. I have listened to noble Lords’ concerns on these issues and will be happy to return to them on Report. I listened to the point made by the noble Lord, Lord Kennedy, and the points made by the noble Baroness, Lady Thornhill, on Amendment 37 in relation to sight of the agreement ahead of entering into it. Again, that seems to have some strength in it and I am happy to look at it.

I should say that we are making great progress; I believe that noble Lords who have looked at the guidance notes will acknowledge that. The notes, which will set out the procedures for, and the rights and obligations of, landlords and agents will provide great assistance in this area. That will support tenants in understanding how to seek appropriate redress if they are dissatisfied, including through provision of draft letters to help tenants raise concerns with their landlords and agents around the treatment of their holding deposit. As I have indicated, I am very happy that noble Lords from around the Committee should engage in this process with officials to help us to clarify points made in the guidance notes to improve them in the interests of landlords and tenants. I acknowledge that we have made some important strides in the process of making sure it is much more lucid and transparent, and less riddled with jargon.

Landlords and agents should give tenants sufficient time to understand the terms of any agreement before signing. I am clear on that. That is why the period before the deadline for agreement is there; it is intended to allow that. I will also ensure that a link to the consumer guidance on the Bill is included in the How to Rent guide. That will also help. Landlords are of course required by law to give their tenants these guides to help raise awareness. I hope those assurances enable the noble Lord and the noble Baroness not to press their amendments.

[Lord Kennedy of Southwark]

My Lords, I thank the noble Lord, Lord Bourne, for that thoughtful and helpful response to this short debate. I will happily withdraw my amendment shortly. Of my four amendments the most important was Amendment 36, which the noble Lord responded to in detail. I was pleased that he did so, because it is only right and fair that if your deposit is withheld you should understand why and how you can challenge that. I will certainly look at that and I hope to bring something back on Report. I thank him very much for that.

I also listened very carefully to the noble Baroness, Lady Thornhill. I thought she made a very strong case for her amendment. Again, I am very pleased that the noble Lord will look at that. I hope we will have something on Report that we can all agree on. At this stage, I am very happy to withdraw my amendment.

Tenant Fees Bill

Lord Bourne of Aberystwyth Excerpts

Report stage (Hansard): House of Lords
Tuesday 11th December 2018 Lords Chamber

Moved by

[Lord Bourne of Aberystwyth]

1: Clause 1, page 2, line 10, leave out “the person” and insert “a relevant person”

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I will first speak briefly on Amendments 1, 2, 5 to 12, 16 to 19, 33, 35 to 41, 60 and 66, which are minor and technical and are intended to bring consistency and ensure the Bill best delivers on its policy intent.

First, while unlikely, as the Bill is drafted a letting agent could conceivably require a tenant to enter into a contract for services with themselves for additional services related to letting, such as providing an inventory. Amendment 5 clarifies that letting agents are prohibited from requiring a tenant or other relevant person to enter into a contract with themselves.

Secondly, it is possible that a relevant person other than a tenant might be a party to a tenancy agreement or an agreement with a letting agent. We have made amendments to Clauses 1 and 2 to be clear that, where a person is acting on behalf of a tenant or guaranteeing a payment of rent, that person cannot be charged a default fee unless otherwise permitted by the Bill.

In the same vein, Amendments 9 to 12 to Clause 4 provide that a term of agreement which breaches Clause 1 or Clause 2 does not bind a relevant person. Similarly, Amendments 33 and 35 to 41 replace the references to “tenant” in Clause 28 as it applies to pre-commencement tenancy agreements and agreements with letting agents with references to “relevant person”.

Finally, we want to ensure that we use consistent language and terminology throughout the Bill. Amendment 66 changes a reference to “incorrect and misleading information” to “false and misleading information” to align with other references in Schedule 2. Amendments 16 to 19 ensure that the language on day and date in Clause 11 is consistent, and Amendment 60 makes it clear that the definition of a television licence in paragraph 9 of Schedule 1 applies to the entire Act.

[Lord Shipley (LD)]

My Lords, since we have begun Report I should declare my vice-presidency of the Local Government Association. I simply say that these are helpful and relevant amendments that have our support.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, as this is the first time that I have spoken on Report, I draw the House’s attention to my relevant interest as a vice-president of the Local Government Association, as the noble Lord, Lord Shipley, did. I thank the noble Lord, Lord Bourne of Aberystwyth, and his officials for a number of the amendments we will discuss, in this group and others. Generally they are very helpful and improve the Bill. That is good news for tenants, and I am genuinely very grateful for that. That is not to say that I agree with everything in the Bill, but I am pleased to say we are making progress. I am very happy to support these amendments and I concur with the noble Lord’s comments.

[Lord Bourne of Aberystwyth]

My Lords, I am very grateful for the noble Lords’ support. I beg to move.

Amendment 1 agreed.

Moved by

[Lord Bourne of Aberystwyth]

2: Clause 1, page 2, line 19, leave out “the person” and insert “a relevant person”

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Moved by

[Lord Bourne of Aberystwyth]

3: Clause 1, page 2, line 38, at beginning insert “subject to subsection (10),”

[Lord Bourne of Aberystwyth]

My Lords, we are all clear that the purpose of the Bill is to ban agents and landlords from charging unfair letting fees to tenants. However, in achieving this objective it is crucial that the legislation does not have an adverse impact elsewhere. Amendments 3, 4 and 29 to 31, in my name, ensure that the Bill does not prevent vital work supporting tenants more broadly.

First, Amendments 3 and 4 exclude local housing authorities or organisations acting on behalf of a local housing authority from the definition of “relevant person” under the Bill. I am most grateful to the noble Lords, Lord Shipley and Lord Beecham, for raising this issue during Second Reading. Local authorities have a duty, as housing authorities, to help the homeless to find accommodation. This is set out in the Housing Act 1996, the recent Homelessness Reduction Act and the homelessness code of guidance. We recognise that, as part of this, councils might need to provide support to applicants—financial or otherwise—to access private rented accommodation. This is vital work, and Amendments 3 and 4 ensure that it can continue. These amendments will ensure that local housing authorities can make payments in connection with a tenancy when acting on behalf of a tenant or guaranteeing their rent.

