Tenant Fees Bill

Melanie Onn Excerpts

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

[Melanie Onn (Great Grimsby) (Lab)]

I congratulate the Secretary of State on his appointment and welcome my hon. Friend the Member for Croydon Central (Sarah Jones) to our housing team. This tenant fees legislation is very welcome. We know that the majority of landlords are good landlords, or strive to be, and understand the expectations upon them before they embark on becoming a landlord. However, a number of rogue landlords and letting agents give the sector a bad name, undermine the good work of quality agents and landlords, and they have squeezed tenants for cash in unfair ways, with disproportionate charges for unjustifiable reasons. It is right that the Government are acting to change this unfair system and Labour welcomes that, but it would be remiss of me to fail to remind the House that we first suggested a move to ban letting fees back in 2013. After five years, it is good that the Government are finally acting on this issue. If we get the Bill right, it will have a positive impact on people’s lives on a day-to-day basis.

The overriding purpose of the legislation is to help to shift the balance of power from unscrupulous agents and landlords towards decent tenants—to make renting fairer, more affordable and more transparent and to give tenants greater clarity and control over what they pay. We will all have heard horror stories of agents or landlords charging people excessive fees to secure properties, or throughout tenancies, imposing additional charges with excessively high administration fees. With fewer social properties available, this places great difficulties on those with low incomes, or those who are renting alone or simply cannot afford thousands of pounds in up-front fees. In an increasingly competitive market, that has led to the UK’s nearly 5 million private renters sometimes feeling that they are an easy target from which to extract unnecessarily large sums of money. That is on top of the £50 billion a year paid in private rents.

As the number of private renters is predicted to rise to 5.6 million people by 2021, we should be aiming for a gold standard of contract of understanding between renters and landlords, or their agents. As it stands, there is an inherent tension between landlords who view their property as an asset or investment and a tenant who sees it as their home. We have to take steps to bring those two positions closer together.

Increasingly there are larger, more professional companies recognising the importance of peoples’ home life and striving to provide properties in high-demand areas. They do not use agents, seek to develop a sense of community and aim to retain tenants for as long as possible and keep rents affordable in line with local incomes—in places such as Argo Apartments—and stand in stark contrast to the enormous billboard I saw from Wentworth Estates, boasting that it could guarantee rents for between one and five years for landlords, would provide three months’ rent in advance and could offer “free evictions”.

[Caroline Lucas]

Does the hon. Lady agree that another way the Government could follow both Labour and Green party policy would be to tackle extortionate rents? The elephant in the room is the need for some kind of rent controls, including rent caps, because although what is in the Bill is a welcome step forward, until we tackle the size of rent increases, we will not be able to provide the homes for the people who need them.

[Melanie Onn]

Labour absolutely recognises the—[Interruption.] Before the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Rossendale and Darwen (Jake Berry) leaps on me—before I am able to make myself clear—Labour absolutely recognises the issue of the amount that people are paying in rent and recognises that there could be restrictions on the percentage of increases in rent, not a rent cap.

The pressure in the housing market is rapidly producing new forms of exploitation. For example, an alternative letting agency-cum-landlord service called Lifestyle Club London markets itself as a membership club. Tenants or members pay an annual fee instead of rent. Club staff are entitled to inspect rooms unannounced at any time and fines can be given for anything even as minor as dirty dishes. This is a fast-moving area. We can see that there are wildly differing practices in the world of private rental and that tenants have had difficulty in getting the treatment that they deserve, which is why groups such as Generation Rent and Marks Out of Tenancy have emerged to give a collective voice to private renters on matters of not only policy but practice.

Although the Bill is satisfactory in many respects, it still provides the opportunity for the continuation of an exploitative approach. For example, clauses 1 and 2 detail the prohibitions on landlords and agents applying fees in many circumstances. The cap of £50 for any of those charges is very welcome, but the explanatory notes go on to say

“or reasonable costs incurred if higher”.

That is a clear opportunity for a coach and horses to be driven through this otherwise very good Bill. We know that some letting agencies and landlords will push these grey areas, and without directly spelling out what charges are permissible and what “reasonable costs” are, there is undeniably room for incorrect interpretation.

The Government have so far given an indication that they will provide guidance on these and other issues, but how can that be enforced? If I speak to Shelter about how a renter can take a case against a banned fee being levied against them, the question then becomes a test of reasonableness. Whether or not such charges are reasonable, I know that it will say that if the Government want to genuinely give tenants additional powers, regulation is required to ensure that they are enforceable and meaningful.

The same goes for default fees, which are to be capped at the level of the landlord’s loss. At first glance, this seems eminently reasonable. A landlord should not be required to pay for a banking or other fine due to a tenant making a payment late or the replacement of a lost key or entry fob. However, the Minister must be aware of the scope for this to become a nice little earner for agents or landlords who would seek to unfairly penalise their tenants for minor errors.

[Mr Jim Cunningham]

I agree with my hon. Friend that there should be some form of adjudication or regulator, whichever way we want to put that argument. The weakness in the Bill, which is a good Bill by the way, is on enforcement, because as most people know, trading standards departments up and down the country in local authorities are totally underfunded.

[Melanie Onn]

My hon. Friend makes a very important point and I will come on to trading standards shortly.

There is no definition of what a landlord can include as a loss. If this includes the use of agents and agents opt to charge for their time—to replace a key or make some phone calls—charges may amount to far more than Government ever intended them to. This is one of the issues that we have seen with the scandal around excessive charges to private leaseholders: without a specified cap, there is scope for the unscrupulous to run riot.

[Jo Stevens]

The Bill is obviously necessary because of the bad behaviour of some landlords and letting agents. Without the measures that my hon. Friend set out, bad behaviour by rogue landlords and letting agents will not be prevented. They will carry on doing it because there is no sanction and no enforcement to stop them.

[Melanie Onn]

My hon. Friend makes a really important point. There is absolutely no point in this House taking through legislation, as good as it is, if it cannot be enforced because it holds no weight in law.

The inclusion of a one-week refundable holding deposit, on top of a month’s rent and six weeks’ tenant’s deposit, is allegedly designed to minimise instances of tenants securing multiples of properties at the same time before finally settling on their preferred property. There has been very little, if any, evidence that this is a regular practice. Additionally, the Government say that there are a number of exceptions to that deposit having to be refunded, including when the tenant provides false or misleading information. Again, although on the face of it, that is a sensible measure, there are no additional protections for tenants if the incorrect information is not their fault. For example, a reference that does not exactly match a tenant’s claims should not immediately mean that they lose that holding deposit. There is scope to develop a mechanism to test inaccuracy and establish the reasons behind it before immediately assuming information has been deliberately misleading.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I draw the House’s attention to my entry in the Register of Members’ Financial Interests. Despite the fact that I have been involved in this sector for most of my life, and am still involved, I am very supportive of the Bill and the drive to ban tenant fees. That said, on the hon. Lady’s point about holding deposits and the reference fees that tenants pay to the agent or landlord, does she not think it a reasonable concern that if we do not allow a letting agent or landlord to hold back a reasonable amount for referencing, they might be more likely to pick a better-off tenant than some of the lower-income tenants she is seeking, quite rightly, to protect? There are concerns about the commercial behaviour that could result if what she describes was to happen.

[Melanie Onn]

The point is that poorer tenants struggle the most. That is why we are trying to make the Bill as good as it can be. It comes back to reasonableness and whether there is sufficient rigour in the proposals to ensure that people are properly protected, and that goes for landlords as well.

The Government must bring back evidence during the remaining stages to convince us that this is a legitimate charge to make, rather than a simple amelioration of losses to agents and landlords. It is notable that the Government have opted to cap deposits at six weeks. The Minister should know that in practice this means all deposits will be six weeks, despite most rents being payable on a monthly basis. Shelter estimates that a six-week cap still means that London renters have to find on average a £1,800 deposit and that outside of London the figure is £1,100. Add to that one month’s rent and a week’s holding deposit, and people are looking at needing £3,750 just to secure a property in London and £2,290 elsewhere. That is a huge amount to save.

Wages are not keeping pace with rents and many people struggle to afford a decent place to live. Most low-paid workers are women. Will they be more disadvantaged by these measures than men, and what about those with disabilities, from black and minority ethnic communities or the lesbian, gay, bisexual and transgender community? The Government have not undertaken a formal equalities assessment of the Bill. Will the Minister explain why and commit to ensuring that an assessment of the proposals is undertaken before the Committee stage? There has been an informal but not a formal process on this matter.

As I said earlier, none of the measures in the Bill will matter without their ability to be enforced. There is direction in the Bill for responsibility to lie with local authorities and their trading standards teams. The Minister will be aware that trading standards teams are currently responsible for checking on age-restricted products, agriculture, animal health and welfare, fair trading, food and hygiene standards, counterfeiting, product safety and weights and measures, and they do this despite having endured a drop in funding from £213 million in 2010 to £124 million in 2016 and a halving of their staffing capability—more in some areas.

The Chartered Trading Standards Institute has previously expressed its concern that the public are being let down in respect of its current areas of responsibility, let alone additional responsibilities—particularly ones that will not pay for themselves through the imposition of fines, which are limited to a maximum of £30,000, whose rules are not enforceable because the drafting provides too much scope for interpretation and for which the Government only plan to provide guidance rather than issue regulation to support tenants and those seeking to enforce the measures in the Bill.

Those in the private rental sector are in desperate need of clear and positive action from the Government to protect their rights. I hope we will see a strengthening of resolve from the Government as the Bill goes forward. They must not miss the opportunity to make a good Bill a great Bill, and I urge them to take this chance to make real changes that could improve this sector of our country’s housing market.

[Several hon. Members rose—]

Tenant Fees Bill (First sitting)

Melanie Onn Excerpts

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

[The Chair]

Thank you. We will now move to questions from members of the Committee. This is a rather unusual situation because this is a time when the Minister is allowed to have some fun and to ask you questions. Let us start with the shadow Minister.

[Melanie Onn (Great Grimsby) (Lab)]

Q Thank you, Mr Bone. I wonder if I could get your views on the ban on tenant fees in Scotland. Obviously, there was a revision to the 1984 ban on tenant fees in 2012, and I would like your views on what that did to the sector.

David Cox: As you pointed out, tenant fees were technically banned in Scotland in 1984, but the legislation was not well drafted and it therefore required revision in 2012. It meant that tenant fees in Scotland between 1984 and 2012 were generally lower than they are in England, at around the £50 or £60 mark.

Various organisations have done research into this, and I would point to the Scottish Government’s own statistics, which suggest that in the 12 months after the ban came into force, rents in Scotland went up by 4.2%. Against that, the English housing survey suggests that rents in England went down by 0.7%. There was, therefore, a 5% difference—well, 4.9% to be specific—between rents in England and Scotland during that period. That is not based on our statistics; that is based on official statistics from the Westminster and Scottish Governments.

I do not suggest that the whole 5% is attributed to tenant fees, but a good proportion of it will be. That is a good example based on official Government statistics that show what is likely to happen. That is why in the impact assessment the Government have accepted that rents are likely to go up, and when this measure was announced in the autumn statement, the Office for Budget Responsibility said that rents will go up as a result. I am fairly sure that everybody who gave evidence to the Select Committee in the pre-legislative phase said that rents will go up as a result.

[Melanie Onn]

Q What did that mean in cash terms, and what do you make of Shelter’s 2014 report that said that the market had improved, and that that was one of the reasons why?

David Cox: I am afraid I only have percentages; I do not have that figure in actual cash terms. On Shelter’s report, I draw your attention to the then Communities and Local Government Committee’s eighth report of the 2014-15 Session. It noted that the Committee had concerns about the methodological approaches adopted, and the sample used in that report equates to 29 letting agent managers surveyed. Its conclusion was that the information was inconclusive based on the small sample size. I would probably agree with that determination, and that is why I prefer to use the Scottish Government’s statistics, which come from a much broader sample base.

[Melanie Onn]

Q Do the other panel members agree with that assessment? Is there anything different that you want to add to that?

Isobel Thomson: No, I do not have any details other than what David has already said.

[Melanie Onn]

Q Mr Cox and Ms Thomson, you both mentioned enforcement. Why do you think financial penalties have not been issued on the scale that you referenced in your opening statements?

Isobel Thomson: I think there is a lack of resources—I think the will is there to do it, but there is a lack of resources. Because of that, as an organisation, we produce an enforcement toolkit for trading standards officers to use to assist them in their work. Although, of course, we were, and are, happy to do that work, we think that they should have the resources themselves to produce such documentation.

David Cox: I agree with everything Isobel just said. If I may, I will add two quick anecdotes. First, not long after the fee transparency rules came into force, I was on BBC Radio 4’s “You and Yours” programme with the head of the Chartered Trading Standards Institute, discussing their enforcement. The gentleman said on air, “Our budgets have been slashed, and we are reducing trading standards offices around the country. Would you prefer us to enforce against children’s toys that are dangerous and choking children, or to check whether tenant fees are being correctly displayed?” With the best will in the world, live on air, I could not say tenant fees.

The other example is of agents up and down the country coming to me and ARLA on a regular basis to tell us about agents that are not displaying their fees correctly. We notify the local trading standards departments, and we get nothing back. As an example, just before Christmas, I notified a trading standards department in the north-west of the country of 13 agents in its area. We provided the evidence that it needed. We got a “Thank you. We will reply within 30 days” email and then nothing. That was five months ago. We are doing the most we can.

That is why we are very supportive of the lead enforcement authority, because ARLA’s sister organisation on the sales side, the National Association of Estate Agents, has the national trading standards estate agency team, so we can feed all the intelligence across the country into one body, which can disseminate it more effectively and forcefully than we can to the local trading standards and environmental health department. We hope that the lead enforcement authority under the Tenant Fees Bill will have a similar impact on the letting side.

[Melanie Onn]

Q The intention of the Bill is that it will be cost-neutral and that fines will cover the cost of any enforcement activity. Do you think that fines set at the level indicated in the Bill will manage to do that, given that fines for non-display are £5,000 at the moment?

Isobel Thomson: They may do ultimately, but there will need to be an accumulated number of fines applied to meet the cost of running the service. They need a pot of money to kick-start the lead enforcement authority, and they need it quickly, because in the Bill there is great reliance on the guidance that they will give to consumers. They need to scale up and be ready, but we have not had any indication yet of when that will happen.

David Cox: I agree entirely. Possibly, in years two or three and beyond, they will, once they have the teams up and running, going out and doing the enforcement. But if they do not have any of the seed funding across board and even in the trading standards department to resource the team in the first place to start going out and doing the enforcement, they will never get to that point where they can start to self-fund. It needs that initial seed funding. There is money set aside for seed funding, but I do not think it will be enough at this point in time.

[Melanie Onn]

Q One final point and then I will be quiet. You said that between 1984 and 2012 tenant fees were lower in Scotland. Why do you think the industry in England did not follow the lead of Scotland and reduce tenant fees during that period?

David Cox: Scotland and England are different markets. Rents and house prices are much lower across the board in Scotland. Rents follow house prices. The costs incurred are different, based on employment costs, office costs and the general nature of the business. Our research suggests that tenant fees in London are more expensive than they are outside London, to take into account the increased costs of running businesses in the capital, compared with the costs of running businesses outside the capital. Scotland is cheaper than England.

[The Chair]

Q Mr Hyslop, do you want to add anything to that?

Adam Hyslop: To loop back to the previous point on enforcement, I would add that one of the great things that, hopefully, the Bill will bring through is the ability to self-enforce better. Currently, there is legislation that was designed to promote transparency and to make sure that tenants are aware of what fees will be charged, without seeking to limit those. That has not been totally successful, partly because it is quite difficult for a tenant to prove whether they were shown those fees and whether they were made clear to them. It is a somewhat abstract concept whether they were aware of the fees before they were asked to pay them at a later point in the process.

The good thing about a clearer and higher-level fee ban is that a tenant paying money is a far more provable event. A tenant can get to that point in the process and then simply refuse to pay the fee if it is presented to them. Even if they get past that phase and they were not aware that they were being charged a fee illegally, it is then easier to prove that they did pay a fee and to unwind that. I feel that self-enforcement is far easier with the legislation being proposed than with the current set-up.

--- Later in debate ---

[The Chair]

Q We will now hear oral evidence from the National Landlords Association and the Residential Landlords Association. We only have until 10.55 for this session. Gentlemen, would you introduce yourselves and, to speed things up, perhaps make an opening statement at the same time?

