Tenant Fees Bill

Maria Caulfield Excerpts

2nd reading: House of Commons
Monday 21st May 2018 Commons Chamber

[James Brokenshire]

We intend to provide guidance on those issues. I do not accept that that would automatically be the situation. It is why we have taken the steps that we have in considering what the right action should be in setting a number of these issues. It is important to recognise that the Bill proposes a number of enforcement measures that offer a strong deterrent to irresponsible agents and landlords, and in doing so protects tenants.

[Maria Caulfield (Lewes) (Con)]

Does the Secretary of State agree that this is very much a geographical issue? In London and the south-east, tenants have really suffered at the hands of lettings agents and their fees. Tenants can pay anything from £175 to £900 just in fees alone. My local citizens advice bureau in Lewes found that on average tenants are paying, for eight weeks’ deposit, nearly £4,000 in advance. This is a real problem for London and the south-east.

[James Brokenshire]

My hon. Friend highlights the issues that go to the heart of the Bill—that is why I hope that it will command broad support across the House.

The Bill places a duty on trading standards authorities to enforce the measures it contains. It also makes provision to enable tenants and other relevant people to recover unlawfully charged fees. It prevents landlords from recovering their property, via the section 21 of the Housing Act 1988 procedure, until they have repaid any unlawfully charged fees. A breach of the fees ban will usually be a civil offence, with a financial penalty of £5,000. However, if a further breach is committed within five years this will amount to a criminal offence. In such a case, local authorities will have discretion about whether to prosecute or impose a financial penalty. Guidance on that will be issued. They may impose a financial penalty of up to £30,000 as an alternative to prosecution. Local authorities will be able to retain funds raised through financial penalties, with the money reserved for future local housing enforcement.

Finally, 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.

--- Later in debate ---

[Maria Caulfield (Lewes) (Con)]

On 3 May 2016, I led an Adjournment debate in which I called for a cap on letting agents’ fees, because they were becoming such a big issue in my constituency. I therefore welcome the Bill, which goes even further.

This issue particularly affects London and the south-east. In my constituency, rent for an average property is close to £2,000 a month. I have worked closely with the citizens advice bureau in Lewes, and it has done a lot of work on this issue. It highlighted how letting agents fees in one of the four towns in my constituency can range from £175 to £922. Coupled with an eight-week deposit, which is standard in Lewes, that can leave tenants paying anything from £3,332 to £3,779. It is just not affordable for someone on the average wage. I was therefore pleased to see in schedule 1 that the deposit is going to be limited to six weeks.

I have two key concerns. The first is about the variety of fees listed in schedule 1. Although the Bill covers holding payments and deposits, several fees that letting agents have introduced will get around the legislation. Citizens advice in Lewes found that people can be charged around £450 to add a second tenant to a property. A reference check can cost £100, as can general admin. An “express move”—to move within 10 days—can cost around £200, and it can cost another £200 to keep a pet in a property. If a tenant moves out and someone takes over the lease, that costs £300 on average. Some Members have already mentioned the six-month tenancy. Tenants often want a longer lease, to which they are legally entitled, but are not allowed to contact the landlord to negotiate one, because it is in the letting agents’ interest to keep tenants on a rolling six-month tenancy, paying around £150 to £350 every time they renew their lease.

My other concern is enforcement and schedule 3. It is a legal requirement for letting agents to advertise their fees, but it just does not happen and is not enforced. Citizens advice looked at 25 letting agents in Lewes and Seaford. Only one currently advertises its fees. We have legislation and it is not being enforced. I am not clear from schedule 3 who is responsible for the enforcement of the legislation and what happens if they do not do it. I welcome the Bill, but I have those two concerns—the variety of fees not covered, and enforcement to ensure that the Bill works properly for tenants.

Tenant Fees Bill (First sitting)

Maria Caulfield Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 5th June 2018 Public Bill Committees

[Melanie Onn]

Q In relation to tenant fees, given that is what we are here to discuss. I am not allowed to go outside the scope of that.