Secondly, Amendments 29 to 31 ensure that the important work of Homeshare schemes, and its parent network in the UK, Shared Lives, can continue. I have said on multiple occasions that the Government strongly support the work of organisations such as Homeshare in matching a licensee, usually a young person in housing need, with a licensor, usually an elderly householder in need of companionship, sometimes combined with some low-level care or assistance. I know that support is shared throughout the House.

The Bill would have unintentionally prevented Homeshare organisations operating by banning payments made by the licensor in respect of the advice and support received from Shared Lives. I reiterate that the intention of the Bill is not, and never was, to undermine or prevent this important and innovative work continuing. I thank in particular my noble friends Lady Jenkin and Lady Barran for taking up this issue and bringing it to the House’s attention.

The Government recognise that we must take this opportunity to amend the Bill to ensure that such work is not adversely affected. To do this, our amendments provide for changes to Clause 26 to exclude from the Bill such licences as those granted under a Homeshare scheme. We have specified that an excluded licence will be one granted to the licensee by a licensor who resides in the housing, where particular conditions surrounding the grant, renewal and continuation of that licence are met. These conditions include a requirement for a charity or a community interest company to give advice to the licensee or licensor in connection with the grant, renewal or continuation of the licence and where the licensee provides companionship or companionship and low-level care or assistance, together with one or more payments in respect of council tax or utilities, for example. Such arrangements are indicative of Homeshare organisations.

The amendments will therefore ensure that excluded licences that meet the conditions I have just set out are exempt from the tenant fee ban. I hope that my noble friend Lady Barran will agree that these amendments address the concerns she raised in Committee and that this achieves our shared ambition—one we can all surely support—which is that organisations such as Homeshare can continue doing their fantastic work well into the future.

[Lord Shipley]

My Lords, the Minister referred to what I said at Second Reading and he is entirely right. I welcome Amendments 3 and 4. They are hugely helpful because they give local housing authorities the flexibility they need to do their job properly, and for that reason they have our support.

[Lord Beecham (Lab)]

My Lords, I join the noble Lord, Lord Shipley, in supporting these government amendments. It certainly is an important function for local authorities. I have to confess—and I refer to my interest as a sitting local councillor—that I am not entirely sure where the funding for this comes from. Do the Government support this financially, or is it left entirely to local authorities? In the latter event, will he look into the extent to which authorities are financing this important element of support for tenants? We certainly support both amendments.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lords, Lord Beecham and Lord Shipley, for their support. I will write to the noble Lord, Lord Beecham, but I suspect that this money comes from local authorities—although of course it finds its way from successive Governments. I suspect that this is part of their functions, but I will certainly cover that in a letter, if I may. The noble Lord never misses an opportunity to focus on an issue such as this, and I will be very pleased to respond to him.

Amendment 3 agreed.

Moved by

[Lord Bourne of Aberystwyth]

4: Clause 1, page 2, line 39, at end insert—
“(10) The reference in subsection (9)(b) to a person does not include—(a) a local housing authority within the meaning of the Housing Act 1985 (see section 1 of that Act),(b) the Greater London Authority, or(c) a person acting on behalf of an authority within paragraph (a) or the Greater London Authority.”

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Moved by

[Lord Bourne of Aberystwyth]

5: Clause 2, page 2, line 46, at end insert “the agent or”

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Moved by

[Lord Bourne of Aberystwyth]

14: Clause 8, page 6, line 13, after “of” insert “paragraph 3 of”

[Lord Bourne of Aberystwyth]

My Lords, Amendments 14, 15, 45 to 48, 61 to 65 and 67 to 70 in my name relate to the treatment of holding deposits. I have been sympathetic to some of the arguments put forward by noble Lords on holding deposits, and I agree that more action is needed to address these issues. I propose to do that in the Bill, rather than in guidance or regulations, to improve transparency and enforcement.

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[The Earl of Lytton (CB)]

My Lords, I declare my interests as a vice-president of the LGA and also as a practising chartered surveyor and private rented sector landlord. Mercifully, I have managed to steer clear in a personal capacity of managing agents—at least for the last many years.

I have one query on the way in which the holding deposit arrangements are intended to function. I quite understand the geometry that sits behind this and the reason for it, so I will not go over it again. But let us suppose that a prospective tenant, having been provided with all the relevant information, pays a holding deposit and then, through some reason of default which would allow the agent to retain part or all of that deposit, there develops an argument as to what proportion—perhaps the whole—should be retained or not. That could take some while to resolve. Meanwhile, the agent is debarred from taking a holding deposit from anybody else, even though it may be clear beyond peradventure that the original deal with, and intention of, the tenant, whose holding deposit is still being hung on to, will not go ahead.

I can see that this could put an undesirable element of drag into the situation. I can also see that it might be the godmother of unforeseen consequences, in that the agent may feel that it is becoming a problem—a rather metropolitan problem, if I may say so; I think of zones 2, 3 and 4 of central London as the areas where a lot of this goes on, although I know it is not unique to there. The corollary to that is that the agent may say, “I’m not going to take a holding deposit at all. It is on a first-come, first-served basis. I have various people interested and the first who comes through my door with the relevant boxes ticked gets it”. That does not seem at all helpful either. That does not happen in my part of leafy Sussex, because we do not deal with things in that way and do not have that sort of high-pressure tenant demand. But I can certainly see it happening in zones 2 and 3 and I wonder what the Minister has to say about how he sees that working in practice, without having some perverse effects on the market.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Baroness, Lady Thornhill, and the noble Earl, Lord Lytton, for their contributions to the debate on this part of the Bill. I thank the noble Baroness very much for her comments and support.

I thank the noble Earl very much for his support and for raising the issue relating to holding deposits. First, as he will be aware, there is no obligation upon an agent or a landlord to operate a holding deposit system if they do not want to do so. It is optional. But where it applies and there is a dispute, if the two parties agree that there is no chance of pursuing the tenancy, it would obviously be open at that stage for the landlord or agent to take another holding deposit in relation to the land in question, as it were, where that matter is truly settled. If it is not settled, a lot will turn on the particular circumstances of the case. If the noble Earl feels that he would like to discuss this further, I will ensure that officials are available to discuss possible scenarios with him. It may be that he wishes to discuss a particular scenario, but in the meantime I commend these amendments to the House.

Amendment 14 agreed.