Richard Lambert: I am Richard Lambert, chief executive officer of the National Landlords Association. Briefly, we are aware of the growth of these charges to tenants by agents over the past 10 to 15 years. We are aware that that has been exploited to some extent, so we see a wide variation. Some of those fees have, frankly, reached egregious levels. We are also increasingly aware that agents double-charge landlords and tenants possibly for the same services. We agree that the Bill goes a long way to dealing with the issues that have emerged.

We think it is important for the Committee to remember that you are legislating to deal with the activities, in the end, of a small minority, but that the legislation will impact the entire industry; and that you are also legislating without having had a chance to evaluate some of the measures that have been brought in over the past couple of years, to see the full extent of the impact that they might have on the industry as things go through.

In terms of the impact on landlords, as David Cox has explained clearly, the client relationship in the future will be unambiguous: the agent will owe a duty to the landlord through the contract.

We have no doubt that the costs to landlords will increase. Agents will certainly try and pass on part of the fee that they have charged to tenants to landlords. We do not believe it is going to be possible for them to move all those charges from the tenant to the landlord, but landlords will certainly have to absorb some of those and, like any other business, they will attempt to respond to an increase in costs by maintaining their profit margins by increasing the price. So, there will be some increase in rents, but how much that happens will depend very much on the market, and that will depend very much indeed on the locality and the situation there.

I think both landlords and agents will have to absorb some degree of that cost. As a result of agents charging landlords more, we expect that there will be more competition. That competition could be in terms of the quality of service, as agents try to retain and increase their client list by providing better value for money; but we could also see that competition emerge in terms of fees, in that agents will try and attract landlords by charging lower and lower fees. We are already advising our members to keep a firm eye on the level of service they are being offered and to make sure that the level of service they are being offered is what is delivered and that it relates to some of their other needs. For example, the number of inspections they are being offered each year by their agent should correspond to that which is required under their insurance contracts.

Undoubtedly, there will be more self-management. Landlords will look at the fees they are being charged and consider whether they should be managing themselves. We have some evidence from some of our surveys that people are increasingly thinking in that direction. Ultimately, as was also made clear in the previous session, the key is enforcement. There are many issues across the private rented sector where we have the legislation in place but there just are not the resources to enforce it, so we need to ensure the surety and certainty of enforcement to make sure that what is in this legislation—and, indeed, in all other legislation across the sector—actually sticks.

David Smith: I am David Smith, the policy director for the Residential Landlords Association. We also have some concerns about the Bill. Clearly, there has been a situation where some agents charge egregious fees, but as Richard rightly said, they are the minority, not the majority. We do not think the Government have done enough with the Consumer Rights Act 2015; there were powers to make regulations under the Act to increase transparency around fees, which were not taken up.

We are very concerned about enforcement. Enforcement under the Consumer Rights Act has been what I would generously call patchy—I have used other terms in other places—and we do not think that enforcement is going to be sufficient. In fact, enforcement provisions in the Bill are a bit of a mess, and we think that is likely to lead to poor enforcement and make the Bill ineffective. I think there is a very high risk that the Bill in fact will not achieve any effect at all, because there will be insufficient enforcement against the bad agents who are already charging the excessive fees and will carry on doing so, and in some cases people will find ways to work around the Bill, as they already have in Scotland to some extent.

We are also concerned that there is a missed opportunity here. Our view is that the biggest cost for tenants is not the fee they have to pay when they move, but the fact that they have to have two tenancy deposits—one for the outgoing property and one for the incoming property. We have advocated on a number of occasions for legislation to be passed to change that dynamic and to rethink the way we use tenancy deposits—to find some way of making tenancy deposits cross over from tenancy to tenancy, to avoid a scenario where tenants are actually having to pay two deposits.

There are no circumstances in which a fee is ever going to be as high as six weeks’ rent. Therefore, the tenancy deposit is always the actual controlling factor in terms of how much tenants have to pay.

[Melanie Onn]

Q Do you think that it is about enforcement, or is it about deterrence? Fines are set at around £5,000. Do you think that is enough of a deterrent? Do you think that if those fines were sufficiently high to worry the small number of rogue landlords, we would not have to worry so much about the enforcement side?

David Smith: The Consumer Rights Act has a £5,000 deterrent penalty, which clearly—presumably—has not worked, because otherwise, we would not be having this discussion at all. I endorse the National Approved Letting Scheme’s study from last year that shows that very, very few penalties have been levied. What is particularly interesting, which Isobel did not mention, is that even fewer of those penalties have actually been collected. Not only are people not levying very many penalties, but in many cases when they levy them, they are never in fact paid anyway. So, I do not see much deterrence there. Local authority officers have told me anecdotally of situations where they have levied penalties and people have said, “Yeah, fine. Send me a £5,000 penalty and I’ll pay it. It doesn’t make any difference to me.”

The structure is also a bit nonsensical. There is a certain situation where the Bill states that it is an offence to charge a prohibited fee, but it is only an offence if I have already sent you a £5,000 penalty notice and then catch you at it again. From a practical point of view—a trading standards officer point of view—they will have to do the whole thing twice to get a prosecution. The Bill also creates a system whereby we can ban agents under the new banning order provisions in the Housing and Planning Act 2016, but the reality is that banning is very unlikely to occur on a first offence, so you are going to have to get two prosecutions, which means you are going to have to catch somebody four times and prove a case against them before you can move to banning them. If prohibited tenant fees are an offence, then they should be an offence and they should be treated as an offence; they should not be an offence with some codicil on the front that says, “You can pay a little bit of money for it not to be an offence.” That does not make sense.

[Melanie Onn]

Q Mr Lambert, would you agree with that?

Richard Lambert: Absolutely. I think the level of penalty is a deterrent to the law-abiding because it ensures that they will not slide into error, but for the people who are breaking the law and who factor it in as part of the cost of business, it will not matter at all, because the lack of enforcement means that they will assume that most of the time they can get away with it, and on the occasions that they cannot, it is simply a cost of doing business.

David Smith: There is a significant level of ignorance, as well. We should not ignore the fact that not all agents are bad in the sense of being evil; many of them are bad in the sense of just being fairly incompetent. While there is a significant percentage of highly professional and highly skilled agents, there is a minority of agents who I would not apply those words to.

[Melanie Onn]

Q Do you think it is right that tenants in England should pay more than tenants in Scotland?

David Smith: It depends what you mean by “pay more”. Do you mean pay more for rent or for fees?

[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.

Tenant Fees Bill (Second sitting)

Melanie Onn Excerpts

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

[The Chair]

Members will now ask you questions. I should point out that this is a very unusual Committee, in that the Minister gets to have some fun and ask you questions, which will probably happen towards the end.

[Melanie Onn (Great Grimsby) (Lab)]

Q 56 Welcome, and thank you for taking the time to be with us this morning. Alex, you touched on some of the challenges that trading standards currently faces within the tenant sector and with the regime. Will you expand on that a little, please?

Alex McKeown: One of the biggest issues is funding—I am sure that has been said many times, and Councillor Blackburn will say the same. There is a lack of expertise within trading standards when it comes to legislation that relates to letting agents. At the moment, not many boroughs or authorities are enforcing the legislation.

I watched Isobel Thomson and David Cox give evidence on Tuesday. Isobel did a survey last year of 42 boroughs to see who had issued financial penalties, and only 7% had done so—and I have worked for four of those. I am the person issuing them, so I know the pitfalls and issues with the current legislation. I have made the mistakes, but I have also achieved quite a lot in what I have done. My knowledge is very different because I do this every day. This is what I do 100% of the time—dealing with this legislation—whereas most trading standards authorities have more than 250 pieces of legislation that they have to deal with. So there needs to be more expertise; there needs to be more funding in order to train trading standards to enforce this legislation.

[Melanie Onn]

Q Explicitly in terms of what could be done to improve the Bill, you have mentioned funding and training. Is there anything else?

Alex McKeown: Do you want a specific on something?

[Melanie Onn]

Yes.

Alex McKeown: Something that I have picked up on is that, at the moment under the Consumer Rights Act 2015 and the redress scheme legislation, the burden of proof is on the balance of probabilities, in terms of issuing these financial penalties. What you are trying to say is that this is going to be self-funding, and at the moment with the Consumer Rights Act 2015 that has the ability to be self-funding, because all we have to do is look at a website and we can see whether it is displaying the correct information or not. It is easy—we have to prove it on the balance of probabilities, we download the website and we have the proof.

In this Bill, you are asking for a criminal burden of proof for a civil financial penalty, and that is going to scare people off; that is going to scare trading standards off. They are not going to want to prove beyond all reasonable doubt that a tenant has been charged a fee. Then, you are also relying on the complaints to trading standards. We do not get that level of complaints to trading standards in relation to tenancies. Then you have to tell the tenant, “You have to give a witness statement on the fact that you’ve been charged a fee”, and they are going to say, “But we might get thrown out of our house. We don’t want to give you a witness statement.” To have it beyond all reasonable doubt, we are going to be up against it, and it will not be self-funding.

[Melanie Onn]

Q Councillor Blackburn, in terms of the specifics in the Bill, what do you think could be strengthened or improved that would actually assist in delivering the Bill and doing what it sets out to do?

Councillor Blackburn: We need to be clear that national trading standards is responsible for appointing a lead authority in terms of enforcement, because that is very important in directing and co-ordinating action. Their current partner—their current lead agency—is a Welsh local authority in relation to housing matters and, of course, because this Bill affects only England, it will not be possible simply to ask that authority to absorb that.

However, finance is also an issue. At the moment, £500,000 is promised to assist in the up-front costs of setting these schemes up. The average local authority trading standards budget is £671,000 a year, so that £500,000 spread across 340 local authorities is unlikely to fill the gap that exists. That is extremely important.

There is also a capacity-building issue within the trading standards profession. As it is, 64% of trading standards authorities are reporting that they have difficulties in recruiting and retaining people, and that issue needs to be looked at nationally. The LGA stands ready to assist in that process and will work with the Chartered Trading Standards Institute, but there is a demographic time bomb in there as well, about the average age of trading standards officers. As councils have cut back on trading standards because of the overall financial pressures on local authorities, it is not seen as a long-term, safe career, if I can put it that way.

[The Chair]

I am going to let the Minister have a go now.

--- Later in debate ---

[Rishi Sunak]

I can wait until the end.

[Melanie Onn]

I would like to come in.

[The Chair]

In that case, shadow Minister, you may.

[Melanie Onn]

Q What you said about the fines is timely. I had just written down a note to ask about the limits of the £5,000 fine. We are concentrating quite a lot on the enforcement side, but there is also the element that it is intended to be a deterrent. You clearly do not think that £5,000 is a deterrent.

Alex McKeown: No. At the moment the rogue agents just fold their companies and re-phoenix, or they simply do not pay. There was a case in Redbridge a few years ago. A rogue letting agent was issued with a £5,000 fine by the local authority three times and they carried on trading. They said, “We are not going to pay it and there is nothing you can do.” Obviously, there are criminal sanctions under the Consumer Protection from Unfair Trading Regulations 2008, but when it comes to the fines, the agent continued to trade. They were featured on the Channel 5 programme, but they continued to trade. So the fine is not enough of a deterrent because, ultimately, they just folded their company and the directors walked away.

[Helen Hayes (Dulwich and West Norwood) (Lab)]

Q I want to revisit the issue of confidence and how protection can be given to tenants to come forward. When the Housing, Communities and Local Government Committee conducted pre-legislative scrutiny of the Bill, we had evidence of the very low expectations of tenants. The quality of accommodation in certain parts of the sector is poor. They are often very vulnerable people and they are proactively told, “This is as good as you can expect and this is what the standard is,” which is combined with the vulnerability inherent in the landlord-tenant relationship and people’s fear of losing their homes. That was reinforced when we went out with Newham Council to do enforcement visits under its selective licensing scheme, and we met tenants who were living in properties that were clearly not fit for purpose and in breach of regulations, but they were told that was fine.

The Bill mentions the need for effective communication with tenants about their rights. We know that the retaliatory eviction legislation is not working and not functioning. How do we get to a framework of protection for tenants that ensures people are sufficiently aware of their rights and also confident enough to come forward and report breaches so that the agents and landlords responsible for those breaches can be put out of business?

Alex McKeown: That is quite a difficult one. The tenants are always going to be scared of being thrown out because so many letting agents do not care about illegal evictions. Again, the housing teams are under so much pressure that they cannot take action when there is an illegal eviction and someone is locked out of their house and loses everything. I go back to having fines against directors as a deterrent and then the criminal sanctions further down the line. Money is always a deterrent to people. They prefer not to pay. They would prefer to have a company criminal record than pay out £30,000. As my colleague says, criminal prosecutions are expensive. It is down to resources, again. What we have often found with the criminal prosecutions is that even with some of the safety aspects, the fine will be £2,000, so we might as well go for the civil penalty—but it is difficult protecting those vulnerable tenants.

Councillor Blackburn: Perhaps I may briefly reflect on our experience in Blackpool of having a very high-profile scheme of selective and additional licensing, working with the local media, and using our own communications channels to get across to people exactly what the council are doing—taking journalists and other interested parties out with us, as has clearly been done in Newham, to see exactly what happens. That has had twin effects. It has raised awareness among tenants that the council is involved and is on their side rather than the side of the landlord. It has also had the effect of some of the worst landlords and letting agents deciding that it is easier for them to go and do business elsewhere. Again, on the awareness-raising side, I think there is a great deal we can do to communicate the fact that “The Government and your local council are on your side here, but you need to take us into your confidence and trust us.”

Alex McKeown: I will just add this: we have all mentioned HMO licensing, selective licensing and additional licensing. I started dealing with letting agents in Newham, so I am well versed in licensing, and I think it works very well in areas with a high percentage of rogue agents, because they will not get the licence, and there is that way forward.

The other thing I will mention is clause 12, which says that trading standards will assist tenants to get their prohibited fees back. As to the likelihood of that happening—it just is not likely. That is one of the problems. However, the Housing, Communities and Local Government Committee report refers in paragraph 99 to tenants being able to go to the first-tier tribunal. What I think would encourage tenants to complain to trading standards and give us statements would be if we could serve our penalty charge notices and, a bit like in a criminal prosecution, add the compensation order for the tenant to our case in the tribunal, rather than saying, “We are going to go to the tribunal with our penalty charges”—and then we have to start a new action in the county court.

It seems disjointed. If we can say to the tenants, “We will get your money back. We are going to deal with this. We will put it into our case, so it all goes into the same tribunal hearing,” I think that will work better. I think that will assist vulnerable tenants a lot more.

[The Chair]

I am jumping in, because I can see we are going to run out of time. I know the Minister is chomping at the bit to have some fun with you, but I am sorry, Ms McKeown, I am going to have to go to the shadow Minister.

[Melanie Onn]

Q I will be brief. I wanted to ask about holding deposits and whether you think that the phrase “reasonably entitled” is sufficient to make it possible to enforce the provision. Do you think that removing the criminal offence from the original draft Bill, following the Government’s response to the Select Committee, was the right decision? Finally, under clause 21, what will be the effect of moving the enforcement of client money protection schemes in non-unitary areas from district to county council level?

[The Chair]

As briefly as possible, please.

Alex McKeown: I did not look at the holding deposits, I admit, so I cannot answer on the holding deposit aspect and the removal of the criminal sanction on that. You asked about client money protection.

[Melanie Onn]

Yes, in terms of moving enforcement of client money protection schemes from district councils to county councils—it is probably a question for Councillor Blackburn.

Councillor Blackburn: There needs to be substantial flexibility in there. As Mr Goodwill commented before, in large counties, the number of cases that will be dealt with in one small district council could hugely outweigh all the other cases that are dealt with across the rest of the county council. There need to be options for local authorities to work together, if they so wish, or to appoint one lead authority—perhaps one district council in a county council, or the county council itself. There is not a one-size-fits-all answer to that question, because the way in which local authorities operate and the amount of expertise differ so much.

[The Chair]

I am sorry; it is very frustrating that we have such little time, but the Minister has been very patient.

--- Later in debate ---

[The Chair]

Thank you. We will shortly move to questions from Members. This is a very important part of the Committee system, because it allows Members to be better informed before going into the line-by-line examination of the Bill, which they will start this afternoon. It also gives the Minister the opportunity to put some concerns to you as well. We will start with the shadow Minister.

