Tenant Fees Bill

Mark Pawsey Excerpts

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

[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.

[Mark Pawsey (Rugby) (Con)]

In respect of fees charged by letting agents, does the Secretary of State agree that there is something fundamentally wrong when a letting agent takes a fee from both parties in the transaction—the tenant and the landlord? That is just not right.

[James Brokenshire]

I understand. In many ways, that lies at the heart of the Bill—the way in which, effectively, there can be charges in two different directions. That underlines why these measures are important and why, to take my hon. Friend’s point, they are intended to promote fairness.

The Government will always stand on the side of people who are being ripped off and exploited and support them. We are taking this action to address inequalities in the lettings market and to create a market that is fair for consumers. By banning fees for tenants and capping deposits, we are delivering on our commitment to make renting fairer and more affordable. The Bill will make a real and meaningful difference to millions of tenants right across the country, especially for young people and families, and I commend it to the House.

--- Later in debate ---

[Mark Pawsey (Rugby) (Con)]

It is a great pleasure to speak in the debate. Like my hon. Friends the Members for Carlisle (John Stevenson) and for Harrow East (Bob Blackman), I am reminded of the work that we did in the Select Committee under the able chairmanship of the hon. Member for Sheffield South East (Mr Betts). It is also a great pleasure to see him in the Chamber this evening.

In its 2013 report, our Committee recognised and expressed concern about the imbalance between tenants and landlords and their agents. I support the Bill because it goes some way towards creating a balance between the parties involved in the taking up of a residential property tenancy. Back in 2013, we drew attention to the sharp practice and abuses perpetrated by some letting agents, and recommended that agents be subject to the same controls as their counterparts in the sales sector. Most residential property agents are involved in both sales and lettings, and in each instance the property involved will be someone’s home. It makes no sense for only one of those tenures to be covered by regulation. The Bill does not provide for the regulation of letting agents, and I am happy for that to come later, but it takes a step towards it in requiring them to behave in a more professional manner.

According to evidence given to the Committee, letting agents often failed to give renters up-front information about fees. I was therefore happy with our recommendation for a code of practice requiring agents to publish a full breakdown of their fees, which was introduced in the Consumer Rights Act 2015. The Bill goes further by banning nearly all up-front fees for tenants. That is welcome, and was a manifesto commitment from my party in the 2017 general election. It strikes me as wrong in principle for an agent to attempt to take a fee from, or make a charge to, both parties in a transaction. When it comes to the relationship between landlord and tenant, the letting agent is clearly acting on behalf of the landlord, with the landlord’s interests paramount. If up-front fees are banned, there can be no danger that unscrupulous agents will charge both parties.

A letting agent in my constituency has contacted me, arguing that through the national approved letting scheme the sector has reformed itself and the Bill is unnecessary, but it also suggests that there should be

“proper comprehensive regulation of all lettings and management agents”,

and states that agents currently provide services for both landlords and tenants, which I rather dispute. According to this agent, those services include offering tenants a choice of viewings at the convenience of existing and incoming tenants, referencing checks on tenants and their guarantors, and even explaining tenancy agreements.

I accept that some of that work supports tenants, but I see no reason why the tenants should pay for it. I believe that when a letting agents engages in those activities, he does so on behalf of the landlord, who—rightly and appropriately—pays him a fee for doing so. The agent is then remunerated for that work, and, in most instances, goes on to earn a regular income through the management charges involved in the collection of rent.

The national approved letting scheme suggests that agency-trained staff are trained to have the right level of knowledge to ensure that neither the landlord nor the tenant is disadvantaged. It fears that the abolition of fees will cause letting agencies to reduce staff levels and training budgets. I am not at all convinced by that. Before coming to the House, I employed a team of salespeople serving the catering trade, but I never expected the customers of my business to pay for the training of my staff. The NALS also suggests that rents may rise. I think that that neglects the principal feature of any market, which is that the prices set are based on supply and demand.

We know that the private rented sector has increased massively. In 2008 it made up 10% of all households. By the time we produced our 2013 report, it made up 18% of households, with 4 million households renting. Today, 21% of the market consists of the private rented sector, with 4.7 million households renting. That is the highest level for 30 years. More and more people are affected, and it is entirely right that the Government are taking action to protect them.