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Moved by

[Lord Bourne of Aberystwyth]

15: Clause 10, page 7, line 33, after “breaching” insert “paragraph 3 of”

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Moved by

[Lord Bourne of Aberystwyth]

16: Clause 11, page 8, line 13, leave out “date” and insert “day”

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Moved by

[Lord Bourne of Aberystwyth]

21: Clause 21, page 14, line 24, leave out from beginning to “subsection” in line 26 and insert—
“The Housing and Planning Act 2016 is amended as follows.( ) In section 134 (client money protection schemes: approval or designation), after subsection (2) insert—“(3) Regulations under this section may confer a discretion on the Secretary of State in connection with—(a) the approval or designation of a client money protection scheme,(b) conditions which must be complied with by the administrator of such a scheme,(c) the amendment of such a scheme, or(d) the withdrawal of approval or revocation of designation of such a scheme.”( ) In section 135 (enforcement of client money protection scheme regulations)—(a) in”

[Lord Bourne of Aberystwyth]

My Lords, I shall speak also to Amendments 22, 27, 32 and 71 in my name which relate to client money protection legislation as set out in Part 5 of the Housing and Planning Act 2016, the Client Money Protection Schemes for Property Agents (Approval and Designation of Schemes) Regulations 2018 and the Client Money Protection Schemes for Property Agents (Requirement to belong to a Scheme etc.) Regulations, which are due to come into force on 1 April 2019.

Client money protection schemes ensure that landlords and tenants are reimbursed in the event of a letting or managing agent going into administration, or where the agent misappropriates their money while in their control. This client money can include rent paid by tenants as well as money passed on by landlords for the purpose of making repairs to a property. Client money protection is designed to be the last resort once a tenant or landlord has already pursued the agent directly or exhausted recovery via the property agent’s insurance. I take this opportunity to thank the noble Baroness, Lady Hayter, for all the hard work she has done in this area alongside the noble Lord, Lord Palmer, on this important legislation that will give tenants and landlords the financial protection that they deserve.

The client money approval regulations set out the conditions that scheme providers must meet in order to be an approved provider. My officials have been working with scheme providers since the summer to support them in making an application. The requirement regulations require property agents who handle client money to belong to an approved scheme. They are due to be implemented on 1 April 2019.

During our extensive engagement with schemes it has become apparent that certain elements of the regulations do not work as originally intended. I thank noble Lords for their discussion of these points in Committee, which I have considered carefully. I am keen to ensure that the client money protection legislation delivers on our commitment to give landlords and tenants financial security but not in such a way as to impose disproportionate and unnecessary burdens on industry, which could have the adverse and perverse effect of increasing costs for tenants and landlords. The amendments in my name ensure that the rules strike a balance while giving tenants and landlords robust protection. This is so that the amount of cover that schemes are required to provide is proportionate, taking into account the availability of insurance and the level of risk posed by members. We are committed to maintaining our published timetable so that mandatory client money protection can come into force on 1 April 2019. Our intention is that, once we have approved sufficient schemes, we will make the requirement regulations and of course they will be made before the relevant provisions in this Bill amending these regulations are commenced.

Turning to Amendments 21, 22 and 17, first, we have clarified that money that has already been protected through a government-approved tenancy deposit scheme is not required to be doubly protected by a client money protection scheme. This was never our policy intent. Secondly, we will not require schemes to pay out where certain risks are excluded by insurers. These policy exclusions typically refer to events such as war, terrorism or confiscation by the state. It was never the policy intent for such unlikely events to be covered. We believe it would be unreasonable to require schemes to pay out where they may be unable to underwrite their risk with insurance because such insurance cover is commercially unavailable.

Thirdly, we are providing that the level of insurance held by schemes is proportionate to the risk of client money loss rather than requiring scheme providers to ensure they can provide cover for every penny held in an agent’s client account. We will in guidance ask schemes to determine the appropriate level of insurance cover necessary to cover a worst-case scenario—their maximum probable loss. This allows schemes to consider controls that their members have in place as well as the amount of client money that is at risk. We will challenge schemes’ calculations through our assessment of their applications for approval to ensure that they are robust.

Fourthly, we are specifying that client money protection schemes can allow limits per individual claimant and scheme aggregate limits that are at least equivalent to the scheme’s maximum probable loss. Allowing schemes to set a limit per individual claimant ensures that they are not required to pay out without limit. It will ensure that more sophisticated large corporate landlords take responsibility for the control of client money held on their behalf. The Financial Services Compensation Scheme has similar individual claim limits, and we are seeking to replicate this accepted practice. It is, of course, vital that consumers are aware of any such limits and we are requiring schemes and their members to be transparent with clients about the limits of protection. The limit would be designed to be more than sufficient to cover likely claims, but if it became apparent that that was no longer the case, the limit would need to be changed.

We expect schemes to act reasonably and to apply to amend the scheme rules if it becomes apparent that their level of cover is no longer sufficient. Any scheme that cannot demonstrate that it has obtained sufficient cover to pay out on all likely claims will not be approved. Allowing both individual and aggregate limits ensures that tenants and landlords have sufficient financial protection, which is the purpose of client money protection, but not in such a way that would have a disproportionate impact on the industry.

Further, for a transitional period of 12 months taking us to 1 April 2020, we are permitting agents to join a scheme if they are making all efforts to apply for a client account but have not yet obtained one. We fully expect all agents to hold their client money in a separate account to ensure that client money is suitably protected. As the Government work with the banking industry, we do not wish to impose unrealistic barriers around a client account that agents are unable to meet by 1 April 2019.

Finally, the duty to enforce the requirement for letting agents to belong to a client money protection scheme is set out in Regulation 5 of the client money protection schemes for property agents regulations. We have therefore clarified in Amendment 32 that the lead enforcement authority set up under the Bill can also enforce the regulations. Amendment 71 is a consequential amendment to the title of the Bill.

Without Amendments 21, 22, 27, 32 and 71, there is a risk that certain scheme providers will be unable to comply with the regulations and therefore leave the market, or that the costs of cover will increase substantially for agents, which could have knock-on consequences for landlords and tenants.

I am proposing these amendments to this Bill to ensure that implementation of mandatory client money protection is not delayed and can be delivered as promised from 1 April 2019. I thank the noble Baroness, Lady Hayter, for giving attention to these matters and raising her concerns.