[Melanie Onn]

Q Thank you, Mr Bone. Could you go into a little bit more detail about your concerns over the description of default fees? What specifically concerns you about what is in the Bill?

Rhea Newman: We accept the principle that there may be certain circumstances in which a tenant should cover the cost of a default, but we want to ensure that there are sufficient protections in the Bill to ensure that, first, this is part of a fair term in a tenancy agreement, and secondly, tenants cover only the actual cost of the default. We welcome that the Government, as a result of the pre-legislative scrutiny, have already tightened the definition to limit payment in the event of a default to the landlord’s loss.

However, we think that that needs to be tightened further, so that the payment covers only the landlord’s reasonable and proportionate loss, because what could be included in loss is currently too broad. We do not think that landlords’ and agents’ business costs, which could include their time, should be factored into that, and we also think that charges for things like sending letters or making phone calls to chase late rent are unfair. Tenants chasing a landlord to fulfil their obligations cannot charge for every communication they send, so we think that there should be parity in those principles.

We think that that definition needs to be tightened further. We also think that, through regulations, the Government could set out clearly the types of things that are allowed to be charged for as a default fee, and impose a requirement on landlords and agents to produce evidence of their costs when trying to charge a default fee. That should be shown to a tenant up front, which would make it easier for them to challenge if anything looks unfair.

The Government are currently proposing to produce non-statutory guidance. We do not think that that will be strong enough, because it will not be binding on landlords and letting agents. Putting it in regulations will make it easier for tenants to challenge and strengthen the hand of trading standards when trying to enforce the Bill.

Katie Martin: I support everything that the witness from Shelter has said. The only thing I would add is that we have seen attempts to use guidance for enforcement in other sectors. For example, in the energy sector, Ofgem introduced guidance around back-billing. That was found to be ineffective, so it had to introduce rules around that. That is also true of council tax debt collection practices. There are other examples of guidance not being followed, which has then required stronger measures. We think that that should be pre-empted and that it should be written into the proposed legislation at this point.

Dan Wilson Craw: I agree with what has been said. I am particularly worried that challenging default fees that are unfair or that relate to unfair terms in a contract will be very difficult for the tenant. Because it is not clear cut, trading standards might not devote resources to investigating it, so we think something stronger than guidance is necessary.

Izzy Lenga: We need a bit more clarity on the reasonableness of charges. There is an issue for students in particular around garden maintenance. There is quite a big disparity as to whether the cost would be just for a gardener or for a whole landscape change. That difference can be a massive cost and that needs a lot more clarity. Anecdotally, I remember that when I was a student we spent two days just plucking weeds out of my garden, because we did not know what we were meant to do and what the cost could be. That clarity would help students a fair bit.

[Melanie Onn]

Q I think it was Shelter that said it welcomed the ban on up-front fees, but it is not quite the case that the Bill bans all up-front fees. There is still a requirement for a holding deposit and the cost of the deposit. On Tuesday, we heard some evidence that highlighted the issue of the dual deposit situation where, if you are in one tenancy and you have paid your deposit, and then you are seeking to move and you have to find a deposit for your next place, you are out of pocket by two deposits and you need to find a holding deposit. The Bill does not entirely deal with that, and I wonder what your view is on how much of a barrier that is for people.

Dan Wilson Craw: We think it is quite a big barrier. We have done some work and we published a report in March on tenancy deposits. The average deposit is about £1,000, and you have to find that as well as the current £400 average letting fee. The majority of tenants will get their deposit back in a number of weeks, but only after they have moved out of their current place and into their new place so, as you say, they are out of pocket. One of our proposals was to passport deposits or to enable a portion of the deposit to be passported from the first tenancy to the next one. The Residential Landlords Association is looking at that as well. This Bill is a great opportunity to explore that in further detail.

Rhea Newman: We support what Dan said about up-front costs: they are a significant barrier for tenants. In our most recent private rented survey, moving costs were about £1,400 on average, and for those who paid letting fees, the average fee was about £250. We regularly hear from our advisers across the country about what a challenge those up-front costs pose for people who are trying to secure a new tenancy, particularly lots of tenants we support who might be on lower incomes.

There is a distinction to be made between what we are referring to as up-front fees that are non-refundable and the refundable bits in the Bill, which are the holding deposit and the security deposit. We support proposals around deposit passporting and that is an area that certainly merits further attention, but it is perhaps beyond the scope of the Bill. Our priority for the Bill is to ensure that the existing provisions are clear and enforceable so it can have the maximum impact for tenants. There is further work to do on other up-front costs, as Dan highlighted.

Katie Martin: Clearly, up-front costs, whether they are refundable or not, are a big barrier for people who are moving within the private rented sector or entering it. We would like that to be tackled. If the cap on the deposit was brought down to four weeks, as we recommend, that would help in respect of dual deposits as well.

Izzy Lenga: I echo my fellow panellists. Our priority campaign this year at the NUS is “Poverty Commission”. We know that students are really struggling with money and are having to work two or three jobs to find where their next month’s rent will come from, on top of their studies and any extracurricular activities. Such things place an added burden and stress on people that in turn can have an impact on their mental health, their ability to study and so on. It affects students financially, but also academically and in their whole welfare.

[Melanie Onn]

Q I have two more questions. Can you tell me about specific challenges for students when it comes to renting and what their general experience is?

Izzy Lenga: A specific challenge is definitely affordability. That is a massive challenge that students face. As I mentioned earlier, the fact that students are too often living in poverty and do not know where their next month’s rent will come from really affects them.

Students often do not know their rights as tenants. That is something that we really try to train them up on. The NUS runs a “Ready to Rent” scheme and encourages student unions to do the same. Landlords often take advantage of the fact that a lot of students are first-time renters, so it might be their first time looking over a contract, for example. There is also the question of the effect on students who are estranged or do not have the necessary documents, such as a passport, and on working- class students who have lived in social housing their whole life and whose families have not filled in contracts and stuff like that for housing.

Those are big things. Another is that the quality of housing for students just is not up to par. People joke, “It’s student accommodation—it’s meant to be damp and in squalor.” We did a report this year about fuel poverty. Students are living in increasing fuel poverty and just cannot afford to heat their own homes, because of the price and because they do not know they can change energy supplier. Things like that are the key issues for students with renting at the moment.

[Melanie Onn]

Q My final question is, how will enforcement work in practice? I would like to get a flavour of how it currently works and what people need to be able effectively to enforce their rights, if that is possible.

Dan Wilson Craw: Do you mean in terms of the general quality of housing?

[Melanie Onn]

Under the Bill, how will people be able to enforce the rights they are being offered in the context of housing legislation as it exists at the moment?

Dan Wilson Craw: A tenant has two options apart from simply saying to the agent, “This fee is unfair.” The tenant can say, “If you don’t retract it, we’ll report you to the council,” or, “We’ll take you to the first-tier tribunal.” Those are the two options they have, in essence. The tenant can go to the council’s trading standards or to another authority and rely on officers to carry out an investigation, or take it upon themselves to make an application to the first-tier tribunal. We need that back-up process, but all a tenant can get through that process is the fee back, so we think there is merit in awarding a higher form of compensation to a tenant who goes through that process. That would create more of a deterrent for an operator who charges an illegal fee, it would potentially save the council work, and it would give the tenant something back for the effort they put in.

Rhea Newman: Enforcement starts with having a really clear ban in the first place. The clearer the ban is up front in terms of all the different provisions—for default fees and refunding holding deposits, and the ban on up-front fees—the easier it will be for landlords and agents to know what they can charge and for tenants to know what they should pay. When the Bill comes into force, there will need to be clear communication to all parties, so that it is very clear what should be charged and what should be paid.

Once the Bill comes into force, it may be quite difficult for a tenant to challenge an unfair fee charged by an agent during a tenancy. That is one of our concerns about default fees. There is concern among tenants, who do not want to raise issues with the landlord during a tenancy for fear that they might face a retaliatory rent increase or eviction. There are problems with challenging unfair fees once you are in a tenancy.

We have concerns that few tenants will use the option to go to the first-tier tribunal. Citizens Advice has done some research about how likely tenants are to take formal routes of redress, such as going to court, for disrepair issues. We know that few tenants will use that option, but it is important that it works as well as possible for those who can be supported to use it. I know you heard from local authorities this morning. I am sure they made the point about ensuring they are sufficiently resourced to enforce the ban. That will be a key part of it.

I come back to the point that the clearer the ban is in the first place, the easier it will be for all to enforce it. The evidence from Scotland really points to that. The reason the ban needed to be clarified in Scotland in 2012 was that the provisions were not clear in the first place. Even after 2012, Shelter Scotland has been running a campaign to help people to reclaim their fees. That just highlights how important it is to get it right in the first place.

Katie Martin: We think that it is really important to get enforcement right. We are concerned about the reliance on trading standards in terms of resourcing and the willingness of authorities to take action. We think the market is very much skewed in favour of landlords and agents, and that tenants actually have very weak bargaining power. As we have pointed out, tenants feel like they are intimidated and do not want to take action against their landlord for fear of retaliation.

We very much support the Government’s moves to introduce mandatory redress membership and we want that to happen as soon as possible, but we do not think that that will fix all the problems. We think that trading standards needs to be adequately resourced. We need to make sure that the requirements in the legislation are really clearly set out so that we hopefully do not get to the point where we have to resort to this kind of redress, but if that happens, it has to be adequately resourced and tenants need to be supported.

[Mr Goodwill]

Q In the opening comments from Citizens Advice, we heard that a four-week deposit was preferable to a six-week one on the grounds of affordability, but in a previous evidence session, we heard from the landlords that where there is a four-week deposit, often the departing tenant will just not pay the last month’s rent in the knowledge that the landlord will then take the deposit to cover that rent. There is then nothing left to cover any damage or any other problems, so they were very much of the view that a six-week deposit would prevent that from happening. In the experience of the panel, is that something that happens quite a lot and would a six-week deposit be preferable for that reason?

Katie Martin: We have done some research on this. Our most recent research found that currently only 2% use their security deposit as their last month’s rent, and 34% have a deposit of four weeks, so it does not stack up as an argument for us. We think the benefits of bringing it down to four weeks would far outweigh the risks.

Tenant Fees Bill (Third sitting)

Melanie Onn Excerpts

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

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I welcome all Committee members to the first of our line-by-line sessions. I hope that we make constructive and speedy progress through the various amendments and clauses.

The purpose of clause 1 is to ban landlords from charging any letting fees to tenants or other relevant people in connection with a residential tenancy in England, which very much achieves the overall aim of the Bill. In addition, the clause provides that landlords must not require a tenant to take out a loan in connection with a tenancy. Our approach to implementing this policy is to ban all fees, with the exception of certain permitted payments outlined in schedule 1, which we will no doubt discuss later.

The clause also provides that a landlord must not require a tenant to procure and pay for insurance or the services of a third party in connection with a tenancy, with the exception of utilities and communications services. That prevents landlords from circumventing the ban and charging fees by other means.

[Melanie Onn (Great Grimsby) (Lab)]

What does the Minister think about the terms of utilities and communications contracts that tenants may be entered into?

[Rishi Sunak]

Relatively straightforwardly, if a landlord has a utility arrangement in his or her name, as is common, it may be more sensible for the contract to stay in the name of the landlord but for the payments to be made by the tenant. That is what the clause refers to. That is reasonably common—indeed, it is accepted practice—and it is important that the Bill allows for it, as it is often cheaper and easier for all parties concerned for that to happen than for the name of the owner of the contract to be changed.

[Melanie Onn]

Does the Minister have any evidence that that is cheaper?

[Rishi Sunak]

As I am sure Committee members know, it is common for there to be hassle, time and cost involved in changing providers between people. I have personal experience of doing so for a satellite service and of adding my wife’s name to something. Those things can sometimes take time, and it is easier for all parties if they stay in the name of the landlord, with an agreement between parties that the tenant pays for the services as they are incurred. Indeed, it is common, generally accepted practice for the tenant to be obliged to pay for their use of such utilities as electricity or gas, as measured by inspection of the gas meters. That is what is allowed for under the clause.

[Rishi Sunak]

That is a separate question between a landlord and tenant in any rental contract. The clause deals with the question of payment. It is important, if the Government are attempting to ban payments being charged to tenants, to note that there are certain exceptions. The clause captures the fact that, on occasion, tenants will continue to pay for the utilities they consume, and that that should not be captured by a ban on fees. It would obviously not be right for tenants to use electricity and gas without the landlord being able to make an appropriate charge for them, if that was how things were arranged.

In the Bill, the phrase

“in connection with a tenancy”

is defined deliberately widely. Requirements in consideration of the

“grant, renewal, continuance, variation, assignment, novation or termination”

of a tenancy that are included in the terms of the tenancy are all covered. That is to ensure that fees cannot be charged at any point during the tenancy, including upon exit. That addresses the concerns raised during pre-legislative scrutiny that the previous drafting, banning fees that were a condition of a grant in renewing or continuing a tenancy, might still allow fees to be charged at the end of a tenancy. That would have been contrary to the policy intention.

Landlords also cannot require outgoing tenants to pay for a reference, in the same way as employers do not charge their employees for a reference today. The clause also applies to a person acting on behalf of a tenant, and a person guaranteeing a tenant’s rent. Tenants and such persons are referred to as “relevant persons”. The clause is one of the principal clauses in the Bill, and as such I beg to move that it stands part of the Bill.

[Melanie Onn]

It is a pleasure to serve under your chairmanship this afternoon, Mr Sharma, and to join the Minister in debating a Bill in our present roles for the first time. I am sure that it will be a suitably memorable occasion.

The private rented sector is the fastest growing sector of the housing market. The number of private renters is predicted to grow by 24% by 2021, which means that one in four households will be renting rather than in owner occupation in three years, according to a report on the PropertyWire website last June. PropertyWire says that property rental

“has doubled in the last 10 years or so, and it is expected to continue to grow to 5.79 million households while 68% of renters still expect to be living in the rental sector in three years’ time, according to the latest tenant survey from real estate firm Knight Frank.”

PropertyWire also says:

“The report says that growth of the PRS has been spurred by conditions both in the housing and labour markets. Younger workers especially are taking advantage of the increased flexibility of renting as a tenure which allows moving between locations without any of the costs associated with buying or selling a property.”

It is clear, therefore, that far from being a nation of homeowners, we are shifting towards being a nation of renters, with about 4.7 million people renting their homes—some by choice, and some because there is no other choice. We must make absolutely sure that regulation of the sector is fit for purpose in the 21st century.

[Daniel Zeichner (Cambridge) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma. The future that my hon. Friend describes has already come to pass in many parts of the country. At least a quarter of properties in Cambridge are now in the private rented sector. The Bill is welcome in many ways, but I worry that it will not necessarily keep up with the changing business models emerging in many places. There is a tendency for landlords to find new and imaginative solutions. Does my hon. Friend worry, as I do, that some internet platforms and so on could provide avenues for people to get around the Bill?

[Melanie Onn]

That is an important point in considering the sector, which I will deal with later in my comments.

The Minister must be alive to ensuring that the Bill is future-proofed. We have heard evidence this week about online providers of landlord services who offer a much more flexible service to their clients—very different from that provided by the traditional estate agent and letting agent sector. The Bill must be right for the future, because the sector is fast-moving and swelling to meet housing needs that the state is currently not providing for in either type or scale. The needs of tenants must have a stronger role than in the past.

It is right that the clause sets out everything that a landlord must not do in relation to tenants, but it is sad that we have to be here prescribing rules to deal with those landlords who have not treated their tenants well. The Government have sought to limit the potential for a loophole where landlords simply require prohibited payments to be made to a third party. The clause sets the expectations that the Government have of landlords and attempts to deal with the relative position of power that landlords have held over tenants, whether that has always been fully recognised or not, to bring about an overdue rebalancing.

The Opposition recognise that the Government have previously taken steps to ensure that bad landlords have nowhere to hide. There will be a record of landlords who continue to flout rules on the quality of housing or overcrowding and of those who have certain criminal convictions. While it is slightly off topic, I cannot miss the opportunity to ask the Government to take steps to make that register more widely available so that tenants’ choice is made part of the country’s housing availability process.

