Renters (Reform) Bill

Lord Etherton Excerpts

2nd reading
Wednesday 15th May 2024 Lords Chamber

[Lord Etherton (CB)]

My Lords, I declare at the outset that, although I do not own any property in the private rented sector, my husband owns a number of such properties. I am grateful to the Minister and the Bill team for engaging with me on some of the issues that I will raise in this debate.

Like others, I warmly welcome the Bill’s additional protection for tenants. But, in judging the overall merits of the Bill, it is necessary to have regard to the state of the PRS and the possibility of unintended consequences. In that respect, I will elaborate to some extent on the description of the PRS given by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Best.

Paragraph 8 of the Explanatory Notes states that

“4.6 million households (c 11 million people) … rent from a private landlord”,

representing 19% of the entire housing market. According to a DLUHC publication in June 2022, it appears that this includes some

“1.3 million households with children and”

nearly 400,000 households with people over 65. The crucial importance of the PRS is highlighted by the fact that there is a shortage of about 1 million homes. In excess of one in five households in England—and one in four in London—rely on the PRS for accommodation.

Who are the landlords of the PRS housing? According to figures given by the Department for Communities and Local Government in 2010, 89% of landlords in England were private individuals, and 98% of these owned fewer than 10 properties. In 2019, the successor housing department indicated that 45% of private landlords, representing 21% of tenancies, owned a single property—the noble Baroness, Lady Warwick of Undercliffe, alluded to that—and a further 38% of landlords, representing 31% of tenancies, owned between two and four rental properties. What does that show? First, the PRS plays an absolutely crucial role in the provision of accommodation; secondly, the overwhelming majority of landlords in the PRS are private individuals; and, thirdly, nearly 50% of them own a single property for let and some 83% own four or fewer properties for let.

All this is important background for the Bill. It demonstrates the need for an extremely careful balance between, on the one hand, protecting tenants in the PRS from bad landlords and giving them appropriate redress in the case of landlords’ defaults, and, on the other hand, not imposing on the many small investor landlords standards and obligations that drive them from the sector. Does the Bill achieve that balance? I ask the Minister what steps have been taken by the department to obtain data on the possible number of private landlords who are likely to leave the market because of fears arising from the Bill. In the absence of such data, I consider that in some respects the Bill does not achieve the right balance and runs a high risk of driving many small investors from the sector. I will focus briefly on four areas.

First, local housing authorities are given powers in some cases to impose a fine on a landlord of up to £30,000. Those are cases where the local authority is satisfied beyond reasonable doubt that the landlord has committed an offence under the Bill, and instead of prosecuting the landlord, the local housing authority can impose such a fine. The reality is that, because of financial constraints, the local housing authority will usually wish to impose the fine itself rather than pursue the matter by way of prosecution in the criminal courts.

I do not consider that it is appropriate for a local authority official to act as judge and jury in relation to a criminal offence, enabling the local housing authority to impose a fine of as much as £30,000 on small investors in the PRS. I have no objection to the court deciding on whatever fine it wishes, but it is not appropriate for a local authority employee to impose fines of this size. For them to do so will result in litigation as to whether the criminal standard of proof has been satisfied and whether the amount of the fine is appropriate. It will lead to a lack of consistency across the country in the amount of fine for any particular infringement. I suggest that, if an offence has been committed and the local housing authority is not willing to limit the fine to £5,000, it should be left to the court to decide whether an offence has been committed and what is the appropriate remedy. It must be remembered that the rental return on many of these rented properties, particularly those owned by a single investor, is relatively modest. Even a small fine will push the investment into an unprofitable one.

Secondly, the standard of proof that is required in the case of a fine by a local housing authority under the Bill is inconsistent. For example, in some places— I will not elaborate today—the local housing authority may impose a financial penalty of up to £5,000, whether or not an offence has been committed, provided the authority is satisfied beyond reasonable doubt of the matters constituting the offence. In other cases, one in particular, it can impose a penalty of up to £5,000 if satisfied on a balance of probabilities that the landlord has breached certain provisions in the Act. There is no obvious reason for such differing standards of proof for the same £5,000 level of fine.

Also, the standard of proof should always be beyond reasonable doubt. Anything less than that, which depends upon probabilities assessed by a local authority employee, will undoubtedly give rise to dispute and appeals.

Fourthly and finally, in relation to two offences under the Bill, the landlord can be liable only if his or her mental state is one of knowledge or recklessness as to the relevant facts. The mental state of recklessness in criminal law is an extremely difficult one and has given rise to case law. It is something less than intention but more blameworthy than carelessness. In broad terms, recklessness will arise if the accused consciously—that is, looking at the matter subjectively—takes an unjustified risk. Such difficult concepts should play no part in this legislation, which will mostly affect landlords who own one or at most relatively few homes. It certainly should not be left to a local authority which wishes to impose a fine of up to £30,000 to reach its own conclusion on the application of recklessness in criminal law. The only state of mind which should be capable of giving rise to an offence under the Bill is intention—actual knowledge or an actual intention of the landlord to do the matters comprising the ingredients of the offence. This is clear, easy to understand and fair. At the end of the day, that is the test of good legislation.