I also address Amendments 23 to 26, which the noble Baroness tabled. I understand her concern that if notice is served on a scheme without any reasons requiring the scheme to amend its rules within 30 days, the scheme may be unable to comply and feel that it has no other option but to wind up its operation. Clearly such a situation would be in neither the Government’s nor the scheme’s interest.

However, I do not believe that the amendments tabled are necessary and as such do not propose to accept them. Specifically in relation to the timeframe and the giving of reasons, the Government are bound by general public law obligations which include acting transparently and fairly and supplying reasons for decisions. I am happy to reaffirm that. We could not seek arbitrarily to serve notice without having discussed our concerns and options with the scheme. The notice is likely to be the final step in the process, having explored with the scheme what amendments would be required. The 30-day notice period is subject to a different period being set out in the notice and therefore we do not believe that Amendment 26, which amends the timeframe, is necessary.

Nevertheless, as noble Lords will appreciate, the Secretary of State needs to be able to serve a notice to compel schemes to make changes where, for example, there has been a significant change in the size for a scheme. With an increase in the membership base, it might be necessary to increase the cover. It is on that basis that I hope that the noble Baroness will understand that I cannot accept her proposal but, with the reassurances that I have given, I hope that she will not press the matter.

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[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords who have participated in the debate on this part of the legislation and turn to the various contributions. I thank the noble Baroness, Lady Hayter, very much for her support, for bringing this forward and for the characteristic grace with which she has dealt with the matter today. Our calculations have been made on the best assessment of the highest probable loss; that should be the basis for deciding cover. We have also taken heed of the fact that, for example, for bank deposits there is a maximum amount currently protected; it would be somewhat perverse if this were a higher amount. Such matters have influenced what we seek to do. It is not the maximum loss; we have taken heed of the highest probable loss, as is the customary arrangement. We also have to take account of what the industry can bear and what is in the interests of all tenants and landlords; that is what has guided us.

On landlords seeking more than one form of cover, I will write to the noble Lords, Lord Flight and Lord Palmer of Childs Hill, so that they get the full picture. With that, I commend the government amendments in this group and reject the others.

Amendment 21 agreed.

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Moved by

[Lord Bourne of Aberystwyth]

22: After Clause 21, insert the following new Clause—
“Client money protection schemes: approval and designation
(1) The Client Money Protection Schemes for Property Agents (Approval and Designation of Schemes) Regulations 2018 (S.I. 2018/751) are amended as follows. (2) In regulation 2 (interpretation), in the definition of “client money”—(a) in paragraph (a), for “agency”, in the second place it occurs, substitute “management”, and(b) at the end of paragraph (b) insert “,but does not include money held in accordance with an authorised tenancy deposit scheme within the meaning of Chapter 4 of Part 6 of the Housing Act 2004 (see section 212 of that Act);”.(3) In regulation 4 (amendments to an approved scheme), after paragraph (3), insert—“(4) This regulation does not apply to an amendment made in accordance with a notice served under regulation 8(1D)(b).”(4) In regulation 5 (conditions which must be satisfied before approval may be given)—(a) in paragraph (1)(a)(iii), for “and without any deduction” substitute “, subject to paragraph (1A)”,(b) in paragraph (1)(c)(i), for “administration of the scheme” substitute “failure of scheme members to account for client money to persons entitled to that money”,(c) after paragraph (1) insert—“(1A) The Secretary of State may determine that the condition in paragraph (1)(a)(iii) is satisfied where the rules of the scheme have the effect that the scheme administrator is required to make good M’s liability—(a) only up to such amount as the Secretary of State considers appropriate,(b) only if or to the extent that M’s liability can be made good without exceeding such aggregate limit on the liability of the scheme as a whole as the Secretary of State considers appropriate, or(c) only if M’s liability arises in relation to a risk that the Secretary of State considers it is appropriate for the scheme to insure against.”, and(d) after paragraph (2) insert—“(2A) The rules of the scheme are to be treated as complying with paragraph (2)(f) if they provide that, until 1 April 2020, they have effect as if they required scheme members to make all reasonable efforts to hold client money in a client money account with a bank or building society authorised by the Financial Conduct Authority.”(5) In regulation 8 (conditions with which scheme administrators must comply)—(a) in paragraph (1), after “practicable” insert “—(a) after that member joins the scheme, and(b) after the scheme rules are amended under paragraph (1D)(a) or in accordance with a notice served under paragraph (1D)(b).”,(b) after paragraph (1) insert—“(1A) Paragraphs (1B) to (1E) apply if the rules of the scheme have the effect of requiring the scheme administrator to make good the liability of a scheme member—(a) only up to a certain amount, (b) only within an aggregate limit on the liability of the scheme as a whole, or(c) only in relation to certain risks.(1B) The certificate provided under paragraph (1) must include—(a) information about the amount referred to in paragraph (1A)(a), (b) information about the limit referred to in paragraph (1A)(b), or(c) details of where to find information about the risks referred to in paragraph (1A)(c),as the case may be.(1C) Paragraphs (1D) and (1E) apply if the Secretary of State considers that—(a) the amount referred to in paragraph (1A)(a) is no longer appropriate,(b) the limit referred to in paragraph (1A)(b) is no longer appropriate,(c) it is no longer appropriate for the rules of the scheme to exclude liability in relation to one or more of the risks referred to in paragraph (1A)(c), or(d) it is appropriate for the rules of the scheme to exclude liability in relation to one or more risks that are not among the risks referred to in paragraph (1A)(c).(1D) The Secretary of State may—(a) where the Secretary of State is the scheme administrator, amend the scheme rules with the effect that the amount, the limit or the risks are replaced with such different amount, limit or risks (as the case may be) as the Secretary of State considers appropriate;(b) in any other case, serve a notice on the scheme administrator requiring that person to amend the scheme rules with the effect that the amount, the limit or the risks are replaced with such different amount, limit or risks (as the case may be) as the Secretary of State considers appropriate.(1E) The scheme administrator must comply with a notice served under paragraph (1D)(b)—(a) within the period of 30 days beginning with the day on which the notice is served, or(b) within such longer period beginning with that day as the Secretary of State may specify in the notice.”,(c) after paragraph (3) insert—“(3A) The scheme administrator must maintain insurance that—(a) covers any foreseeable liability which may arise in connection with the failure of scheme members to account for client money to persons entitled to that money, and(b) is appropriate with regard to the size and number of scheme members and the amount of client money held by scheme members.(3B) Before renewing the scheme’s insurance, the scheme administrator must obtain the approval of the Secretary of State to the type and amount of insurance.(3C) The Secretary of State may approve the renewal of the scheme’s insurance only if the Secretary of State is satisfied that, if the insurance is renewed as proposed, the scheme administrator will continue to comply with paragraph (3A).”,(d) in paragraph (5), at the end of sub-paragraph (a) for “; and” substitute “,(aa) where paragraph (1B) applies— (i) information about the amount referred to in paragraph (1A)(a),(ii) information about the limit referred to in paragraph (1A)(b), or(iii) information about the risks referred to in paragraph (1A)(c),as the case may be, and”, and(e) after paragraph (6) insert— “(7) In this regulation, references to renewing a scheme’s insurance (however expressed) include obtaining new insurance.(8) Paragraphs (2), (3B), (3C) and (4) do not apply where the Secretary of State is the scheme administrator.”(6) The amendments made by this section are without prejudice to any power to make an order or regulations amending or revoking the regulations mentioned in subsection (1).”