As we heard in evidence this morning, an increasing number of tenants have for too long found themselves with the smallest of bargaining chips in their relationship with their landlord. On Second Reading, I talked about the inherent difficulty of the situation, with landlords, often seeing their property as an asset on which to secure returns, set against the needs of tenants who, in the absence of being able to secure ownership, wish to make their house their home.

The Government have made an exception to prohibition, including contracts for utilities and communications services, which is why I asked the Minister the questions I did with some interest. I understand that utility and communication services may be in place at the start of a tenancy. Indeed, some purpose-built to-let properties have all amenities covered, with free wi-fi provided to entire blocks, as an incentive or assistance to tenants, and as one less thing to worry about, with landlords not wanting to have their tenants wait around for engineers to arrive—or not, as the case may be—and deal with installations. However, is it not the case that the contracts that landlords have adopted for their properties may sometimes not provide the best value—for example, where prepayment meters are used or the tariff is at a general level—resulting in excessively high bills? That could come as a surprise to some tenants.

Prepayment meters are particularly common at the lower end of the housing market, and they bring their own problems. Once the equipment is in place, it is difficult to change provider. There can be charges for removals—no longer, I accept, from the big six—and if the account is in deficit, customers cannot swap between providers, let alone move to a billing system for their energy needs. That is important because, as the PropertyWire report goes on to explain, there is growth in the private rented sector at the more economic end of the housing scale at a time when the sector as a whole is changing.

With prepayment meters, it is not the tenant but the landlord who is the customer, but the tenant is tethered to the landlord’s choice of how their energy will be supplied, and those on low incomes or benefits are stuck with the most expensive method of energy bill payment. The Bill says—I paraphrase—that a landlord must not require a person to enter into a contract with a third party in connection with their tenancy, but that does not apply if the contract is for the provision of a utility to the tenant, or for the provision of communication services. For prepayment meters, the tenant is not required to enter into a contract—they have absolutely no choice in the matter. Worse than that, they are unlikely to ever have a choice in the matter so long as they reside in that property. They will remain tied into something that has been paternalistically decided for them.

[Mr Robert Goodwill (Scarborough and Whitby) (Con)]

Is it not the case in many cases that there being a key meter or a prepayment meter in the property is due to the actions of a previous tenant, for whom the meter had to be installed because of an unpaid bill? It is then very difficult for either the landlord or the new tenant to change that situation.

[Melanie Onn]

The hon. Gentleman raises a valid point. It is certainly the case that landlords often find themselves feeling that they have no other option but to put a prepayment meter in to avoid ending up as the recipient of all the bad debt that may well have been run up. However, I think it has become a bit of a choice for some in the sector, particularly at the lower end of the market, and by doing so they devolve themselves of any more responsibility in relation to their tenants. That is a shame, because it means that a good relationship is then not built up between tenant and landlord and there is not the element of trust, or of being treated like an adult, that one might hope for in that situation.

Landlords come in all shapes and sizes and are at variance across the country in the type and number of properties that they hold. There are landlords who are not resident in this country; entrepreneurial, buy-to-let landlords with small portfolios; those who inherit a family home on the death of a loved one; those who find themselves with an additional property after meeting a new partner; professional landlord companies that purpose-build to cater for particular groups, such as students or young professionals; speculative landlords who devolve all responsibility to agents; and those who live in the next street and keep a very close eye on things. Subsection (4), which relates to utilities and communications, needs to be clear to all those different types of landlords. Does the Minister think that that is the case?

That clarity is especially important because there is continuing growth of large-scale investment in build-to-let or multi-housing, which is professionally managed rental accommodation, usually at scale, in purpose-built blocks. That market, which only emerged in force in the UK in very recent years, is now worth an estimated £25 billion. Will tenants be protected against being required by these large corporations to enter into a contract that may not be the most economical, and that may take away their ability to choose between providers?

What will happen if there are difficulties in the contract that tenants have been required to sign up to? How easy will it be for the tenant to extract themselves from that contract—or could they prohibited from doing so if it is connected to their tenancy? For example, if they want to live in a building, will they have to go with Virgin for broadband or Npower for gas and electricity—other good broadband providers and power and energy suppliers are available—as the landlord gets a special tariff when those are supplied to the whole building? That would be entirely outwith the tenant’s control. What are the Minister’s thoughts on that?

Young professionals aged 25 to 34 make up the largest proportion of households living in the private rented sector. That is expected to remain the same in 2021, with their stay in the sector further lengthening, as the affordability issues surrounding home ownership—particularly gaining access to a deposit—remaining a challenge. Why should those people be limited in their ability to make a choice on their provider?

Among professionals living in the private rented sector, it is expected that there will be slightly faster growth in the number of under-25 households during the next five years, as well as an increase in older households—especially baby boomers. We must have consideration for those when it comes to the affordability of bills.

Under-25s receive a lower rate of minimum wage than other workers, so their disposable income will be much more restricted. Younger workers are usually paid less commensurate with their post and experience, which of course does not make them any less professional, and their ability to access things like housing benefit, the limits on local housing allowance and the shared occupancy rate all have an impact on their securing housing in the first place. How much they are required to top up from their own funds will have a severe impact on what utilities they can afford.

Hon. Members present must have had numerous constituents come to see them about the challenges of utility bills. The Minister has mentioned the difficulties of trying to change provider. Such difficulties are encountered particularly when prepayment meters are involved and perhaps when there are multiple occupants. Getting bills straightened out when there is confusion about meters is a lengthy process that, in my experience, results in carrier bags full of contradictory letters from those providers. Older renters on fixed incomes may also face financial restrictions, and I ask the Minister to consider that in his response too.

On the definition of a landlord, I outlined some of the common understandings of the types of landlords that we might all recognise, but I would like assurances from the Minister about who will be covered by the Bill. We cannot have a situation where Parliament takes all reasonable steps to further protect renters from the precipitous situations that they currently find themselves in, only to discover that organisations are deliberately seeking to absolve themselves of the responsibilities that all other landlords are subject to under the Bill.

In particular, I think about the case of Lifestyle Club London that I brought up on Second Reading. At the moment, that company can forgo many of the protections that are considered standard in a usual tenancy. By defining itself as a membership club, it can enter a property with absolutely no warning, it can levy huge fines to tenants for small things such as dirty dishes, and it can even give just seven days’ notice before terminating a contract and forcing the occupying person to move out.

Of course, that goes against many of the things that should be guaranteed for any renter, but companies such as Lifestyle Club London can justify that behaviour by saying that their residents are licensees and not tenants on assured shorthold tenancies. Residents pay a membership fee rather than a deposit, a monthly contribution rather than rent, and have terms and conditions rather than a tenancy agreement. That type of practice is completely unacceptable and unfair to residents, who often do not realise they are being exploited by companies that act in that way.

The Bill is the place to end that practice once and for all, by ensuring that licensees are covered by the same protections against fees as assured tenants and by prohibiting membership fees, monthly contributions and terms and conditions fines. The fact that a loophole exists to allow that type of agreement suggests that licensees of that nature have been left out of protections brought in by similar legislation to prevent landlords from acting in certain ways towards tenants.

I do not intend to move an amendment today because I await the Government’s response with interest. The Government have an opportunity to be explicit in their intentions and perhaps to table their own amendments in future to make it absolutely clear that companies such as Lifestyle Club London are covered by the Bill. Is it the Minister’s understanding that such clubs will be considered to be landlords under the terms of the Bill?

I would also like reassurance from the Minister that there are no loopholes around how tenancies and tenancy agreements can be defined that would allow de facto tenants to be afforded less protection from prohibited fees, and that if it turned out that a landlord could use alternative definitions to charge prohibited fees, the Government would return to the House to make the necessary changes to close that loophole as soon as it became apparent.

What type of loan is the Minister thinking of in subsections (5), (6) and (7)? I have spent a long time trying to conjure the purpose of such a loan from tenant to landlord, how that might come about and on what evidence the terminology is based, but it remains altogether unclear. I hope the Minister will provide some reassurance on those points.

[Rishi Sunak]

It is a great pleasure to embark on my first Bill Committee with the hon. Member for Great Grimsby and I look forward to going through it with her. I will try to keep this on point and address the specific issues that she raised.

First, on utilities and the provision thereof, some of her comments will be well directed at the energy price cap legislation that is working its way through Parliament. I am sure she will engage in that process. With regard to this Bill and this specific clause, I say to her that that process is something that any tenant would likely follow as part of their deliberations about which kind of property to rent, in the same way as I would imagine tenants decide whether a property has good mobile signal, any broadband available, what kind of energy is available, and so on. Those are all things a tenant will have awareness of in advance of making a decision with regard to the suitability of that particular property for their circumstances.

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[Rishi Sunak]

The clause bans letting agents from requiring a tenant or other relevant person to make a payment or loan, or secure insurance or services from a third party in connection with a tenancy. The clause works with clause 1 to ensure that the legislation applies equally to all tenants, no matter whether they let through a letting agent, as captured in this clause, or directly with a landlord, as captured in clause 1.

The provisions in the clause essentially mirror those in clause 1, so I will not repeat myself, but it may be helpful if I highlight briefly where the two clauses differ. The key differences are in the definition of “in connection with” a tenancy agreement, because the letting agent makes arrangements on behalf of the landlord and is not itself party to a tenancy agreement. There is also no exception allowing letting agents to require a tenant to procure utilities or communication services. That exception is relevant only to landlords, but clause 2 essentially has the same effect as clause 1, which is to ban letting fees.

[Melanie Onn]

I recognise that for the most part the clause mirrors the prohibitions applying to landlords. It is important that letting agents, which are often the professional guide to the amateur landlord and often operate on behalf of the landlord, developing close relationships over many years while in the pay of the landlord, have the propriety of their conduct considered closely.

The same principle applies to letting agents as to landlords, in that there are some excellent agents and some that fall far short, often seeming to set unreasonable charges without much comeback. Letting agents also lack the personable relationship with tenants that often develops between landlords and tenants. Landlords often develop levels of understanding with tenants that give tenants a bit of leeway, meaning that they could charge under the permitted fees under the Bill, and under a tenancy agreement through default fees.

Good landlords will often be empathetic about genuine and honest mistakes or problems that tenants make or face, and look for practical and easy solutions for both parties. For example, they may let tenants sort out replacing a lost key by themselves, and at a lesser cost, if it is a first offence. They may take some of the loss if a tenant has to move out in the event of a job loss, or a family emergency, or a genuine struggle to pay rent or exit fees. While there are some excellent letting agents that go the extra mile to keep tenants happy and in their property, too often letting agents take an extremely hands-off approach to tenants and only see them as a way to make money and collect fees, which are currently far too high, whenever they contractually can.

Currently, letting agents often charge fees that would be prohibited under the Bill during the move-in period and make a significant amount of money out of a new tenant. As a result of the Bill, letting agents will be far more driven by the desire to keep properties full for as long as possible, as they will see far fewer benefits from a property that rapidly changes tenancy than when they could charge those often high fees. That will help the drive towards achieving the aim of everybody in this room to see longer tenancies in the private rented sector, and increase the value of good-quality service from letting agents that keeps tenants happy and in place.

It will also move the balance of power in the letting market far more towards the tenant. Letting agents often make money through introductory charges to tenants and a percentage commission of the rent. Where once letting agents may have been happy to charge high fees and wait until someone comes along who is able and willing to pay them, the Bill will mean that letting agents will want a property to be filled as soon as possible, so they can earn commission on the rent. That will mean that letting agents have more reason to provide a good service to tenants and act to promote properties to get them filled as quickly as possible.

Tenants have no choice of letting agent if they want to move into a specific property. Who to choose as an agent for a property is currently at the behest of the landlord and therefore letting agents do not focus on offering a good deal to tenants, but on offering the best deal to landlords. Letting agents levy as much of the charge as possible on a tenant to avoid charging above the market rate to a landlord, as there is no point in trying to offer a good deal to tenants if no landlords use the agency to let their property. The result is that tenants are often charged well above reasonable amounts in set-up costs alone. They can often be expected to find hundreds of pounds for things such as credit checks, referencing and set-up paperwork, on top of a holding deposit, security deposit and the first month’s rent. Even for a modest property, that often runs into hundreds of pounds, perhaps even thousands.

We know that people on low and average wages often find it impossible to find the deposit to buy a property, but at the moment many would struggle to find the money to move into a rented property. That is grossly unfair, given that at the very least the landlords are the owners of a property that has increased often significantly in value over the past few years, and are often also rich in their own right. Yet they receive all the advantages in the letting agent market at the expense of our growing population of private renters, who are often young and increasingly likely never to own a home.

That is especially true in areas with high levels of student accommodation. For example, Leamington Spa has an extremely high level of student accommodation for a town of its size, due to a nearby university. Almost all that rental market is operated through agents and is used by students who have little knowledge of their rental rights and what is a fair rate for the charges that letting agents levy. It is a fast-moving market. There is pressure on students to secure a place that they like quite rapidly, often for a fixed-size group, six or seven months before moving in, and the pressure often leads to students paying £300 or £400, sometimes unexpectedly, if the pace of the property uptake surprises them, on top of their current rent and living costs while they are at university.

[Jo Stevens]

I represent a typical university constituency. It is in Wales and is not affected by this Bill, but by way of example, I mentioned on Second Reading a street in one of the wards in my constituency. I added up every single person living in student accommodation in that street of 200 houses, and letting agents are making in excess of £320,000 every single year in just that one street. Does my hon. Friend agree that that is something we need to prevent?

[Melanie Onn]

The important thing for students is that they understand the system that they are going to be entering, as for many of them it will be the first time they have moved away from home. They also should understand whether they are subject to unfair fees that are excessive for young people who are most likely to be reliant on student finance and part-time work if they do not have help from their family. We should also ensure they are fully aware of all their rights in those circumstances. The idea that they are having to make such decisions many months in advance when they are feeling the pressure leaves them wide open to exploitation. Their situation will hopefully be aided by the Bill.

Picking up what I was saying—it is a little haphazard, sorry—these costs represent a lot of money for a full-time worker, but for many students, they represent their whole living costs for a month. The balance needs to change dramatically. The extension of schedule 1 to letting agents will mean that they can no longer absorb the cost of a low landlord commission rate by passing the cost on to tenants.

We support the clause, but a few points of concern arise. As it is nearly identical to clause 1 in wording, I will not labour the points I raised in our consideration of that, but I want to seek some clarity on some particular differences between the clauses and draw the Minister’s attention to subsections (4), (5) and (6). Will he outline again the purpose of the loan and confirm that it is included as a preventive measure to avoid landlords seeking any alternative finance mechanism by which to re-route a payment? I would be grateful if he did. It would ensure that I have understood what he said.

The main point I wish to make about clause 2 relates to subsection (3), which states that a letting agent cannot require a tenant to enter into a contract for provision of a service or a contract of insurance. While the rest of the clause reflects clause 1, subsection (3) does not go on to specifically exclude utilities or communications. Why is that the case?

The Minister will know that letting agents can earn a commission for placing clients’ properties with particular utility companies. Switches of energy provider must be done with the bill payer’s consent, and that is likely to be the landlord during a period of the property being void, but it allows for a default situation to arise for tenants when they move in and start receiving bills that are not the most economical for them, requiring them to pay higher rates on generic tariffs. They are then free to change supplier, but they have already been paying at a higher rate and they then have to go through the process of moving supplier. I know that process is supposed to be easy and straightforward, but it is still a chore and an off-putting task for anyone trying to find the right and best deal.

Are letting agents to be permitted to continue to be incentivised to sign up unwitting renters to these rip-off rate utility companies? Will the Government commit to taking steps within the Bill, rather than waiting for guidance? If we are to deal with tenants’ fees and making things fairer for renters, why not do it all now? We should say that such inducements should not be available to letting agents. Renters should be notified in advance who the utility and any other established providers are and given the opportunity to make arrangements that better suit their budget. I hope the Minister can provide answers to those questions.

[Rishi Sunak]

To respond directly to the two specific points that the hon. Lady raised, I can give her the same assurance that I gave on clause 1: the exception for insurance can specifically not be a means to require a payment that otherwise would be prohibited by the legislation. The same assurance stands here, and I hope that gives her the reassurance she needs. Secondly, to focus specifically on the clause we are debating, it does not allow letting agents to charge for utilities or communications services, but clause 1 does. The specific reason for that is that the contract would typically be in the name of the landlord and would be a function of the landlord-tenant relationship. That should not be permitted for the letting agent. I assume that she does not think they should be included.