Richard Lambert: Housing is a devolved issue, and therefore it is for the individual countries of the UK to decide their situations.

David Smith: I appreciate that there is a great attraction in comparing Scotland with England, but the markets are enormously different. Outside the main cities in Scotland, the vast majority of letting and estate agents are co-located with solicitors, so the economics of the business is totally different. Inside the cities, it is a bit more like it is in England and Wales, but the size of the market is tiny by comparison and I am not convinced that it is a particularly good comparator. You might do better by comparing with the Irish Republic, which is of a similar size and has much more similar economic structures in some way. I see your point, and I do not think you are necessarily wrong, but I do not think it is as simple as a direct comparison between the two—sorry.

[Maria Caulfield (Lewes) (Con)]

Q On the issue of enforcement, I have been working closely with my local citizens advice bureau in Lewes, which has done a huge amount of work on this. The current system does not work because it is up to local authorities to enforce it, and tenants often do not realise that there are fees that have to be paid, and that on the same high street those fees could vary from hundreds to, in some cases in my constituency, thousands of pounds, and that letting agents are supposed to publish those fees.

So, currently, the enforcement system is not working. Is it not right that if fees are banned, tenants will be able to self-enforce, because they will be aware that no fees should be charged? Do you not recognise that this would give more power to tenants in the process, given that currently they are not able to make those decisions?

David Smith: But why? There is no mechanism within this Bill for tenants to self-enforce.

[Maria Caulfield]

Q There is, because it will be very clear that these fees will be banned.

David Smith: But they are still reliant on the local authority taking up the cudgels on their behalf, which evidence shows that at the moment they do not do.

[Maria Caulfield]

Q But do you not recognise that that gives power back to the tenants? They can then question letting agents as to why fees are being charged. Currently they do not have the information to be able to do that.

Richard Lambert: There is a level of lack of understanding amongst many tenants, in that often they will find themselves handing over money that they discover is for fees when they thought it was for a deposit. The agent will give them an explanation as to why they are being asked to pay something over, and will then change the story later on.

If an agent is exploiting the opportunity, inevitably tenants will fall into that. We do still find that many people who go looking for rented property simply are not aware of the legislation and the protections that they already have. We, as an organisation, have actively gone to local authorities and said, “We have walked down the high street and counted up the number of agents who are not displaying their fees. We think that you could probably collect enough fines over a space of two hours to fund your activity enforcing this regulation for the rest of the year.” The reluctance is to do it in the first place, because the response is always, “We don’t have the resources to do that in the first place.”

David Smith: Every time I go and see a local authority councillor I always bring them at least one example of an agent in their area who is illegally charging fees or breaking the law in some way. I do it consistently.

[Maria Caulfield]

Q Do you not welcome the Bill, then, in that it will make it very clear to tenants that there should not be fees being charged in the first place? They can then make that decision for themselves.

David Smith: But there are scenarios in which the Bill allows the charging of fees. It allows the charging of fees provided they are optional, for example. It is not an outright ban on fees; it is a partial ban on fees. There are circumstances where fees are chargeable, where they are optional. And you are relying on tenants actually finding out about their rights. Unfortunately, at the moment most tenants are grossly unaware of their rights, and will remain so.

[Maria Caulfield]

Q Do you not recognise that the Bill would improve that situation?

Richard Lambert: The Bill will make the situation clear for the majority but, again, there will be a minority of tenants who will not be fully aware of their rights, and there will be a minority of agents who will continue to try to exploit the situation. The only way to deal with that is with effective enforcement. In the first instance, effective enforcement needs to be properly resourced. Once you have that kick-start, the fines generated and the authorities’ ability to attain the proceeds from those fines will mean that they can continue to resource it. You have to have the initial resource to make that enforcement effective, otherwise you are simply passing the legislation, and it is not being policed.

David Smith: More to the point, it would be the weakest and most vulnerable tenants being exploited by the agents, as it is now.