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Moved by

[Lord Bourne of Aberystwyth]

27: After Clause 21, insert the following new Clause—
“Client money protection schemes: requirement to belong to a scheme etc
(1) The Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations 2019 are amended as follows.(2) In regulation 2 (interpretation)—(a) in the definition of “client money”—(i) in paragraph (a), for “agency”, in the second place it occurs, substitute “management”, and(ii) at the end of paragraph (b), for “; and” substitute “,but does not include money held in accordance with an authorised tenancy deposit scheme within the meaning of Chapter 4 of Part 6 of the Housing Act 2004 (see section 212 of that Act);”, and(b) at the end of the definition of “regulated property agent”, insert “;“scheme administrator” has the same meaning as in the scheme approval regulations (see regulation 2 of those regulations); and“scheme approval regulations” means the Client Money Protection Schemes for Property Agents (Approval and Designation of Schemes) Regulations 2018.”(3) In regulation 3 (requirement to belong to a client money protection scheme), omit paragraph (2).(4) In regulation 4 (transparency requirements)—(a) before paragraph (1) insert—“(A1) Paragraph (1) applies if the scheme administrator of an approved or designated client money protection scheme provides a certificate under regulation 8(1) of the scheme approval regulations to a regulated property agent.”, and(b) in paragraph (1)—(i) in the words before sub-paragraph (a), for “A” substitute “The”, and(ii) omit sub-paragraph (a).(5) The amendments made by this section are without prejudice to any power to make an order or regulations amending or revoking the regulations mentioned in subsection (1).”

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Moved by

[Lord Bourne of Aberystwyth]

29: Clause 26, page 17, line 27, at end insert—
““excluded licence” means a licence which is granted to a licensee by a licensor who resides in the housing where—(a) a charity or community interest company gives advice or assistance to the licensee or the licensor in connection with the grant, renewal or continuation of the licence, and(b) the only consideration for the grant, renewal or continuation of the licence is—(i) the provision by the licensee of companionship to the licensor, or such provision together with the provision by the licensee of care or assistance (other than financial assistance) to the licensor, or(ii) provision of the kind referred to in sub-paragraph (i) together with one or more payments in respect of council tax, a utility, a communication service or a television licence;”

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Moved by

[Lord Bourne of Aberystwyth]

32: Clause 27, page 20, line 6, at end insert—
“(6) In regulation 5 of the Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations 2019 (enforcement)—(a) in paragraph (1) omit “, subject to regulation 8(3)”,(b) after that paragraph insert—“(1A) Paragraph (1) is subject to—(a) regulation 8(3), and(b) section 24 of the Tenant Fees Act 2018.”, and(c) in paragraph (3), after “the Secretary of State” insert “or the lead enforcement authority (if not the Secretary of State)”.(7) The amendments made by subsection (6) are without prejudice to any power to make an order or regulations amending or revoking the regulations mentioned in that subsection.”

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Moved by

[Lord Bourne of Aberystwyth]

33: Clause 28, page 20, line 30, after “tenant” insert “or a relevant person in relation to the tenant”

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Moved by

[Lord Bourne of Aberystwyth]

35: Clause 28, page 20, line 35, leave out “the tenant” and insert “a relevant person”

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Moved by

[Lord Bourne of Aberystwyth]

42: Schedule 1, page 24, line 12, leave out “the amount of six weeks’ rent,” and insert “—
(a) the amount of five weeks’ rent, where the annual rent in respect of the tenancy immediately after its grant, renewal or continuance is less than £50,000, or(b) the amount of six weeks’ rent, where the annual rent in respect of the tenancy immediately after its grant, renewal or continuance is £50,000 or more,”

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Moved by

[Lord Bourne of Aberystwyth]

44: Schedule 1, page 24, line 14, at end insert—
“( ) “five weeks’ rent” means five times one week’s rent,”

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Moved by

[Lord Bourne of Aberystwyth]

50: Schedule 1, page 24, line 31, leave out “A” and insert “Subject to sub-paragraphs (3) to (8), a”

[Lord Bourne of Aberystwyth]

My Lords, I shall speak also to Amendments 51 and 53 to 57 in my name, and to Amendment 54, which is in my name and that of the noble Baroness, Lady Grender. These relate to payments made in the event of a default under Schedule 1 to the Bill.

As noble Lords will be aware, the Bill permits landlords and agents to charge default fees where a tenant fails to perform an obligation or discharge a liability arising under or in connection with the tenancy. This provision has been subject to much debate and discussion, and I have welcomed noble Lords’ valuable contributions on it—in particular, those from the noble Baroness, Lady Grender, and the noble Lord, Lord Kennedy.

I maintain that we should not seek to remove default fees provision from the Bill entirely and that landlords and agents should be able to recover certain costs sustained during the tenancy where the tenant is at fault. However, I have listened carefully to the representations that have been made and I appreciate the concern that landlords and agents might seek to use the default fees provision as a backdoor to charging tenant fees. This is certainly not something that we want to see happen and, although the Government have already taken considerable steps to minimise abuse, I agree that more can be done.