[Melanie Onn]

My concern is that letting agents are able, upon the agreement of the landlord, to set these things up in their own name. That does happen. Does the Minister think that that is okay, particularly given that they receive inducements for it?

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[Melanie Onn]

I beg to move amendment 5, in schedule 1, page 23, leave out lines 19 to 29.

[The Chair]

With this it will be convenient to discuss the following:

Clause 5 stand part.

That schedule 2 be the Second schedule to the Bill.

Amendment 22, in clause 6, page 4, line 21, leave out “or Schedule 2”.

Amendment 23, in clause 7, page 4, line 35, leave out “and Schedule 2”.

Amendment 24, in clause 8, page 5, line 9, leave out “or Schedule 2”.

Amendment 25, in clause 8, page 5, line 29, leave out subsection (5).

Amendment 26, in clause 10, page 6, line 43, leave out subsections (6) to (9).

Amendment 27, in clause 10, page 7, line 2, leave out “(2), (5) or (8)” and insert “(2) or (5)”.

Amendment 28, in clause 15, page 10, line 13, leave out subsection (2).

Amendment 29, in clause 15, page 10, line 20, leave out “or holding deposit”.

Amendment 30, in clause 15, page 10, line 21, leave out “or holding deposit”.

Amendment 31, in clause 15, page 10, line 23, leave out “or holding deposit”.

Amendment 32, in clause 15, page 10, line 24, leave out “or holding deposit”.

Amendment 33, in clause 15, page 10, line 35, leave out “or holding deposit”.

Amendment 34, in clause 15, page 10, line 37, leave out “or holding deposit”.

Amendment 35, in clause 15, page 10, line 39, leave out “or holding deposit”.

Amendment 36, in clause 17, page 11, line 23, leave out subsection (2).

Amendment 37, in clause 17, page 11, line 28, leave out “or holding deposit”.

Amendment 38, in clause 17, page 11, line 30, leave out “or holding deposit”.

Amendment 39, in clause 17, page 11, line 32, leave out “or deposit”.

Amendment 40, in clause 17, page 11, line 34, leave out “or deposit”.

Amendment 41, in clause 17, page 11, line 36, leave out “or deposit”.

Amendment 42, in clause 17, page 11, line 39, leave out “or holding deposit”.

Amendment 43, in clause 26, page 16, leave out line 34.

Amendment 44, in clause 28, page 20, line 22, leave out subsection (11).

[Melanie Onn]

The aim of the amendment is to remove unfair fees from tenants’ disproportionate burden, and to make the system fairer and power more balanced than it has been in the past. On Second Reading, the Secretary of State described holding deposits as simply a “refundable” deposit to “reserve a property”. I fear that they have the potential to be used in other ways.

As I said on Second Reading, the inclusion of such deposits in the legislation was

“allegedly designed to minimise instances of tenants securing multiples of properties at the same time before finally settling on their preferred property. There has been very little, if any, evidence that this is a regular practice.”—[Official Report, 21 May 2018; Vol. 641, c. 647.]

Indeed, in this morning’s evidence session we heard completely the opposite from Generation Rent, and that, in fact, holding deposits can often be used by letting agents or landlords to hold multiple deposits from one individual, taking their funds, preventing them from seeking other properties or from participating in a bidding process to rent other properties, and setting them back weeks in being able to access the home that they want.

[Richard Graham]

I thought we heard clearly from all our witnesses this morning that the proposal to passport deposits was widely welcomed and would help to solve that problem. Does the hon. Lady agree?

[Melanie Onn]

The hon. Gentleman is slightly mistaken in his recollection. That was not to do with the holding deposit; it was to do with the deposit given as security once the prospective tenant has gone through the holding deposit process. The holding deposit is simply to secure a property and to register interest. Referencing is then undertaken before a person is accepted and considered to be the tenant. Although I agree with the principle of passporting deposits, that was not the specific issue with holding deposits.

[Richard Graham]

Surely the deposit and the ability to move from one tenancy to another are much more important.

[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—

[James Frith (Bury North) (Lab)]

Spread betting.

[Melanie Onn]

My hon. Friend says “spread betting” from a sedentary position. It does feel as though everyone is hedging their bets on the property of their choice. It seems nonsensical that anybody would have sufficient spare funds available to put down multiple holding deposits and undergo multiple reference checks, which would not work in their favour when it came to their credit scores. It is interesting that we heard something today that we did not hear during the Select Committee’s pre-legislative scrutiny. It was suggested that the situation could be completely reversed, with holding deposits being used unscrupulously by letting agents or with landlords holding all that money for a period of time. That would then set back individual tenants in their search for a property. There absolutely is room for improvement.

[Mr Goodwill]

The hon. Lady says that the aim of the proposed legislation was to make things fairer for tenants. Does she agree that all the NGOs that gave evidence this morning made it clear that it would make things fairer for tenants?

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[Melanie Onn]

The NGOs were very clear that there were still issues and that they still had concerns. We were all in the same evidence session this morning, and we all heard them say there are issues. We are right to take into consideration all the evidence and not simply cherry-pick the bits we might wish to hear. I am raising this point because I do not think sufficient consideration has been given to the impediment that holding deposits may represent for individuals, particularly young people who may be on lower incomes.

In addition, the Government say that there are a number of exceptions to having to refund that deposit, including when the tenant provides false or misleading information. Although on the face of it that is a sensible measure, there are no additional protections for tenants if the incorrect information is not their fault. For example, a reference that does not exactly match a tenant’s claims should not immediately mean that they lose that holding deposit. There is scope to develop a mechanism to test inaccuracy and establish the reasons behind it before immediately assuming information has been deliberately misleading.

I suspect that the Minister will respond robustly to that point and say that there is provision within the Bill, particularly relating to landlords, that gives them flexibility to give reasonable consideration to the circumstances. That is absolutely fine, but in practice most people go through some form of letting agent or management agent as part of the letting process. It is a tick-box exercise and the possibility of any kind of flexibility is much reduced. Letting agents go through it page by page, thinking, “Have I done everything that I was supposed to do on the list? Have I collected the deposits? Have I done the appropriate checks? Have I compared the information provided to me by the prospective tenant with the information from their previous landlord?” Who knows what information a previous landlord may deliver to a letting agent, because there is nothing to say that it would necessarily be a favourable response.

The letting agent is not necessarily going to utilise any kind of discretion, because it is not in their interest to do so. They simply have to complete the necessary forms and stages to enable the tenancy to take place. They then have to provide evidence to meet the requirements of the legislation, or prove to their employer, who is also their client—the landlord—that they have undertaken all the necessary checks and that the information does not meet, to the letter, the requirements of the legislation, unless there is further regulation, so x number of people have been rejected. I am interested to know how many tenants are rejected because the information they provide is not a carbon copy of that provided by their previous landlord.

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[Jo Stevens]

We know from previous Acts and codes of practice that guidance codes of practice have little weight in dealing with the rogue organisations that we are concerned with. If the Government are serious about their intentions—and I believe they are—they should simply put what they want in the Bill. If it is in the Bill, it can be enforced.

[Melanie Onn]

My hon. Friend is right. On Second Reading I was clear about wanting to make the Bill the best it can be and not leave gaping gaps through which tenants’ rights can fall, to be blatantly ignored. If there is an opportunity to improve it, I hope that the Minister will not be too precious, and that he will take those things on board and seek to make improvements so that the aims are achieved. I believe that the aims are genuinely held, so why not do accordingly? I would follow up on what my hon. Friend said by commenting that when such structures are left to mere guidance they are too soft and they will not prevent unscrupulous landlords and letting agents from doing all they can to skim off money and maximise their profit margins.

Guidance is not good enough if we are to transform a system that is stacked against tenants. That point extends across more than the provisions on holding deposits; it is a foundational problem with the approach taken in the Bill. Clarity is important not only in relation to landlords and those who might want to act unfairly. If it is not clear when the withholding of holding deposits is not legal, that is a serious problem. Informed tenants are empowered tenants; so if the Government are serious about transforming letting and the process around lettings, they will do all they can to inform all relevant stakeholders as clearly as can be.

Shelter said in their response to the Bill:

“Evidence from Scotland suggests there is lingering confusion around the ban on letting fees which has affected compliance”.

We do not, and I am sure that the Minister does not, want to be in the situation that Scotland was in, after many years during which legislation was in force that did not work all that well, of having to do it all again or put forward amendments. If there is an opportunity to get things right and learn lessons from our nearest neighbours, let us do so and make sure the Bill does all it sets out to do.

The Shelter response said that independent research had highlighted the fact that,

“even after the ban was clarified, less than one-third of renters clearly understood there was a law banning fees.”

That emphasises the importance of a simple ban. The Government must always prioritise clarity and good communication, as this morning’s sitting with a representative from the Local Government Association made clear.

The issue of holding deposits also adds to the broader financial burden facing tenants. To secure a property under the Bill would cost, according to Shelter’s estimates, £3,750 for a property in London and £2,290 outside the capital. Those figures include a six-week deposit—as the proposed cap, which is really quite high, allows—a month’s rent and a week’s holding deposit. The six-week deposit could leave a tenant out of pocket twice. If they leave one property and are seeking a new property, there is a period when they are doubly out of pocket. Although the deposits are refundable, tenants receive an average of only 77% of their deposit back, so the idea of passporting deposits must be given greater consideration.

--- Later in debate ---

[Rishi Sunak]

I will speak first to clause 5 and schedule 2 in general, and then respond specifically to amendments 5 and 22 to 44.

Clause 5 and its accompanying schedule, schedule 2, relate to the treatment of holding deposits. The Government recognise the concerns of agents and landlords that, in certain circumstances, they can be put at risk because of a tenant’s actions—for example, if a tenant withdraws from a property despite reference checks having been undertaken. To address that, landlords and agents will be allowed to charge a holding deposit, capped at one week’s rent. That will act as a deterrent to tenants from registering in multiple or unsuitable properties, and ensure that there is a financial commitment from the tenant to a property.

We also do not want to inadvertently encourage agents and landlords to discriminate against individuals when considering potential tenants for their properties. The use of holding deposits will ensure that landlords do not cherry-pick tenants they perceive to be the most suitable and therefore likely to pass a referencing check.

We recognise that it may sometimes be appropriate for landlords and agents to retain the holding deposit. For example, if a tenant fails a right to rent check under section 22 of the Immigration Act 2014 and the landlord or agent could not reasonably have been expected to know that they would fail; if the tenant provides false or misleading information that the landlord is reasonably entitled to take into account when deciding whether to grant a tenancy; or if the tenant decides not to rent the property. In such cases, the landlord or agent will be entitled to retain the holding deposit.

We will of course encourage landlords and agents to consider, on a case-by-case basis, the appropriate amount of deposit to retain and to provide a reasonable explanation to tenants when they decide to retain a holding deposit. Guidance will be provided to support landlords, agents and tenants to understand their rights and responsibilities around holding deposits.

[Melanie Onn]

When will that guidance be provided?

[Rishi Sunak]

It will be soon. The hon. Lady will be pleased to know that—

[Melanie Onn]

Will the Minister give way?

[Rishi Sunak]

If I may finish the sentence, the hon. Lady will be pleased to know that organisations such as those we heard from this morning—Generation Rent, Shelter and Citizens Advice—are currently engaged with officials in helping to draft that guidance. I am sure she will want that guidance to be as accurate and as helpful as possible. I think I am right in saying that a meeting may have taken place yesterday, so that guidance is well on the way.

[Melanie Onn]

Was the phrase the Minister intended to use “in due course”?

[Rishi Sunak]

As the hon. Lady said, I will not be precious in this Committee, and I will take reasonable suggestions. I will take her suggestion on board and rephrase to “in due course”. I assure her that work on the guidance is under way, and we are working to get it right. As I said, we believe that this approach is fair to landlords and tenants.

On the amendments, it is important to clarify for Committee members what we are discussing. The amendments do not suggest reforming, improving or tweaking the holding deposits. They suggest that holding deposits be removed entirely from the list of permitted payments outlined in schedule 1, so that, under no circumstances, should there be any holding deposit. That was obviously not the Select Committee’s position following its pre-legislative scrutiny, and it was not the position of the witnesses we heard from this morning, all of whom, when asked if they agree with the principle of a holding deposit, said they do.

The amendments go against that set of opinion and suggest removing holding deposits entirely. To do so would be to take away a vital mechanism in the Bill that allows landlords security while reference checks are carried out. That is important for several reasons. From the outset of this policy, landlords and letting agents have expressed concern that one of the side effects of the ban on tenant fees would be that tenants might speculate on multiple properties.

[Melanie Onn]

Where did the Minister get the evidence that that has ever happened in the history of anything?

[Rishi Sunak]

Yes, I heard the shadow Minister’s points on this. It is important to note that there is no evidence for this because there are currently letting fees. Tenant fees are charged, and that is what we are all here to get rid of. The side effect of tenants no longer having to pay any fees will be that there will be no financial disincentive when they apply for a property. The disincentive to speculate currently applies, but when we legislate to remove tenant fees, which is exactly what we are doing, that safety lock and mechanism will not be there. That is why people consider it to be a side effect. Looking for evidence of something that has yet to happen is unlikely to be fruitful.

[Rishi Sunak]

The hon. Lady talks about a subset. I am also talking about groups of agents. It is not necessarily the case that speculating might or might not happen, but it is important to guard against it happening. That is surely fair, and landlords are reasonable in asking for some protection against it. This is not about unfairly withholding money from people. In the cases that I will come on to, and as we have already discussed, there is no reason why deposits will not be returned to tenants acting in good faith.

[Melanie Onn]

The Minister seems to be asserting that, in the absence of these up-front fees, people will suddenly be going around with wedges of cash in their pocket that they would not otherwise have had, rather than understanding the difficulty that people have had up until now to get any money together whatever for this purpose. It really is a slightly erroneous argument.

[Rishi Sunak]

I do not think it is erroneous at all. Removing tenancy fees from the legislation, as we are doing, will of course put money back into the pockets of tenants.

What we are talking about here is a deposit that is there for a number of days while a tenant applies in good faith for a property, which presumably they have the financial means to afford and have the deposit for. It is entirely reasonable to request that and, as we have heard, not all agencies require it. Indeed, the guidance will not say that it is mandatory or necessary. It is there as a safety mechanism, should landlords feel that it is appropriate to their situation.

[Melanie Onn]

How many days, on average, are holding deposits held for?

[Rishi Sunak]

That will be a function for people to decide individually. The legislation sets a cap of one week’s rent for what can be taken as a holding deposit, but it is not mandatory that a full week’s rent is taken.

[Melanie Onn]

How long will it be before individuals can get their deposit back, if they are required to pay one?

[Rishi Sunak]

I believe I am right in saying that, from a tenancy agreement being signed, it is a matter of days. If the hon. Lady allows me, I will get back to her with that information. My memory is that it is seven days, and it can be used in lieu of the deposit itself, but I will happily come back to her on that point. She is right that it will not be stuck there in the system so that it cannot be used for a subsequent purpose to do with the tenancy. I think that is the general point she is making.

Allowing a landlord to ask for a holding deposit enables tenants to demonstrate that they are sincere in their application for a property. It ensures that landlords and agents are not out of pocket if a tenant registers an interest in a property, only to withdraw it when something better comes along.

Secondly and importantly, we want to ensure that landlords do not take an overly cautious approach and pre-select the tenants that they perceive would be most likely to pass a reference check. Removing holding deposits from the list of permitted payments would put the tenants who most need the protections that the Bill provides in a position where they are less likely to be considered.

Finally, holding deposits act as a means of security for the landlord, who is at risk of losing out on a week’s rent if a tenant withdraws from the application, fails a right to rent check, or provides incorrect or misleading information.

--- Later in debate ---

[Rishi Sunak]

I could not agree more with my hon. Friend, who puts it very well. This is not about demonising people; it is about making sure that the private rental sector, which, as he so rightly identifies, is likely to experience some growth, is healthy and well invested in so that people who are looking for somewhere to rent have somewhere to call home. That is why we get the balance right in the Bill.

To conclude, we heard evidence on Tuesday from agent and landlord groups who were quite certain that if landlords and agents were unable to take a holding deposit, they would cherry-pick tenants. None of us wants to see that. I remind the Committee that the amendment would remove in its entirety the idea that landlords can charge any holding deposit. We do not support that and think that it would damage the functioning of the market, so I urge the hon. Member for Great Grimsby to withdraw the amendment and ask hon. Members to agree to clause 5 and schedule 2.