[Maria Caulfield]

Q I just have a quick question on default fees. Will you set out your views on default fees, and why they are necessary? I recognise that there are tenants who often leave properties in a state in which they did not find them. How often, in your experience, are default fees payable? What percentage of tenants would this apply to?

Richard Lambert: I wouldn’t know.

David Smith: We don’t have data. The continuing use of the phrase “default fees” misrepresents what is going on here. David Cox gave one of the best examples: that of a tenant who loses their keys and expects the agent to go over at midnight. “Default fees” is shorthand for a mechanism that exists in almost every commercial contract.

[Maria Caulfield]

So businessmen like you don’t know how often default fees are applied, as it stands.

David Smith: At the moment, quite a lot of agents put default fees into their agreements, but they are very rarely charged. In practice, they are mostly taken out of the tenant’s deposit. In many cases there is no deposit left to take. Most agents do not bother.

Richard Lambert: I think for self-managing landlords, it depends whether you have just one incidence of this. Let’s stay with the example of somebody locking themselves out, forgetting their keys and coming home from a night out at 2 am and being unable to get in. They ring the landlord and ask them to bring a key round. The landlord will usually complain and possibly do it once. If they find that it is happening two or three times then they will start to say, “Well actually, I am going to charge for my time involved in getting up in the middle of the night, coming over and letting you in.” If there is more of an issue and the landlord has to engage a locksmith, that could involve a charge of £150 or £200 in London. They will want to try and recover that kind of fee. With self-managing landlords where the relationship is directly with the tenant, there is a level of give and take initially, but then if it is a continuing problem or if there are several incidents then, yes, they will do something.

[Maria Caulfield]

Q So is there a need to have default fees within this Bill?

Richard Lambert: I think there is.

David Smith: Landlords are always entitled to recover their costs from a tenant’s breach of contract. A default fee is actually where the parties pre-agree what the level of that fee should be, creating a degree of certainty between them so that tenants are going to know that they will have to pay this amount and this amount only, whatever the actual cost of, say, a locksmith. There is a benefit to having a fixed tariff of fees for particular contractual breaches. It is a commonly used mechanism across a wide range of contracts.

[Sarah Jones (Croydon Central) (Lab)]

Q May I just ask for information? Obviously we accept that the majority of landlords are good landlords and do the right thing. You talk about exploitation, variation and some egregious levels of charging, and some exploitation of people. Would you describe what evidence there is as to the numbers of good agents versus bad agents, and good landlords versus bad landlords? We talk about the bogus ones who are charging people but is there evidence of the number, or of where they tend to be? Do they tend to be the bigger ones or smaller ones? Are they in cities or in rural areas? What do we know?

Richard Lambert: It is almost impossible to identify that. Those kinds of landlords and agents do not self-identify, by definition. Somebody once said to me, “The worst tenants tend to gravitate towards the worst landlords.” Often, those kinds of landlords will be housing people with chaotic and vulnerable lives who find it difficult to go anywhere else, or people who may be on the verges of criminality. Quite often, you find that the actual accommodation provision is a sideline of a wider organised criminal activity, and it is a part of something that will involve people trafficking, prostitution, drugs, money laundering and so on. The letting of the property is simply a factor: they need somewhere to house the people.

David Smith: The only way to clarify that would be to look at the number of landlords prosecuted as a percentage of the overall number of landlords. However, the problem with that as a measure is that enforcement is so poor.

Tenant Fees Bill (Second sitting)

Maria Caulfield Excerpts

Committee Debate: 2nd sitting: House of Commons
Thursday 7th June 2018 Public Bill Committees

[Sarah Jones]

Q For my final question I just want to change the subject. We will look today at the deposit element of this proposed legislation. There has been quite a debate on what level of deposit is fair, in terms of what people can afford and what is fair for the landlord to be able to hold. Do you have any views on what that level should be, whether it should be three, four, five or six weeks’ rent, or something else?