I believe that there are two main instances where tenants may be required to pay a default fee: if they lose their key or other security device giving access to the housing or if they fail to pay their rent on time. With that in mind, our amendments specify that these are the only circumstances under which a landlord or agent can charge a default fee. Amendment 54 will ensure that landlords and agents cannot write arbitrary default fees into tenancy agreements and makes very clear to tenants, landlords and agents where a default fee can be charged.

Landlords or agents will be able to require a default fee for the late payment of rent where the payment has been outstanding for 14 days or more. Amendment 56 sets out that landlords or agents will be able to charge interest at no more than an annual parentage rate of 3% above the Bank of England’s base rate for each day that the payment is outstanding. Any amount above this will not be permitted; it will be a prohibited payment.

With respect to the charging of a default fee to cover the costs associated with replacing a lost key or other security device, any such charge must not exceed the landlord’s or agent’s reasonable costs incurred and must be evidenced in writing to the person who is liable for the payment. The amount of any payment which exceeds the reasonable costs to the landlord or agent in respect of the default will be a prohibited payment. I believe that the risk of such a list being incomplete is mitigated by the provision in Clause 3 to bring forward amendments to the list of permitted payments through affirmative regulations, should this prove necessary.

I take this opportunity to speak to Amendment 52, tabled by the noble Lord, Lord Kennedy. This amendment seeks to provide that if one tenant loses their key or pays their rent late then other tenants in a joint tenancy cannot be held accountable. I am afraid that I cannot agree to such an amendment. Joint tenants are jointly and severally liable for the rent and for maintaining the property. That is the essence of a joint tenancy. If one joint tenant does not pay the rent, the landlord can seek repayment from all the other tenants. This is what tenants agree when they sign a joint tenancy and Amendment 52 would introduce a significant change as to how joint tenancies work in that regard. It would risk unfairly penalising landlords and unsettling the law in an established area.

With regard to a lost key, tenants will, again, be jointly responsible for the keys in the same way as they are all responsible for any damage to the property. Of course, tenants can make their own arrangements, and I am sure that the person who loses the key will generally be the one who makes any associated payment, but the tenants are all responsible to the landlord for the keys. It would be a significant change to alter this position and one that could be quite hard to enforce if there were disagreements between the tenants about who lost the key.

Finally, it has never been the intention that the Bill should affect a landlord’s or agent’s right to recover damages for breach of contract. Amendment 57 clarifies this position and ensures that such payments will not be outlawed under the ban. I am aware that there has been some concern about this provision and would like to provide reassurances now, as well as explaining why I cannot accept Amendment 58. Given that we are now listing default fees in the Bill, it is important that we include the provision permitting charging for damages. Otherwise it could be interpreted that we are prohibiting contractual damages. This would not be fair and would be a significant and substantial change to existing law.

Amendment 58 has no substantive effect. I believe that the intent of the noble Lord is to ensure that any damages payments are reasonable and evidenced in writing. It is not necessary to provide an amendment to this effect. In general, damages are meant to put the innocent party back in the position they would have been in had the contract not been breached—nothing further. No reasonableness test is therefore needed, nor appropriate. Similarly, to enforce a damages claim landlords or agents are required to go to court or to seek to recover them from the tenancy deposit. In both cases, they need to provide evidence to substantiate any claim. There is already a large amount of case law dealing with what is appropriate in a contractual damages case. I assure noble Lords that the inclusion of the damages provision is not a back door to default charges, as was suggested by the recent Citizens Advice briefing. Its analysis of this situation is inaccurate.

Regardless of whether an amount is specified, Clauses 1(6)(b) and 2(5)(b) prohibit an agent or landlord attempting to insert a clause requiring a payment—for example, saying that if you do X, you must make a payment—except in so far as this is permitted by paragraph 4 of Schedule 1, as amended. Both the examples of types of damages given in the Citizens Advice briefing do this and would therefore be banned under the Tenant Fees Bill. I appreciate the concerns raised by the noble Lord and seek to reassure him about this. I believe we had sought to agree that I could give reassurance on this at Third Reading, but I understand that we have not been able to come to any agreement about not voting. Perhaps the noble Lord will be able to give that reassurance shortly, or am I getting inaccurate information?

[Lord Kennedy of Southwark]

Absolutely inaccurate.

[Lord Bourne of Aberystwyth]

Right. Perhaps the noble Lord will be able to cover that.

As I have said, long-standing case law supports the courts not enforcing clauses that have no relation to the loss actually sustained, which in most cases would constitute an unfair contract term under applicable consumer law. The amendment proposed by Citizens Advice in its briefing would have no substantive effect. It is already the case in the Bill as drafted that the relevant person may recover the amount, or part, of damages where a claim for damages has been determined by the court or settled by agreement between the parties.

I believe the amendments in my name will help protect tenants from spurious charges by making it very clear when a default fee can be charged. I also remind noble Lords that we have made a number of significant amendments to respond to all the key concerns raised to date. I believe the amendments proposed in my name provide a fair compromise. I hope noble Lords agree with this, and I know it is in our interests to proceed with this vital legislation. I beg to move.

[Baroness Gardner of Parkes (Con)]

I apologise to the House; I would have spoken earlier, but it did not seem that Amendment 42 was actually moved. Even now, I think it is appropriate to mention my concern about that. Why cut back to five instead of six weeks? I declare my interest, which is in the register. Many landlords find that, towards the end of a tenancy, the tenant pays nothing and they are well out of pocket—even if they have six weeks’ rent—if the property is damaged, which happens more frequently than one would hope. I cannot see that it is worth making the major differentiation between five and six weeks. I was perfectly happy with six weeks, and I thought it was fair that everyone should be in the same position.

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[Baroness Grender (LD)]

Perhaps I may ask for clarification: are we now talking about five weeks, or about default?

[Lord Bourne of Aberystwyth]

My Lords, it might be helpful to the House if I deal with the rental issue first. If anyone wants to speak on that, I suggest they do so now. I apologise that we glossed over it earlier.

If there are no other points on the rental, I shall deal with the issues raised by my noble friends Lady Gardner of Parkes and Lord Flight, the noble Lord, Lord Shipley, and the noble Earl, Lord Lytton.