[Melanie Onn]

I have listened carefully to the Minister’s response, but I am not convinced, unfortunately. I would like to press the amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[The Chair]

For the sake of clarity, I remind Members that although we have debated clause 5, schedule 2 and various amendments, decisions on those points will be taken formally later in our proceedings according to the order of consideration set out on the selection list.

[Melanie Onn]

I beg to move amendment 10, in schedule 1, page 23, leave out paragraph 4 and insert—

“4 (1) Subject to sub-paragraphs (3), (4) and (5), a payment that a tenant is required to make in the event of a default by the tenant is a permitted payment if the tenant is required by the tenancy agreement to make the payment in the event of such a default.

(2) In this paragraph “default” means a failure by the tenant to—

(a) perform an obligation, or

(b) discharge a liability, arising under or in connection with the tenancy.

(3) But if the amount of the payment exceeds the reasonable and proportionate value of the loss suffered by the landlord or letting agent as a result of the default, the amount of the excess is a prohibited payment.

(4) The Secretary of State must by regulations made by statutory instrument specify the circumstances in which a payment is to be considered a payment in the event of a default within the meaning of sub-paragraph (1).

(5) Regulations under sub-paragraph (4) must also make provision as to the procedure to be followed by a landlord or letting agent in seeking to recover a payment under this paragraph, which may include a requirement to give notice of proposed recovery in a prescribed form accompanied by evidence of the loss sustained by reason of the relevant default.”

This amendment would require the Secretary of State to make regulations on payment of defaults and procedures for recovery of default payments.

The Bill leaves us with far too great a risk of subjective interpretations and loopholes through which those who would seek to maximise profits can do so at the expense of tenants. We are concerned that the Government are far too willing to leave these fees up for interpretation, with enough room for a whole manner of things to be put within them. That is why we tabled amendment 10.

When the fundamental purpose of the Bill is to ensure a fairer deal for tenants and remove fees that have no clear basis, it is a mistake to set out the specific circumstances in which default fees may be charged simply in guidance and not in regulations. We know that although guidance should be followed, unfortunately that is not likely to happen in every circumstance. That is why we tabled our amendment to remove paragraph 4 of schedule 1, which would require the Secretary of State to make explicit what is acceptable as a default payment. It must be absolutely clear; otherwise, abuse is all too easy.

The amendment also deals with the benefit of having

“a prescribed form accompanied by evidence of the loss sustained by reason of the relevant default.”

Having a paper trail akin to invoicing is a fair principle on which to work. Businesses have to invoice in all other transactions, and we see no reason why default fees should be treated differently. Transparency is key to trust in the system. If a tenant is being charged, it is fair and reasonable that they be able to see clearly what they are being charged for and that it is not disproportionate to the costs facing the landlord. Recovery of the costs genuinely incurred by the landlord would be guaranteed by the need to accompany the form with evidence, such as receipts.

Taking the example that recurred throughout the evidence session, if the tenant needed a replacement key but the landlord, as standard, wished to charge the capped fee of £50, the tenant would not know whether that was a fair charge. In fact, we know that that would not be a fair charge. Fifty pounds for a new key—does anybody think that that would be a fair charge? Yet that is precisely what landlords or letting agents will be able to charge. The tenant might think it unreasonable, given how much cutting a key costs, but their ability to query the charge would not be clear—it could be wrapped up with the agent’s time or the number of phone calls it took.

Plenty of people will ask “How many letting agents does it take to get a key cut?”, but a clear itemised bill will make clear what each charge is for. I would not advocate that a landlord or letting agent charge for their time spent on getting an additional key cut, phoning to make an appointment to get the key cut or sending a notice of the intention to get the key cut, but if that was happening and those were standard charges within the letting agent’s brief—there is often a set of standard charges for that sort of thing—itemisation would enable the individual tenant at least to see exactly what the landlord or agent was charging them for and thus to challenge the charge. There would be no place to hide any rounding up or skimming off that would boost the landlord or letting agent’s profits.

If we do not make the amendment, tenants’ confidence in the whole system could be fatally undermined. Trust needs to be rebuilt. As things stand, the relationship between tenants and those who provide them with homes is fundamentally unbalanced. We believe that the requirement for a paper trail fits in with the principle outlined in paragraph 5, which highlights the need for any charges to be reasonable, referring to

“the reasonable costs of the person to whom the payment is to be made in respect of the variation, assignment or novation of the tenancy”.

Amendment 10 is firmly in accord with that spirit and the broader intent behind the Bill. Finessing the Bill to require a paper trail and to clarify the provisions dealing with what is and is not a default payment would go a long way to restoring tenants’ trust in an often unfair system.

The Select Committee recommended

“that Government issue clear guidance to tenants, landlords and letting agents”—

in my view, that does not go far enough—

“on what constitutes a reasonable default fee, and guidance to tenants about how to challenge the inclusion of such fees in tenancy contracts. The reasonableness of both the type and the amount of fee should be considered. The Government’s intention to issue such guidance should be communicated during the Second Reading debate”,

and it was.

As we heard in evidence today, however, guidance is not always sufficient. Even if someone had the nerve to challenge a fee that was levied upon them when they suspected that it was unfair, the guidance would not be sufficient to enable organisations that represent tenants on a regular basis to support them sufficiently.

--- Later in debate ---

[Rishi Sunak]

I thank the hon. Lady for her comment, but the point of the legislation is that there will be far greater protection for tenants and a deterrent for landlords from behaving in the way she outlined, because there will be significant financial penalties and banning orders at stake for landlords who misbehave. There is a process for tenants to seek redress, partly informed by the recommendations of the Select Committee, such as going to the first-tier tribunal that does not exist today. The combination of all those things makes it much less likely that a landlord would behave in such a manner, for the simple reason that they would be behaving illegally. If that were to be found out by trading standards, the first-tier tribunal or any redress scheme, the penalties for that misbehaviour could be incredibly significant.

This legislation will have the impact required. The guidance we will put forward will specify that it will be best practice for the landlord to provide evidence of their loss, which they will do precisely because they know in the back of their mind that if they put out a speculative number and are challenged, the consequences will be significant for them. All in all, I ask the hon. Member for Great Grimsby to withdraw her amendment.

[Melanie Onn]

The Minister says that the Bill will seek to ensure that erroneous behaviours by landlords or letting agents will be far less likely, but that does not fill me with any kind of confidence. He goes on to talk about the enforcement element—the fines, trading standards and potential criminal prosecution if that happens more than once—but he fails to acknowledge the issues of enforcement, which I understand comes much later in the Bill, that have been very clearly expressed in the oral evidence we have heard.

Making the legislation work requires the enforcement to work. As we have not yet got to that point, it is very difficult for me to feel at all convinced that the Minister’s proposals will ensure that tenants will be properly protected from default fees and that letting agents or landlords will fulfil all their responsibilities. I know that the responsible ones will, but I am not remotely interested in them. For that reason, I am afraid that I will not withdraw the amendment.

Question put, That the amendment be made.

--- Later in debate ---

[Rishi Sunak]

We want to ensure that the effect of including a banning requirement as a term of a tenancy agreement is clear, and the clause provides that a term of any agreement that contravenes the proposed legislation is not binding on the tenant. The clause also establishes that the rest of the agreement will continue to apply where any part is found to be non-binding, to ensure that the tenancy can continue and that landlords and tenants remain protected by the terms of the contract. Finally, the clause provides that if the tenant or someone acting on their behalf has been required to make a prohibited loan, that money should be repaid on demand. Members of the Select Committee will be pleased that that provision has been included, as it reflects one of the Committee’s recommendations during pre-legislative scrutiny. The clause establishes vital protections for tenants.

[Melanie Onn]

The spirit of the proposed legislation is to protect tenants and remove burdens from them wherever possible, in order to rebalance power, which has for so long been in the hands of letting agents and landlords, in favour of tenants. That is as true for costs as it is for other things. We tabled amendments 11 and 12 because we would like to see more rights. Although we opted not to press them—we have not been very successful in votes this afternoon—we welcome clause 4, as it offers tenants greater protection from retaliatory evictions. Even if it is not as bold or strong as we might like, it is nevertheless a step forward legislatively.

As we know, retaliatory evictions are a real problem. They can cause a great deal of distress and concern for tenants, and they are one of the major reasons why people do not speak up against their landlords or seek to enforce their rights as tenants. The power imbalance in the relationship between the landlord and the tenant, which I have referred to throughout our deliberations, represents one of the worst abuses of the sanctity of people’s homes. Despite our amendments having fallen, any additional contract security for tenants is a good thing, although we urge the Government to consider strengthening it.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.—(Kelly Tolhurst.)

Tenant Fees Bill (Fourth sitting)

Melanie Onn Excerpts

Committee Debate: 4th sitting: House of Commons
Tuesday 12th June 2018 Public Bill Committees

[Rishi Sunak]

I am very happy to answer the hon. Gentleman’s question briefly now, as I am sure that we will come to it when we consider the various amendments and clauses that deal particularly with capacity and resources. In a nutshell, we believe that the Bill and the enforcement measures in it will be self-financing with the fees that can be charged by local enforcement authorities and trading standards authorities; on top of that, they will receive seed funding in the first year of up to £500,000.

As I was saying, the investigatory powers are set out in schedule 5 to the 2015 Act.

[Melanie Onn (Great Grimsby) (Lab)]

The Minister just mentioned charges. Is he referring to the fines?

[Rishi Sunak]

Yes; I meant the fines that will be charged of up to £30,000 for a second offence and £5,000 in the first instance.

To return to the investigatory powers, they are laid out and provide the ability for trading standards authorities to investigate, inspect and enforce the provisions; they enable them to carry out their enforcement activity.

I hope that the clause will stand part of the Bill.

--- Later in debate ---

[Melanie Onn]

It is a pleasure to serve under your chairmanship, Mr Sharma.

As we have heard and read in the evidence from the likes of the Local Government Association, the Chartered Trading Standards Institute and the Chartered Institute of Housing, there are significant concerns about the enforcement powers being conferred on the local weights and measures authorities around the country. For the avoidance of doubt, we are talking in this clause about local trading standards teams. As I have mentioned before, they have a wide and varied remit. They enforce laws on behalf of consumers on matters such as age-restricted products; agriculture; animal health and welfare; fair trading, which includes pricing, descriptions of goods, digital content and services, and terms and conditions; food standards and safety; intellectual property, including counterfeiting; product safety; and, of course, weights and measures.

Trading standards cover more than 250 statutory duties, including providing businesses with advice. The CTSI says that the service is already overstretched and underfunded, with just £1.99 per head being spent. The situation has been recognised by the National Audit Office, which has said that there is a direct threat to the consumer protection system’s viability as a whole, yet here the Government seek to add another layer of responsibilities, technicalities and duties to those of the service without giving due consideration to the implications of the request, and simply assuming that their assessment that the scheme will be fiscally neutral after two years will come to pass. That seems a rather carte blanch approach to me—a “close your eyes, cross your fingers and hope for the best” kind of plan. It is not robust and it is not a process modelled on the evidence of the experts who operate in the roles, day in and day out. There is time for the Minister to correct this.

Our constituents will mostly know trading standards for tackling rogue traders. My constituency being a port town, we have a very active trading standards department, which regularly discovers dodgy goods that people try to smuggle in, including recently some dangerous counterfeit cigarettes, filled with anything up to and including asbestos, for sale cheap on the black market, with a street value of around £8,500. Trading standards are often the first in a position of authority to come across goods linked to organised crime and criminal gangs, and they provide essential eyes and ears within local communities.

Is the Minister confident that the addition of these tenant fees enforcement powers to trading standards’ responsibilities, with only pin money for start-up and roll-out, will not impact on its already essential role protecting consumers? How can he be sure, and what steps will he take to ensure that that is the case going forward? We heard of cuts to trading standards departments of 40% to 50% at a local level.

Across the country, the Chartered Trading Standards Institute tells us that there has been a cut of more than 50% of skilled officers. Does the Minister seriously think that trading standards will be able to effectively implement these new powers? If so, how? What priorities should trading standards officers have? If faced with tracking down an influx of poisonous fake spirits, surveilling for evidence to prosecute the sale of knives to under-18s or taking action against a landlord requiring a £150 prohibited fee from a tenant, which would he suggest the officers pursue as urgent?

If the Minister concedes that the loss of money is likely to be less urgent in its nature than the matter of illegal spirits or the selling of knives to teenagers, at what point does he anticipate that an officer ought to get around to looking into the issue of the prohibited fee? Given the restrictions on time and staffing levels, is not a TSO, rather than acting in an individual case, far more likely to deal with a single landlord facing multiple allegations of charging prohibited fees? It will be dealing with the big fish, rather than the small fry, that will be a reasonable and proportionate use of staff time. Has the Minister thought about the practicalities of enforcement? Has he compared it with how enforcement of housing matters is currently dealt with, or even tried to plug some of those gaps?

In order for the London Borough of Newham’s landlord licensing scheme to be effective, it had to bring together several different agencies, including the police, the UK Border Agency and specialist housing officers, and had to invest in systems to accurately identify those properties that were incorrectly licensed. While it has drawn in significant revenue for the Treasury and the council, it took a laser-focused determination from the political leadership in Newham to get their processes up and running to tackle landlords operating outside the regulations. Can the Minister guarantee that the same will happen to trading standards departments around the country, when it could be said to be somewhat of a Cinderella service? How will he monitor that, and what will his measure of success be?

The Local Government Association said in its evidence that, given the reduction in capacity of trading standards across many authorities, there should be flexibility for local areas to determine whether the ban is enforced by local trading standards or private sector housing teams. Does the Minister agree? The LGA went on to say that the Government had ignored the findings of the working group, which concluded that there should be enforcement of mandatory client money protection by local authorities, rather than trading standards. Is the Minister content to ignore the working group’s findings?

Has the Minister listened to the CTSI when it says that a self-financing enforcement model would potentially create a disincentive to provide regulatory compliance? That certainly seems to be the case with the current system around the display of fees. The fine acts as neither a disincentive for the businesses nor an incentive for the enforcement teams. The LGA pointed out that the Government’s theory that funds generated by fines will increase when non-compliance increases does not add up if companies close themselves down, only to re-emerge under a different name or structure in order to avoid a fine.

The CTSI also says that the costs of providing advice and guidance to a company that is subsequently compliant are not factored into the Government’s calculations. Of course, there was the issue raised by CTSI in our evidence session regarding the differences in the burden of proof and the framework of enforcement. The enforcers, in this instance the trading standards officers, will be required to prove offences beyond all reasonable doubt. What does this mean in practice for people—for families—who are already likely to be afraid about not securing the property that they want to live in and perhaps are under pressure to secure it because they have given notice on a prior residence, or are being thrown out of a property that they already reside in? Will this substantial basis of evidence encourage people to come forward, to make a complaint and seek redress? Let us remember that they are already in a significantly less advantageous position than the landlord or the lettings agent. They are not the experts in renting and even less so are they experts in the most recent legislative changes.

It goes back to the point I made earlier: the reality is that enforcement officers are far more likely to try to build up a stronger case with multiple complainants than deal with breaches on a single case-by-case basis. Does the Minister consider that this is serving tenants’ best interests? The remedy would not be sufficient in financial terms for the local authority, nor will the legislation be seen as fit for purpose by those it is intended to protect. Is he really content to preside over this? The CTSI says that most consumer rights breaches and the Estate Agents Act 1979 are obtainable on a balance of probability test. Why does he not consider amending the Bill to reflect this modest yet effective change? If it is the case that the higher the evidential requirement, the more work is involved and the more risk there is for the local authority, and the less likely it is that the Act will be easily enforceable, should he not just do the right thing and make the amendment now? I say that because one of the biggest frustrations of my constituents is around laws that are not enforced. Whether it is parking restrictions, dog mess or fly-tipping, they expect the rules to be fully and fairly applied. Where they are not, the blame comes back on an unfairly overstretched local authority, trying to do its best against the financial odds—financial odds that I know the Minister has recognised in previous comments that he has made.

I do hope that the Minister will take my comments on board. These are the views of royally chartered organisations, which work within the current legislative framework and can anticipate the difficulties of seeing this legislation in operation. It is only through proper enforcement with enforceable regulations that we can hope to see this law do everything the Minister has set out for it to do; otherwise, I am confident that it will be left wanting.

