Tenant Fees Bill

Lord Flight Excerpts

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

[Baroness Hayter of Kentish Town (Lab)]

My Lords, first, I thank the Minister for his sympathetic and speedy response to the issues that I, along with the noble Lord, Lord Palmer of Childs Hill, with the support of the noble Lord, Lord Best, who is in his place, and the noble Lord, Lord Deben, who is not in his place at the moment, raised in Committee about how the department was implementing these otherwise very welcome plans to introduce mandatory client money protection for letting agents. It was because the noble Lord, Lord Palmer, and I had worked very well with the Minister on that initiative that we were concerned that the whole thing was going a bit pear-shaped because of the introduction of unrealistic requirements on the main providers of CMP protection. But, thanks to the Minister—I have to thank him for that—the department moved very rapidly, as it is well able to, and responded to make the significant changes that the Minister has now introduced. We both thank and congratulate the people who drafted those changes. They will, of course, help ensure that both RICS and ARLA can continue to protect both landlords and tenants through their schemes.

There was just one area on which I sought clarification, which is indicated in the amendments to which the Minister has already responded. I know that these have been discussed with RICS, ARLA and officials. I am getting nods from the Box. The government amendments introduce a power, as has been said, for the Secretary of State to serve notice on scheme administrators, requiring them to amend their scheme rules in respect of the cover they may hold. We consider this a sensible addition because it ensures that appropriate cover will be in place and, importantly, it will prevent arbitrage between the different schemes. That is something that we had not thought of but we are very grateful that officials did so.

As has been noted, our concern is with the current wording, which we did not feel gave sufficient clarity on how such a scheme, where it proved necessary, could close in an orderly manner where the Secretary of State’s justified requirements proved unworkable. The amendments I tabled were therefore to clarify that schemes may alternatively close in an orderly manner in such a scenario, rather than leaving administrators open to a lot of uncertainty. I know that the Minister appreciates those points, as we have heard. It was a backstop—if I may say that—that we were looking for: something we hoped would never be needed but should be there in case. I think the Minister has given the reassurance needed about flexibility and the use of normal other legislation to ensure that such reasons are given, and in the right way. I am getting nods from other people on that point.

Although I tabled the amendments, they were clearly only a bit of final tidying up. We are very pleased and grateful that, as a result of what we raised in Committee, it has been possible to bring this forward in such a timely manner that we can go ahead on 1 April not just, unfortunately, to leave the European Union, but, perhaps a little more importantly, to have client money protection in place.

[Lord Flight (Con)]

My Lords, I refer to my interest as a modest landlord, as declared in the register. The new rules to protect rent paid by tenants to agents do not protect landlords fully. Letting agents will have to join the new government-approved client money protection insurance scheme, but changes proposed by the Government as to the level of insurance held by these schemes will not cover the full value of rental money held by agents. I cannot see the point of that. Is it not in the interests of all parties for the insurance effectively to cover all potential liabilities? The scheme will not pay out in some circumstances; it will be able to cap the amount it pays out. Surely it would be more sensible for the scheme to provide for full protection.

[Lord Palmer of Childs Hill (LD)]

My Lords, first, I thank the Minister for his incredible help and support in getting this legislation through, and the noble Baroness, Lady Hayter, who has done a lot to make this Bill work.

I want to pick up on a point made by the noble Lord, Lord Flight, because it is one of the questions that arises from these amendments. Perhaps I may tackle it by dealing with the level of insurance required, which is what the noble Lord, Lord Flight, was talking about. The best way of looking at it is perhaps to think about what the Residential Landlords Association —the RLA—has recently said. It advises, consequent to the changes to the legislation, that to help reduce the risk, landlords should spread their properties across a number of agents so that they reduce the need to go over whatever insurance limits were agreed with each one. The RLA summed this up by saying:

“Otherwise we will encourage landlords to ensure that they do not put all their eggs in one basket and spread the risk”.


Are the Government aware of landlords spreading their risk rather than keeping it with one agent, and what will the Government’s attitude be? I believe that is the point raised by the noble Lord, Lord Flight. This is a great improvement to the legislation but I would like the Minister to respond to my question.

--- Later in debate ---

[Lord Flight]

My Lords, I similarly would like to speak to Amendments 42, 43 and 44, on tenancy deposits. The objective for everyone is to have a fair balance that works. I note that, at Second Reading in the Commons, the Secretary of State referred to the then proposal of six weeks as,

“a balance of greater protection to tenants while giving landlords the flexibility to accept higher-risk tenants”.—[Official Report, Commons, 21/5/18; col. 642.]

I also note that Scotland has an eight-week as opposed to a six-week arrangement.

I urge the Government to think again on this issue. Reducing the security deposit to five weeks’ rent rather than six leaves scope for unfairness to landlords. There is always the risk that, at the end of a long tenancy, the tenant will leave the property in a poor state or will have had pets. Cutting the deposit to five weeks’ rent will quite likely leave the landlord out of pocket. In turn, that will make landlords more cautious about the tenants they take on, at a time when the need for more rented accommodation is acute. This is not a huge issue, but the Government’s previous proposition of six weeks was the sensible and fair balance. I do not understand why they have moved to five weeks, and nor does the industry—having not been consulted or advised about this, it feels somewhat mistreated by the Government.

[Lord Shipley]

My Lords, if I might, I will intervene at this stage to speak to Amendment 43, which is what we are currently talking about. In the flurry of amendments not being moved, no debate took place, but the issue has now been raised by two noble Lords.

My name is attached to the amendment that refers to five weeks, and I think it is the right conclusion. I want to thank the Government for having agreed a change from six weeks to five. At Second Reading and in Committee, we went through every option: from the Scottish model of eight weeks to my probing amendment proposal of four weeks. As I recall, the Government at that stage said the figure would be between the four weeks we requested and the eight weeks that apply in Scotland.

There is a lot of money at stake here for tenants. Having heard from the perspective of landlords, I would like to speak on behalf of tenants. For a large number of poorer people, a change from five to six weeks could make finding that level of deposit a strain. Anything that can be done to minimise that strain is a good thing. The figure was described as being “up to” six weeks, but the fact that it is now five weeks will be of benefit to a large number of tenants. Because it covers the difficulty that, in some months, four weeks may not be a month and many people operate tenancy agreements on a monthly not weekly basis, it is legitimate for the Government to propose that we go to five weeks. I want to express our support for the Government’s decision.