On the point that we have moved significantly from six weeks to five weeks, yes, it is a movement, but it is scarcely, as the noble Lord suggests, a fundamental shift. It is not as if we are moving from 10 weeks to one week. Perhaps I may provide some reassurance. All the evidence is that most people currently take deposits of between four or five weeks. It is not therefore massively inconsistent with current practice.

At the top end of the market we are retaining the six-week limit for the most expensive properties where the fittings and fixtures may be more costly. It will remain at six weeks where the annual rental is more than £50,000. I hope that provides some reassurance to those noble Lords who have raised the concern.

These are not issues of principle so much as matters of judgment. It is the judgment of Solomon and there will always be some people who disagree with where we are. However, as I say, we have looked at current practice, listened to what outside organisations have said and on that basis we have fixed it at five weeks for most people, but at the top end of the market we have retained the six weeks.

[Lord Kennedy of Southwark]

My Lords, we have jumped around these groups of amendments today. There appears to be an issue with the printing of the Whip’s sheet.

I wish to address my remarks largely to Amendments 50 to 58. Generally, I am happy with what I have heard from the Government today on most amendments, particularly those in this group. The exception is Amendment 57, to which I will address most of my remarks.

Members of this House discuss amendments to Bills all the time, but most are never voted on: they are probing and have been tabled to get answers from the Government. We go backwards and forwards as we seek to improve the legislation. My Amendment 58 is very much in that vein. The Government have put down Amendment 57, which I fully accept deals with damages and makes it clear that if there are any issues, the terms can be clarified in the future. Somehow, damages are being turned into prohibited payments, and I do not want to do that either, so I am with the Government on this issue.

However, on looking at Amendment 57, we were concerned about the heading, “Payment of damages”. We went to the Public Bill Office and talked to colleagues. We are concerned that, as written, it could be deduced—obviously, it is open to argument—that the reasonableness and fairness of such a payment cannot be questioned. It is not so much about going to court, but what happens when people are drawing up agreements and so on. We should remember that we are dealing with tenants and landlords, and the relationship between the two is not always one of equals.

For that reason, I have proposed, as an amendment to Amendment 57, my Amendment 58, which would simply remove the three words of the heading: “Payment of damages”. The provision would be retained but the heading would go. Removing the heading would, in effect, add the provision to the previous group, where a protection is provided: actions have to be reasonable, and reference is made to “evidence”. That is all my amendment is intended to do. I do not know if this is the right way to do it, but it has certainly enabled us to have this discussion today.

I tried to get an assurance from the Government that they would come back at Third Reading and discuss this issue further. It may be that people cleverer than me can come back with a better amendment. All I am trying to do is ensure that tenants are treated fairly and properly. I was happy to come back to this issue at Third Reading, and gave an assurance that we would not vote on it. I have the text message to prove it on my phone; I do not know what else I can say. To then be told that I did not give such an assurance—that is just not the case. I am really upset about this.

All I want to do is get this right. I do not want the Bill to become law and in a year’s time, we find the Government saying, “Oh, we made a mistake. We will change it when parliamentary time allows. We should have this on the rogue landlords’ database. We did not listen to you last time, Lord Kennedy, but of course you are right. When parliamentary time allows, of course we will put it right”. My intention is to get this right today. I have given that commitment and I have the text message, so I cannot see what the problem is in coming back at Third Reading in a few weeks’ time and getting it right. We are not going to vote on it, but I think the position should be clarified.

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By the way, I am utterly convinced that there is no intention here to create a damages loophole that further exploits tenants. The Bill team and the Minister have been working to ensure that the wording is tightened and that there is no loophole. With that in mind, we need an assurance from the Minister by Third Reading about how we will get from here to there, in order to ensure that there is no suggestion that damages can become the new loophole now that default has been tightened up. Our request is simple and straightforward: to have this clarified by Third Reading.

[Lord Bourne of Aberystwyth]

My Lords, it may be convenient for me to say that I regret any misunderstanding. I too thought that we had an agreement on this matter. Perhaps I may say two things. First, I propose to accept the amendment in the name of the noble Lord, Lord Kennedy. Secondly, I will be very happy to engage in discussions on this issue ahead of Third Reading. As the noble Baroness, Lady Grender, suggested, I am convinced that there is no reason for the noble Lord to be concerned—but I know that he is and so I will be happy to engage in discussion ahead of Third Reading. I hope that that is helpful.

[Lord Kennedy of Southwark]

I am absolutely delighted. I thank noble Lords for that. There was obviously some confusion, but I am sure that we can get this sorted out by Third Reading. I thank the Minister very much.

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Moved by

[Lord Bourne of Aberystwyth]

51: Schedule 1, page 24, line 31, after second “a” insert “relevant”

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Moved by

[Lord Bourne of Aberystwyth]

53: Schedule 1, page 24, line 33, after “paragraph” insert ““relevant”

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Moved by

[Lord Bourne of Aberystwyth]

57: Schedule 1, page 25, line 1, at end insert—
“Payment of damages
_ A payment of damages for breach of a tenancy agreement or an agreement between a letting agent and a relevant person is a permitted payment.”

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Moved by

[Lord Bourne of Aberystwyth]

60: Schedule 1, page 26, line 14, leave out “paragraph” and insert “Act”

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Moved by

[Lord Bourne of Aberystwyth]

61: Schedule 2, page 27, line 7, leave out “before the deadline for agreement” and insert “relating to the housing”

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Moved by

[Lord Bourne of Aberystwyth]

71: In the Title, line 6, leave out from “agents” to end of line 6 and insert “; to make provision”

Tenant Fees Bill

Lord Bourne of Aberystwyth Excerpts

3rd reading (Hansard): House of Lords
Tuesday 15th January 2019 Lords Chamber

Moved by

[Lord Bourne of Aberystwyth]

1: Clause 11, page 8, line 31, after “10(8)” insert “—
(i) in a case within paragraph 4 of Schedule 2”

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I will speak briefly to Amendments 1 and 2 in my name. They are minor and technical, and consequential to an amendment we agreed on Report that would require landlords and agents to be up front about why they are retaining a holding deposit. Amendments 1 and 2 to Clause 11(3)(c) specify the day on which interest is to be payable where reasons for retaining the holding deposit have not been provided within the required period, and the holding deposit needs to be repaid. This date is the day after the end of the relevant period. I beg to move.