[Rishi Sunak]

There are in general three broad questions or buckets of comments. First, whether trading standards are the right institution to take on this task; secondly, prioritisation of resources for the things that trading standards have to do; and thirdly, a specific question about the burden of proof required for the penalties that are in place in this legislation. I will try to answer each of those three questions directly.

First, regarding whether trading standards are indeed the right body, which the hon. Lady questioned, there is unanimous agreement among leading industry bodies that trading standards are the logical choice. Indeed, the Chartered Trading Standards Institute itself, which the hon. Lady referred to, said that trading standards

“are well placed to enforce the ban”,

thanks to their local knowledge of landlords and letting agents.

[Melanie Onn]

Would the Minister accept that in the evidence we heard there was a reference to trading standards working closely with housing officers in particular, to better inform their local knowledge in an area that they may not have information relating to, because the trading standards authority has said that in terms of tenants they currently receive a small number of complaints in this area.

[Rishi Sunak]

I am generous in giving way, but in this occasion I may have been too generous, because I was just about to make that point. It is exactly because we recognise that in different areas there are different situations that we do not want to mandate a top-down approach. We have encouraged close co-operation. I do not want to pre-empt our debate on the next clause, which talks specifically about the powers for district authorities to enforce the provisions in the Bill. Also, on the particular question raised about client money protection and who ought to be the body enforcing that, 74% of respondents to the consultation said that that enforcement should primarily be by trading standards. It is important to note that trading standards can, under this legislation, discharge their responsibilities to the local housing authority, should they feel that is most appropriate for their area. I hope that addresses concerns on that point.

--- Later in debate ---

It is also worth noting that that was laid out in the draft Bill and there were, to our knowledge, no adverse comments either from participants or the Select Committee. It is also important to note that it is usual to require a criminal standard of proof for financial penalties that are issued as an alternative to prosecution. For example, it is a requirement for any regulations made under the Regulatory Enforcement and Sanctions Act 2008, to confer powers on regulators, to impose financial penalties for an offence, and is also the position for several other pieces of legislation, including the Housing and Planning Act 2016, the Housing Act 2004 and the Political Parties and Elections Act 2009.

[Melanie Onn]

I thank the Minister for his response. The suggestion that there has been unanimous agreement across professional bodies on TSOs does not stand up to the evidence we heard. In all the submissions we had in writing, concerns were raised about the level of training available for trading standards officers, the level of experience they have in this area and their expertise, and they may well be better assisted by other organisations.

[Rishi Sunak]

I would be grateful to know if the hon. Lady is aware of an industry body that does not believe that trading standards should be the enforcement agency for this legislation. If she could name that industry body, who else does it propose should be the enforcement body?

[Melanie Onn]

I am commenting based on the evidence we heard last week. We heard from the CTSI and the LGA, which both raised those concerns. It is not about not having trading standards involved, because they clearly have an area of expertise, but there were concerns about their level of expertise, experience, training and resources.

The issue of resources was repeatedly mentioned in the evidence we received in writing and verbally. I appreciate the points the Minister made about resources and about looking to Torbay as the standard bearer for all enforcement and revenue-raising operations. I presume that we will look to Torbay in the future as the arbiter of whether this legislation is working.

On the burden of proof, the Minister says that nobody raised issues about that in the Select Committee’s pre-legislative scrutiny. However, it has come to light more recently. The high level of the burden of proof is something that we have heard about and that industry bodies have raised as a concern, given what they are used to dealing with as trading standards officers. It would be an error for the Minister to dismiss those comments lightly.

[Daniel Zeichner]

My hon. Friend is giving a very good speech. I think we were all in the evidence session the other day when we heard from the CTSI, which made it very clear why it is so important that we get this right. My experience in this place in the last three years is that we have seen successive pieces of legislation that we are pretty sure are not going to get enforced. Does my hon. Friend agree that if they do not get enforced, there is no point in having them, and that undermines public trust in what we are doing? It is really important that this legislation is enforceable.

[Melanie Onn]

I thank my hon. Friend for making that point, which goes to the heart of this. There is no point in doing this if the legislation is not enforced or does not do what the Minister intends—namely, rebalance the relationship of power between tenants and landlords. Enforcement is key, because if rogue landlords do not fear that the fine or the potential banning order will reach them, why would they bother to worry about whether they are operating within the legislation?

[Helen Hayes (Dulwich and West Norwood) (Lab)]

On the Select Committee, we went to see the licensing scheme in Newham in action. One important feature of that scheme is that the council undertakes proactive enforcement work against properties it suspects are being let by landlords who have not yet registered. It is an important part of the resourcing requirement that councils need to make the scheme as effective as possible, but that has not yet been taken into consideration. Will my hon. Friend comment on that?

[Melanie Onn]

My hon. Friend makes an incredibly important point about being proactive and about the intention of trading standards officers or others to undertake that initial work, rather than just relying on the enforcement element of the legislation. I hope the Minister has heard those points, takes them seriously and receives them in the manner in which they are intended. We will not be pressing this matter to a vote, but we reserve the right to return to it on Report.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7

Enforcement by district councils

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

The clause places a duty on local trading standards authorities to enforce the ban on letting fees and the requirements relating to holding deposits. It gives district councils the power to enforce the provisions if they choose to do so.

Local housing authorities enforce other measures in private rented sector legislation, such as the provisions related to banning orders for rogue landlords and agents. We very much encourage close working between district and county councils in non-unitary authorities to ensure effective enforcement. That is why we are giving district councils that are not trading standards authorities the power to enforce this legislation. That will ensure that local housing authorities are able to take enforcement action should they become aware, while undertaking their other duties, of a landlord or agent breaching the provisions of the Bill.

District councils must have regard to any guidance issued by the Secretary of State or the lead enforcement authority. The investigatory powers available to a district council for the purposes of enforcing the Tenant Fees Bill are set out in schedule 5 to the Consumer Rights Act 2015, which the clause amends.

[Melanie Onn]

The Government included the clause following the Bill’s pre-legislative scrutiny. We understand that the devolution of powers between different tiers of local government is in the interest of promoting collaborative relationships with a range of stakeholders, but will the Minister explain how a district council will enable or access these powers?

The Bill provides district councils with the same powers as a weights and measures authority. The Government’s response to the Housing, Communities and Local Government Committee’s report on the Bill says that a district council may choose to be an enforcement authority, but the Committee’s recommendation refers to a weights and measures authority being able to delegate its powers to other tiers of local government where appropriate. Will the Minister explain what process he envisions district authorities having to go through order to be able to undertake enforcement roles in this context?

If weights and measures responsibilities are held at a county council level, and if additional funding for staffing or training has been directed there, but a district council wishes to undertake its own enforcement measures, will there be a requirement for that funding to be cascaded down? Or do the Government expect that funding bids will be made at the outset by those authorities that wish to be enforcers, and that there may then be overlap in the bidding and awarding of such funds?

The Committee’s report contained evidence that any system based purely on hypothecated funds would provide a challenging environment for councils, as it would not provide for up-front or proactive work. It is in the interests of local authorities, tenants, landlords and letting agents that fines are a last resort; it is the early work that will prove the most important.

[Rishi Sunak]

With regard to district councils enforcing the Bill, there is no special process that they need to go through; they have the same rights and powers as trading standards authorities, so they do not need any special permissions. They can get on and do that should they see fit.

With regard to the hon. Lady’s last point, just like trading standards authorities, an authority that enforces against the contravention of the Bill will of course keep any fines that are levied, which will help to fund that enforcement.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Financial penalties

[Melanie Onn]

I beg to move amendment 2, in clause 8, page 5, line 13, leave out “£5,000” and insert “£30,000”.

[The Chair]

With this it will be convenient to discuss amendment 3, in clause 8, page 5, line 16, leave out from “exceed” to the end of line 17 and insert “£30,000”.

[Melanie Onn]

We welcome the spirit of clause 8. We must seek to hit landlords and letting agents who act badly where it hurts if we are to change realities for tenants. However, the need to strengthen the financial penalties in the clause is twofold. First, we must always ensure that the penalty fits the seriousness of the breach and acts as a deterrent. Secondly, we need to recognise that, if the Government’s plan is for the regulation to become self-funding, fines need to be able to fund the enforcement of the legislation.

To make my point on this, I draw the Committee’s attention to the evidence given by the experts last week. Isobel Thomson from the National Approved Letting Scheme said:

“We carried out a survey of 42 local authorities in June last year, looking at the enforcement of the Consumer Rights Act 2015. Of those 42 local authorities, 93% had failed to issue a single financial penalty against a letting agent in the previous two years.

What are we going to be faced with with the fee ban? Enforcement really needs to come to the fore. The Government have mentioned that there will be a lead enforcement authority. We need to know who that is, how they are going to gear up and how they are going to be resourced. That is what I would like to see.”—[Official Report, Tenant Fees Public Bill Committee, 5 June 2018; c. 4, Q1.]

The NALS evidence is absolutely clear: without the resources for enforcement, there are concerns that the letting fees ban could have very little impact. That surely cannot be what the Government want to see.

There are others who fear that the lack of resources could prove a real impediment to the legislation functioning as intended. When I asked the LGA’s Councillor Blackburn what he felt could be done to strengthen the Bill so that it achieves its aims, he was quite clear. He detailed how the financing of the Bill was an issue:

“At the moment, £500,000 is promised to assist in the up-front costs of setting these schemes up. The average local authority trading standards budget is £671,000 a year, so that £500,000 spread across 340 local authorities is unlikely to fill the gap that exists. That is extremely important.”

There is also a capacity-building issue within the trading standards profession. As it is, 64% of trading standards authorities are reporting that they have difficulties in recruiting and retaining people, and that issue needs to be looked at nationally. The LGA stands ready to assist in that process and will work with the Chartered Trading Standards Institute, but there is a demographic time bomb in there as well, about the average age of trading standards officers…because of the overall financial pressures on local authorities, it is not seen as a long-term, safe career, if I can put it that way.”—[Official Report, Tenant Fees Public Bill Committee, 7 June 2018; c. 34-35, Q58.]

--- Later in debate ---

[Rishi Sunak]

After careful consideration of all the feedback received during the consultation and engagement process, the Government are of the view that the level of financial penalties provided in the Bill is the right one. Furthermore, the approach to financial penalties aligns with that in other housing legislation. Most would agree that a £30,000 fine for an initial breach of the ban, as the amendment suggests, is excessive and could cause significant devastation.

[Melanie Onn]

Can the Minister explain the circumstances in which he anticipates a £30,000 fine will be imposed against an initial offence?

[Rishi Sunak]

My understanding of the amendment tabled by the hon. Lady is that that is what it proposes—an initial breach of the ban would be £30,000.

[Melanie Onn]

But what about in the Minister’s version?

[Rishi Sunak]

In the Government’s version, it would be £5,000, and that is what we are discussing. My understanding of the hon. Lady’s amendment is that the financial penalty for an initial breach would be £30,000 rather than £5,000. We propose to leave it at £5,000. I am happy to take an intervention if she wants to clarify.

[Melanie Onn]

indicated dissent.

[Rishi Sunak]

No—okay.

The Government’s aim has been to provide a sufficient deterrent for an initial breach of the ban that still allows landlords and letting agents who may inadvertently commit a breach not to be disproportionately penalised. We therefore resist amendments 2 and 3.

As hon. Members have noted, breaches of legislation related to letting agents, such as the requirements to belong to a redress scheme and to be transparent about letting fees, are subject to a fine of up to £5,000. However, we have listened to concerns that a £5,000 fine may not be enough of a deterrent for some agents and landlords, so clause 8 proposes a financial penalty of up to £30,000 for a further breach of the ban.

Importantly, that upper limit is consistent with the higher rate of civil penalties introduced in April 2017 under the Housing and Planning Act 2016. Given that the repeated charging of fees is a banning order offence, we firmly believe that the level of penalty needs to be consistent with the legislation under that Act, which brought banning orders into force.

It is too early to argue that the higher level of financial penalty at £30,000 has not been successful in offering a more significant deterrent to non-compliance. In the evidence that Alex McKeown of the Chartered Trading Standards Institute gave last week, she said that she believed that £30,000 would act as a “significant deterrent”.

[Rishi Sunak]

I thank my hon. Friend for another thoughtful and measured comment. He is absolutely right: we are not in the business of demonising particular groups of people; we are interested in having a fair and functioning market. The balance that that requires has been a focus throughout all the deliberations on the Bill.

[Melanie Onn]

Would the Minister accept that the principle of the fines is not to demonise anybody, but to act as a successful deterrent?

[Rishi Sunak]

Indeed, I was quoting the evidence from the Chartered Trading Standards Institute that said that £30,000 was a significant deterrent.

--- Later in debate ---

[Melanie Onn]

If the CTSI says that £30,000 is a suitable deterrent, does the Minister think that that should be the minimum?

[Rishi Sunak]

Again, I fear that I have been too generous in giving way. I was about to make the point that it should not be forgotten that an agent or landlord convicted of an offence under the ban is liable for an unlimited fine, if that is the route of enforcement that the enforcement agency wants to go down; £30,000 is the alternative to a criminal prosecution where fines can be unlimited and people can be subject to banning orders, which I am sure all hon. Members agree are extremely serious and significant deterrents. The guidance that we will produce will support local authorities in determining the level of the penalty in any given case. I urge the hon. Lady to withdraw her amendment.

[Melanie Onn]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

We have aimed to be ambitious and tough in our enforcement approach to provide a sufficient deterrent to the continued charging of fees. Clause 8 sets out the fact that a breach of the fees ban will be a civil offence with a financial penalty of up to £5,000. However, if a further breach is committed within five years, that will amount to a criminal offence. In such a case, local authorities will have discretion on whether to prosecute or impose a financial penalty. Clause 8 provides that enforcement authorities may impose a financial penalty of up to £30,000 as an alternative to prosecution, as we have discussed. The level of fine reflects the feedback that we received during the consultation period. I will not rehash the arguments for why we think that is an appropriate level.

A financial penalty cannot be imposed if the landlord or agent has failed to return the holding deposit because they have received incorrect information about the tenant’s right to rent property in the UK. That reflects a recommendation from the Select Committee on this particular point. Before imposing a financial penalty, enforcement authorities must be satisfied beyond reasonable doubt that the landlord or agent has breached the ban on charging tenant fees. Only one financial penalty may be imposed per breach and an enforcement authority can impose a penalty for a breach outside its area. This clause should be read with schedule 3, which sets out the procedure to be followed by an enforcement authority after it imposes a financial penalty. Financial penalties, I believe, will act as a serious deterrent to non-compliance.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Schedule 3

Financial Penalties Etc

Question proposed, That the schedule be the Third schedule to the Bill.

--- Later in debate ---

[Rishi Sunak]

The clause is straightforward and contains a power for the Secretary of State to make regulations amending the amount of financial penalty that a local authority can change. This is purely to reflect changes in the value of money.

Permitting local authorities to levy financial penalties of up to £30,000 for breaches of the regulations on fees is intended to serve as a significant deterrent to agents and landlords. Including a power to amend the maximum penalty ensures that the Government can address any issue where the deterrent effect has not kept pace with inflation. We consider that regulations by negative procedure are appropriate in this case, since the changes are intended only to reflect the value of money, not to alter the intent or effect of the legislation.

Subsection (3) enables the Government to make transitional, transitory or saving provisions in relation to the uprating, in order to ensure that there is a smooth transition from one upper limit to another. In summary, the clause will enable the legislation to remain relevant over time.

[Melanie Onn]

It is crucial for this policy and for the hopes within it to be impactful that the fines are sufficient to act as a deterrent. Opposition Members have raised concerns throughout Committee stage that they might not be.

Any punishments for wrongdoing by rogue landlords and letting agencies must be sufficient to be seen as more than simply the cost of doing business. That is not simply my opinion but that of a landlord advocacy group. Indeed, Richard Lambert, chief executive of the National Landlords Association, said earlier this year:

“The NLA supports making the punishment fit the crime because too many of the criminals who operate in the private rented sector”—

it is somebody within that sector who said this—

“see the current level of fines as little more than a cost of doing business and we would welcome greater consistency between civil and criminal penalties.”