Alex McKeown: I certainly think the maximum should be six weeks, which it is at the moment. That has been the norm within the industry. I know that Citizens Advice—the CAB—and others that have given evidence want it brought down to at least five weeks. I understand some of their arguments for that, but to be honest with you, that has not been my main focus.

Councillor Blackburn: I do not have a view.

[Maria Caulfield (Lewes) (Con)]

Q I want to touch on the point you made about the requirement in the Bill of proof to a criminal standard and how difficult that will be. Do you have any suggestions for how the Bill could be formed to allow enforcement to happen relatively easily and effectively?

Alex McKeown: I think it needs to be more similar to the redress scheme for letting agents and property managers in the Consumer Rights Act, because that is a fairly simple process. You get the evidence, you issue the notice of intent, they make representations, you then issue a final notice and it goes to the tribunal. That process has worked very well. We obviously get some random judgments coming out of the tribunals, but that is a better way of doing it.

The only issue we have found is that you will get a large fine against a company—such as the £30,000 fine—and they will then fold their company and phoenix. That is where we may need to look at holding the directors themselves liable. That will assist trading standards in getting the money back.

[Maria Caulfield]

Q That is very helpful. In terms of the bands having clear and unambiguous definitions, particularly around the default fees, are you saying that in the Bill itself and its schedules, there is not enough detail to be able to uphold that?

Alex McKeown: On the default fees?

[Maria Caulfield]

Yes.

Alex McKeown: Yes. I have not looked closely at that, but I know that, again, the CAB has written an amendment on the default fees aspect, to try to make that clearer. At the moment it is quite vague. That does need to be tightened up.

[Maria Caulfield]

Q As a trading standards officer, as the Bill stands would that be difficult to—

Alex McKeown: To prove beyond all reasonable doubt? Yes, I think so.

[Daniel Zeichner (Cambridge) (Lab)]

Q I want to pick up on the point in the evidence from the CTSI about the rise of alternative business models—certainly in my city, and I also did some work with my hon. Friend the Member for Blackpool South (Gordon Marsden) in Blackpool on this issue. I just wonder whether you feel that the Bill as it is currently framed would deal with some of those issues, or whether there is a danger that people might move to using some of those platforms to evade the focus of the Bill.

Alex McKeown: The alternative business model is often rogue agents trying to avoid protecting deposits, to avoid giving legal agreements and, in time, to charge the tenant fees. That is also why I feel the burden of proof needs to be back down to the civil burden of proof. It will be difficult to prove beyond all reasonable doubt that somebody is a letting agent and not a membership club. You can see the evidence we need to prove it from the legislation that relates to the membership clubs, and from some of the legal precedents about what constitutes an assured shorthold tenancy.

To give an example, the London Borough of Tower Hamlets took a letting agent to court that said, “We don’t have to join a redress scheme, because we’re not a letting agent, because we only issue a licence to occupy.” The London Borough of Tower Hamlets then had to go into housing law and ask, “Is this tenancy a licence to occupy or an assured shorthold tenancy?” The judge in that tribunal case said, “On the balance of probability, you are a letting agent and should be a member of a scheme.”

That is what we need for the alternative business models. We need to able to prove that, on the balance of probability, they are not membership clubs, the agreements they are giving out are tenancies, and the fees they are charging will be prohibited fees.

Tenant Fees Bill (Third sitting)

Maria Caulfield Excerpts

Committee Debate: 3rd sitting: House of Commons
Thursday 7th June 2018 Public Bill Committees

[Melanie Onn]

I disagree. The principle aim of the proposed legislation is to limit the unfair, up-front costs that make it much more difficult. We know that young people make up the bulk of the sector at the moment, and that is only set to grow. Moreover, in general—I accept that this is not always the case—those young people will be on lower wages, so such deposits are an unnecessary barrier to people in that age bracket being able to obtain the property that they desire to become their home.

My concern relates to the abuse of those holding deposits. When this matter was discussed in the Select Committee, there was a suggestion that tenants seeking a property were putting down multiple holding deposits so that they could play a game of which property they were going to choose, as if individuals have so much money that they are able to put down multiple holding deposits. I have not seen the evidence for that.