[Baroness Grender (LD)]

My Lords, on these Benches we accept this amendment. I take this opportunity to thank the Minister and his team for all their hard work. The last time I thanked them, they were a little busy trying to sort out a little local difficulty regarding definitions of damages. I am pleased to learn from Citizens Advice that it is now reassured that sufficient clarity will be given in guidance. If there is a latest draft of the guidance, having suggested some of the amendments, I would be happy to take a look at it. I am sure that my noble friend will do the fulsome thanks in the next bit but I just wanted to thank the ministerial team and the Minister very much for progressing the Bill. I look forward to its further rapid progress and would like to hear from the Minister when he thinks it will be enacted.

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[Lord Kennedy of Southwark (Lab Co-op)]

I look forward to hearing the Minister’s response to my noble friend. I accept that these amendments are minor and technical and I am happy to support them.

[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords for their contributions concerning these amendments. I will say more at the final stage of the Bill—the passage, I hope—about the points the noble Baroness, Lady Grender, raised, but I thank her very much indeed. As always, I thank the most reverend Primate very much indeed for his positive contributions and engagement, and his most kind comments. He is extremely gracious. As always, the noble Lord, Lord Foulkes, asks a question that goes straight for the middle stump. I will write to him, if I may, on that issue because I do not want to mislead him.

[Lord Foulkes of Cumnock]

I am grateful and anticipate being the recipient of a letter. However, if we agree it may be too late because, before we agree, should we not know if Saturdays and Sundays are included, or if it is only weekdays? I normally find that weekdays are the only days counted for this purpose, and that Saturdays and Sundays, when offices are closed and people are unable to take payments and so on, are not included. I do not know if help is on its way, but I think it would be helpful to know exactly before we agree this.

[Lord Bourne of Aberystwyth]

My Lords, I now have the answer, and it is “any day”. I am very grateful to the noble Lord for coming back on the issue, which gave me the opportunity to get expert advice on it. I hope he is content with that. I also thank the noble Lord, Lord Kennedy, for his contribution.

Amendment 1 agreed.

Moved by

[Lord Bourne of Aberystwyth]

2: Clause 11, page 8, line 33, leave out “paragraph 4 of Schedule 2” and insert “that paragraph, or
(ii) in a case within paragraph 5 of that Schedule, the day after the end of the relevant period within the meaning of that paragraph.”

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Moved by

[Lord Bourne of Aberystwyth]

That the Bill do now pass.

[Lord Bourne of Aberystwyth]

My Lords, I will make a few concluding remarks. It has been clear throughout that this is a Bill that we all support, and one that will deliver important changes to the private rented sector, improving lives for millions of tenants. I am grateful to all noble Lords from all parts of the House who have engaged so thoroughly and passionately during the proceedings in this House.

Specifically, I thank the noble Baroness, Lady Grender, for her work to date in promoting a ban on letting fees, which has been notable. I also thank the noble Lords, Lord Kennedy and Lord Shipley, for their significant contributions during our debates. I thank the noble Baroness, Lady Hayter, who is not in her place at present, for helping to ensure that the client money protection regulations work as intended and the considerable work that she has done on this, as well as the noble Lord, Lord Palmer of Childs Hill. Finally, I thank my noble friends Lady Barran and Lady Jenkin for raising the important issues of home share schemes, which I think we all value.

I firmly believe that all the amendments made in this House strengthen the Bill and offer greater protections for tenants while not unfairly impacting on landlords and agents. I thank industry groups and local authorities for their constructive engagement and support in strengthening the Bill’s provisions and offering feedback on our draft guidance.

We will continue to work closely with stakeholders to ensure that the ban is properly communicated to tenants, landlords and agents, particularly with regard to contractual damages, which were the subject of debate on Report. I reassure the House again that there are already large amounts of case law that deal with what is appropriate in a damages case. Damages are generally not meant to do anything more than put the innocent party—“innocent party” being a legal term—back in the position they would have been had the contract not been breached. They are not a back door to default charges. I will repeat that: they are not a back door to default charges.

We are committed to working with Citizens Advice, Shelter and other industry groups to ensure that tenants fully understand their rights with regard to paying and challenging contractual damages. I know that it is in all our interests to ensure that this vital legislation becomes law as quickly as possible.

Implementation is, of course, subject to parliamentary timetables, and amendments we have made need to be considered in the other place. We also need to allow a period of time following Royal Assent to enable agents and landlords to become compliant with the new legislation. We therefore intend for the provisions of this Bill to come into force on 1 June 2019. This would mean that the ban on letting fees would apply to all new tenancies signed on or after this date.

I conclude by thanking officials who have worked diligently on this Bill and have performed massive tasks in ensuring that we are in the position we are now. I thank Becky Perks, Rosie Gray, Tim Dwyer, Nigel Bousfield, Elly-Marie Connolly, Laurence Morton, Jane Worthington and, from my own office, Lucjan Kaliniecki. I beg to move.

[Lord Shipley (LD)]

My Lords, I thank the Minister for his statement. He said that the Bill would improve the lives of millions of tenants, and he is absolutely right. It is a much better Bill as a consequence of the close cross-party co-operation it has undergone in your Lordships’ House.

I thank the Minister for his willingness to give a great deal of time, meeting regularly with us to identify outstanding issues. From these Benches, I thank my noble friend Lady Grender, whose assiduous campaign over a substantial period has led to fruition in this Bill, which is indeed a significant milestone in the support of tenants’ rights. I also thank Sarah Pughe, in the Liberal Democrat Whips’ Office, for her help. I also extend my thanks to the Bill team and all the officials who gave us a great deal of time in recent weeks while the detail of the changes that were being made in your Lordships’ House was finalised.

We lowered the level of the deposit cap to five weeks’ rent, listed default fees on the face of the Bill, introduced greater transparency around holding deposits, removed local authorities—I declare that I am a vice-president of the Local Government Association—and those acting on behalf of local authorities from the definition of a “relevant person”, and we addressed deficiencies in the client money protection scheme, among a number of other changes. Some of those changes are very important, and enable the Minister to say that the Bill will indeed help financially a large number of tenants.

I thank the Minister for his co-operation throughout this process. The last few weeks have been very productive, making sure that the Bill will stand the test of its application.