[Maria Caulfield (Lewes) (Con)]

It was my understanding, listening to the witnesses this morning, that they all agreed in principle with holding deposits. They saw a need for them. They might have concerns about how that mechanism is used, but I heard them speak in support of holding deposits in principle.

[Melanie Onn]

The hon. Lady’s point that the witnesses had concerns about how holding deposits would be used is exactly why I am raising this matter. The aim of the proposed legislation is to make things fairer and easier for tenants. The suggestion has been that tenants are somehow playing a system or a game—

Tenant Fees Bill

Maria Caulfield Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Wednesday 5th September 2018 Commons Chamber

[Rishi Sunak]

That has not changed. In Committee and during the evidence sessions, there was overwhelming support for the idea of trading standards authorities playing a key role in enforcement, given their complementary responsibilities in similar legislation. We have heard good evidence for that, and they will be supported up front by half a million pounds from the Government in the first year of the implementation of the legislation.

We want to ensure that the enforcement authorities are required to notify the lead enforcement authority in the circumstances that I have set out. At present, they are required to notify the lead enforcement authorities only when they impose a financial penalty. Extending the notification requirement to criminal offences will help the lead enforcement authority more effectively to monitor and report on the effectiveness and operation of the ban. This will also help to support local authorities better with their own enforcement actions.

Fourthly, on enforcement, when a tenant takes action to recover their fees, they should have confidence that their local authority can assist them through the process. The Bill already provides that local authorities can assist an individual in recovering a prohibited payment via the first-tier tribunal.

[Maria Caulfield (Lewes) (Con)]

One issue with current legislation on the requirement to publish letting agents’ fees has been the lack of enforcement. What confidence can the Minister give the House that enforcement will actually happen under this very welcome new legislation?

[Rishi Sunak]

My hon. Friend spoke passionately on Second Reading about renters in her constituency and the work she has done with them to ensure that they are treated fairly. I commend her for that, and for raising a very good point. I am pleased to tell her that the Government are funding enforcement activity with half a million pounds of fresh funding in the first year after the Bill is enacted. Subsequent to that, the fines that the legislation will enable local authorities to levy—potentially up to £30,000 for a repeat incidence—will help to fund ongoing activity. I am confident that we will be able to deal with the issue that she raises.

--- Later in debate ---

[Maria Caulfield]

To go back to amendment 3, is the hon. Lady not reassured by schedule 1? It states that

“if the amount of the payment exceeds the loss suffered by the landlord as a result of the default, the amount of the excess is a prohibited payment.”

Does that not reassure her that the Bill will protect tenants from those who want to charge exorbitant default fees, as evidence will have to be provided and the amount will have to be justified by the cost that the landlord or the letting agent has had to pay out?

[Melanie Onn]

As I said at the outset, we support the Government amendments and will not oppose any of them, but I am not sufficiently reassured that my amendment is not still required. As I said, we will not oppose the relevant Government amendment, which has come about as a result of constructive conversations in Committee, where a lot of these issues were dealt with in great detail.

We have not touched in great detail so far on how we can ensure that landlords do not avoid their responsibilities, and that is by enabling local authorities to enforce more proactively. The increase in the fines will go towards assisting with that, and we know that the Government have also committed some funding towards that. The evidence that we heard was that trading standards across the country is a decimated sector within local government. It is already unable to do what is required of it in making checks on letting agents—for example, on the displaying of tenants’ fees. We should therefore allow the additional funding that comes in through these fines to go to local authorities and back into enforcement, which is exactly what the Minister has proposed with the £5,000 fine. That will give local authorities greater income and revenue to provide that enforcement.

I will leave it there, but I hope that Members on both sides of the House will consider voting for the amendments that we have put forward today.

--- Later in debate ---

We need a system that we can trust. Landlords need a system that they can trust. Above all, tenants need a system that they can trust. This Bill will help the Government to achieve that, and I am happy to support it.

[Maria Caulfield]

I want to touch on two issues to do with fees and enforcement. I want to put on record my thanks to the Lewes citizens advice bureau, which did extensive research for my Adjournment debate in May 2016. While the explanatory notes to the Bill say that letting agents’ fees are on average £200 to £300, in my constituency —probably because it is in the south-east—they are on average between £200 to £1,000. On top of a deposit of six weeks’ rent in advance, that means someone can have to find £2,000 to £3,000 in advance.

This legislation will make a huge difference to tenants in my constituency of Lewes. However, I have some concerns about default fees, which I raised on Second Reading and in Committee. I am pleased to see Government amendments 5 and 6, which tighten these provisions. As stated in my entry in the Register of Members’ Financial Interests, I am a patron of the charity Homelink, which provides more than £100,000 of support to tenants looking for deposits in the Lewes district. The charity is still slightly concerned about default payments, but amendments 5 and 6 are really welcome because they tighten the provisions and state that default payments have to be listed in advance in any tenancy agreement and that there has to be evidence that those fees exist.

[Dr Rosena Allin-Khan (Tooting) (Lab)]

Will the hon. Lady give way?

[Maria Caulfield]

I will not give way, simply because of the time constraints on us.

If tenants are found to be in breach of those requirements, they will be liable to penalties and to prosecution, so I am more reassured than I was at the start of the debate. I welcome the fact that the Minister has listening ears, because he has really tried to listen to all Members on this matter.

On the enforcement issue, I am still concerned—not because of this legislation, but because of the failure to enforce the existing legislation requiring letting agents to publish their fees. I welcome the fact that, under clause 7, district councils will be able to keep the penalties charged, and I very much welcome the Minister’s announcement today that there will be £500,000 of up-front loading for councils to enable them to invest in staff and to start taking on enforcement. I want to pursue this, however, by asking what will happen if that still does not result in enforcement, because we will be no further forward with this brilliant legislation if enforcement does not happen. I also put on the record my interest as a vice-president of the Local Government Association, which asked for the up-front loading.

If we are giving councils the money in advance and they are able to keep the penalties, they really must step up to the mark and enforce the legislation. It will make such a difference to tenants’ lives if they know in advance what fees they will have to pay and that those fees are evidence-based, and if they know that if those fees are abused, there will be prosecutions and severe penalties. I cannot support the Opposition’s amendment 3, simply because schedule 1 sets out which fees will or will not be payable, while the Opposition have only given some examples of such fees. That is not really strong enough, and the amendment would severely weaken the legislation.

I congratulate the Minister, who has done a fantastic job in listening to everyone. I still have some slight concerns about enforcement and the default payments, but I am very happy to support the Bill.

[Sir Christopher Chope]

It is a pleasure to be able to speak in this debate. I am neither a landlord nor a tenant, but I am the chair of the all-party group on the private rented sector, and that sector is under substantial pressure on issues relating to regulation and interference by the Government.

The Residential Landlords Association has estimated that, in the past nine months alone, there have been over 25 consultations across Whitehall proposing changes that will have an impact on the private sector. More than 140 Acts of Parliament and more than 400 regulations affect landlords in the private sector already. That is why many of those landlords choose to get help from letting agents, and this Bill is a direct attack on the profession of letting agents. As my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) has said, this is not a Conservative measure at all, and I despair at the fact that so many people seem to want to support this exercise in socialism and control.

Why should a Conservative Government be engaged in preventing professionals from charging a fee for services rendered? Doctors in my constituency charge those aspiring to become social tenants £15 a time to get a medical certificate in support of a social housing transfer. That—in response to my hon. Friend the Member for Harrow East (Bob Blackman)—is not a cost, but a charge. It is a charge, and it is an arbitrary charge: it is imposed, but payable. As I understand it, the Government are not proposing to abolish the right of doctors to charge for writing letters, so why are we proposing to prevent letting agents from charging for the services that they provide?