As is clear from the amendments we have tabled, we have concerns that the Bill will not go far enough in ensuring that its aims can be fulfilled. The fines are a clear example of where the tension between aims and the probable reality of any impact is at its greatest. If fines can be as little as £5,000, as with the penalties for the display of tenants’ fees, that seems to act as a minimal deterrent to landlords. Surely the best that we should hope for is that those fines encourage the sector to operate well within that framework, and that they do not have to be levied. In the more lucrative markets, that is a very small sum. For larger landlords, it is small fry.

To add to that hypothetical, trading standards and local government up and down the country have had their budgets decimated. As we heard at the evidence session last week from Councillor Blackburn of the Local Government Association, as I have mentioned, there has been a 56% drop in trading standards enforcement officers since 2009—more than half of them have been lost. It is a vital sector, which will enforce the Bill, but without good trading standards officers, there is a real risk that the legislation, for all its good intentions, could lack impact on the ground.

There is a lack of expertise and resources, and those problems seem likely to get worse. Rogue landlords and agencies are likely to factor the likelihood of any claims being made against them into their business calculations, as Richard Lambert of the NLA suggested. As things stand, their calculations might suggest that taking a risk is worth it, particularly in areas where tenants are not as clued up, or where local authority services and budgets have been really affected.

Any changes need to be made by means of new primary legislation, but perhaps that is not the ideal approach; perhaps the Minister or the Secretary of State should be able to look at the matter again in conjunction with evidence about how the enforcement process has been going, and whether the fines are sufficient sticks to encourage that good practice across the board. It is clear that the Government want the policy to be part of transforming letting to make the tenant’s life much fairer than it is under the status quo, but for that to be done, there needs to be some real, critical engagement with the facts on the ground from the Government in future. For the legislation to have its proposed impacts, it is key that the Minister has an open mind about how it is best put into practice. The punishments have to fit the crime, and they need to be responsive to the realities of the letting market, which means that there must be space for rethinking that which is required.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Clause 10

Recovery by enforcement authority of amount paid

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 11 stand part.

--- Later in debate ---

[Rishi Sunak]

We want to ensure that when a tenant has paid an unlawful fee, they are repaid as soon as possible. Clause 10 enables an enforcement authority to require a landlord or letting agent to repay the tenant or other relevant person any outstanding prohibited payment or holding deposit. Similarly, if the landlord or agent required a relevant person to enter into a contract with a third party, they may be required to pay compensation. That may be ordered if the local authority imposes a financial penalty for a breach of the Bill. It does not apply if the tenant has made an application to the first-tier tribunal to recover the payment or if the amount has already been repaid.

Clause 11 enables the enforcement authority to require the landlord or agent to pay interest on any payment referred to in clause 10. That ensures that the agent or landlord does not receive any financial benefit from a prohibited payment.

[Melanie Onn]

For the Bill to have an impact, it has to be possible for prohibited payments to be recovered, and for those enforcing the legislation to fulfil their roles. We have already touched on our concerns about whether there are sufficient resources for local authorities and trading standards to function as the Government would like. These clauses highlight a particular potential issue in the legislation as it stands. The need for a criminal level and burden of proof for the civil financial penalties discussed in this Bill is a flaw that could well hamper its effectiveness. We all want to see legislation that is effective, that leaves tenants and landlords clear on what is permissible and what is not, that ensures that rogue traders are dealt with effectively, and that leaves tenants able to bring claims when things do go wrong.

--- Later in debate ---

[Rishi Sunak]

It is vital that strong action is taken against irresponsible agents and landlords who persist in charging unlawful and unfair fees to tenants. This will act as a strong deterrent and better protect tenants. Clause 12 provides that a landlord or letting agent who breaches the ban on fees commits an offence if they do so within five years of conviction or imposition of a financial penalty for an earlier breach. Agents and landlords who commit an offence are liable on conviction to an unlimited fine. An enforcement authority has, in each case, the discretion to decide whether to impose a financial penalty of up to £30,000 or to pursue prosecution. A financial penalty issued as an alternative to prosecution does not amount to a criminal conviction. Subsection (6) amends the Housing and Planning Act 2016 to provide that an offence under the clause is a banning order offence, which means that if a landlord or agent is convicted of an offence a local housing authority may apply to the court to ban them from letting housing and/or acting as a letting agent or property manager in England for at least a year.

In our consultation there was strong support for prosecuting and/or banning repeat offenders. We have listened, and the clause shows that we are serious about cracking down on rogue operators. If the court makes a banning order, the local housing authority must add the landlord or letting agent to the database of rogue landlords and property agents established under the 2016 Act. By giving local authorities the power to take robust action against the worst operators we better protect tenants and ensure that reputable agents and landlords are not undercut or tarnished by rogues.

Clause 13 provides that, as well as the business itself, an officer of a body corporate or a member with management functions can be prosecuted for a breach of the ban on letting fees. The clause addresses issues raised by the hon. Member for Croydon Central and is designed to ensure that individuals with responsibility for repeatedly breaching the ban on tenant fees can, along with their organisations, be prosecuted and banned from operating. That will help to prevent the establishment of so-called phoenix companies, whereby an individual moves from a firm that has been banned and opens up a new business only to continue disreputable practices.

[Melanie Onn]

I want to make a couple of points. On the rogue landlords database, have the Government conceded that they will open it up, making it far easier for tenants to assess whether their potential landlord is someone from whom they wish to rent a property?

The provision regarding phoenix companies is incredibly important and I am pleased that the Minister has taken the opportunity to include it in the Bill, but is he confident that it will work in practice? I have seen such companies operating in other industries, and I am concerned about whether individuals who are overseas can be prosecuted. Will it be easy to prevent such individuals from continuing to be landlords within phoenix companies? Although an individual may be named as part of a company in Companies House records, a phoenix company can arise in the name of someone else with whom that person has a close association. Parent companies and subsidiaries can be established and registered in other names, but an individual can have an association with each of the subsidiaries of a parent company that might not have direct influence on or knowledge of what those subsidiaries are doing. That might come about regularly, so on whom will justice be brought to bear for breaches of legislation?

[Rishi Sunak]

I am glad that the hon. Lady generally welcomes the approach to tackling something that I think we all want to see prohibited. We are confident that the provisions will work. Overseas landlords and letting agents are subject to all the existing requirements for being a member of a redress scheme, and we have consulted on those provisions and will extend them. It is mandatory for letting agents to be a member of a redress scheme. Without such membership they cannot function in the market and will be in breach of their legal obligations. Whether people are overseas or in the domestic realm, there are multiple levels of protection and they must comply with the regulations in order to let property.

--- Later in debate ---

[Rishi Sunak]

This clause, too, is relatively straightforward. It places a duty on enforcement authorities to notify other relevant authorities when taking action. That is necessary for a number of reasons, each of which the clause provides for. First, if a local trading standards authority takes action outside its local area, or a district council takes action, the relevant local trading standards authority is notified and work is not duplicated. The relevant local trading standards authority is then relieved of its enforcement duty, unless it is subsequently informed that the proposed enforcement has not taken place. Secondly, a record can be kept by the lead enforcement authority where a financial penalty has been imposed, withdrawn or quashed on appeal. That will inform whether any subsequent breach is dealt with as an offence. A trading standards authority must notify the local housing authority if it has imposed a financial penalty or made a conviction. That ensures that the relevant information is communicated to the right authorities at the appropriate time. As such, the clause has a key but simple role in ensuring that the enforcement of the legislation is carried out effectively and all relevant parties are aware of what is happening on the ground. I urge the Committee to support the clause.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15

Recovery by relevant person of amount paid

[Melanie Onn]

I beg to move amendment 13, in clause 15, page 10, line 36, after “that” insert

“, with the consent of the relevant person,”

This amendment provides that the consent of a tenant or the person acting on their behalf or who has guaranteed to pay their rent must consent to the use of a prohibited payment for rent payments or tenancy deposit payments.

Under amendment 13, the tenant would have to consent to their holding deposit or a prohibited payment being used to cover rent or deposit costs. We do not object to the principle of subsection (6), which the amendment seeks to change. The payment of a tenancy deposit or a prohibited payment into a deposit or as part of rent is entirely sensible and in many cases will be an optimal arrangement for both the tenant and the landlord. In the case of the holding deposit, this can be an important agreement between the tenant and the landlord that reduces the burden of paying a deposit, rent in advance and holding deposit all at the same time. Allowing a tenant to put that money towards a deposit can make it easier to pay what for many is a high fee and a significant amount, and prevent the holding deposit being held for as much as a week after an agreement has been made, when the tenant is likely to be short of money. We are therefore glad to see the principle in the Bill.

However, as the Bill stands, the landlord will have discretion as to whether to apply that payment. Although that does not seem to be a significant problem at first, and in many circumstances may not cause a problem, allowing landlords to do so indiscriminately could lead to difficulties for tenants in certain circumstances. The first problem arises from the fact that many people pay their rent on a monthly basis, through a fixed-sum standing order. Although standing orders are amendable, that can be a time-consuming process for the tenant. To deduct the prohibitive fee from a month’s rent, they must amend the standing order twice to account for the change. Government Members might feel that that is quite a trivial point, as making changes to bank payments is part of daily life, but we believe it will result in the tenant having to go out of their way for something that is not their fault. We must remember that when considering this amendment. It would be wrong for tenants to end up doing time-consuming work to receive their money in a timely and orderly fashion, given that they are not the ones who charged the fee.

A second problem that we seek to address with the amendment is how subsection (6) would apply to people with a joint tenancy. Taking the example of a joint tenancy in which the tenants pool the rent in one account and pay it to the landlord as a lump sum, if one tenant loses their key and is required to pay a default fee, which is later deemed to be prohibited, would the landlord be able to deduct that from the rent? In that scenario, taking the prohibited fee from the rent would not be a simple way of paying back the tenant. They paid the fee from their own pocket, but the rent deduction comes out of a pool for which all tenants are jointly responsible. Given that the deduction would not automatically be tied to the person who is entitled to it, the process could be abused by other people who are part of the pool. Although in most cases such agreements are set up by families or a close group of friends, it should not automatically be assumed that it is an easy or preferred way for the relevant person to receive their money.

It is their money. I have set out several scenarios, but a significant rationale for this amendment is the principle. Put simply, it is the tenant’s money, and they should have the final say about what happens with it. As it stands, subsection (6) allows landlords to do what they want with the tenant’s money that they have been required to give back and ought not to have had in the first place. I hope that Committee members will recognise that this is a practical and fair amendment. If someone has been wronged, it should be made as easy as possible for them to receive the repayment to which they are entitled.

[Rishi Sunak]

An important principle of the Bill is that any unlawful payment can be recovered in full by the tenant, as it is their money. Tenants can do that either by seeking direct recovery from the landlord or agent, or by going to the local authority or applying to the first-tier tribunal. It is important to note that they can also go to their agent’s redress scheme if they are seeking the recovery of a prohibited payment from an agent. Offsetting the prohibited payment against the rent or deposit will ensure the tenant is not left out of pocket. It is best practice for a landlord or agent to ask the tenant, or any person guaranteeing their rent, whether they are happy for any unlawfully paid fee to contribute towards a future rent or tenancy deposit payment. We are planning to encourage that through guidance, and we expect that most landlords and agents will do that. We do not currently see the need for specific provision to that effect in legislation.

That said, I have been considering this broad area for a while, and I want to ensure that what we have in place works. I hear what the hon. Lady said. The clause was designed to ensure that the repayment process is relatively automatic. We did not want to put extra steps, which might delay things, into the process. We are looking at some of the areas that she mentioned. With that in mind, if she will bear with me as I look through those things, I ask her to withdraw the amendment.

[Melanie Onn]

I am glad the Minister is listening. He said that the automatic expectation is that, to seek redress, tenants will go through a first-tier tribunal or go to a local authority just to get back what is theirs, which is in the hands of the landlords, despite the fact that the Minister clearly thinks it is best practice for landlords to have a good relationship with tenants. It is not inconceivable that the relationship has broken down if it is deemed that a prohibited payment has been made.

I was going to press the amendment to a vote, but given that the Minister has requested that we bear with him, I will not do so. I will hold him to his word. I will withdraw the amendment, but I reserve the right to table it again if we are not satisfied with what he comes back with. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Melanie Onn]

I beg to move amendment 14, in clause 15, page 11, line 4, leave out

“all or any part of”,

and insert—

“a sum of money not less than and not more than three times”.

This amendment would enable tenants to claim back prohibited payments without assistance from the local authority, along with compensation from the landlord or letting agent worth up to three times the fee paid.

The amendment would entitle tenants who seek to claim back prohibited payments without assistance from the local authority to compensation from the landlord or letting agent worth up to three times the fee paid. During the evidence sessions, we heard often how the Bill needs more resources to enforce the new provisions that it will bring in and to fully achieve its aims. One thing necessary to improve the enforcement of the Bill is to provide further encouragement to tenants to self-report and to call out the use of prohibited fees by their landlords.

Trading standards will face practical difficulties in enforcing the Bill. They face a lack of resources across the country, which has meant their losing, as we have said, 56% of enforcement officers since 2009 and therefore lacking the expertise with letting agents that they would like. There is therefore a need to look at self-reporting as an addition to trading standards, and the addition of clause 15 to the Bill shows an acknowledgment of that by the Government. The amendment would strengthen that by providing tenants with compensation, when making a claim, for three times the initial sum charged.

A three times figure is already used to enforce deposit protection regulations, so both the three times figure and the idea of compensation for mistreated tenants has a basis in current property law. The amendment would act as an extra deterrent to landlords’ and letting agents’ breaking the law, by increasing the level of punishment, and would provide sufficient motivation and compensation for tenants to go through what could be a stressful and time-consuming tribunal process. As the amendment would help to enact the purpose of a Bill that both Government and Opposition want to be effective, I hope that both will accept it and thereby increase the enforcement power of the Bill.

[Rishi Sunak]

Tenants absolutely should get back any unlawful payments in full, whether direct from the landlord or agent, via the enforcement authority or through an order of the first-tier tribunal. However, we do not think it appropriate for the tenant to receive further compensation, given that the landlord or agent is liable for a significant financial penalty in addition to reimbursing the tenant.

It is also worth noting that the Bill provides further protection to tenants by preventing landlords from recovering their property, via the procedure set out in section 21 of the Housing Act 1988, until they have repaid any unlawfully charged fees. To add in compensation, as the amendment suggests, risks penalising agents and landlords multiple times for the same breach, which is not fair. We believe that our existing approach strikes the right balance and offers a serious deterrent to non-compliance. I ask the hon. Lady to withdraw the amendment.

[Melanie Onn]

Unfortunately, I will not withdraw the amendment. I do not feel entirely satisfied by the Minister’s comments on this and I do not think that he has addressed the issues around the negative position that tenants find themselves in compared with landlords, so I will press the amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Rishi Sunak]

Clause 16 is another straightforward clause. It provides that an enforcement authority such as a local trading standards authority can help a tenant recover unlawfully charged fees or a holding deposit that has been unlawfully withheld. That is because we recognise that tenants might require or would like assistance to navigate the county court process. The enforcement authority would help a tenant or other relevant person to make an application to the first-tier tribunal: for example, by providing advice or by conducting proceedings.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clause 17

Restriction on terminating tenancy

[Melanie Onn]

I beg to move amendment 15, in clause 17, page 12, line 3, at end insert—

“(5A) No section 21 notice may be given in relation to the tenancy until the end of a period six months from:

(a) the day after the day on which the final notice in respect of the penalty for the breach was served; or

(b) the day after the day on which any appeal against the final notice is determined or withdrawn.”

This amendment would protect tenants against the issue of a section 21 notice when a penalty has been applied in relation to a breach under Clauses 1 and 2 of this Bill.

I believe the amendment would strengthen the provisions in the clause. As the Bill stands, landlords are unable to serve section 21 notices while there is still an outstanding balance of a prohibited payment or holding deposit to be repaid to the relevant person. The principle behind the clause is welcome. It would be wrong for a tenant to be served a section 21 notice while a landlord has failed to serve their obligations in terms of repaying money that was taken incorrectly. The same principle guides the inability of landlords to serve section 21 notices if they do not properly protect a tenant’s deposit, and more recently if they do not carry out their obligation to undertake any necessary improvements.

Such extra protections should improve a tenant’s rights and mean that rogue landlords cannot get away with retaliatory evictions if a tenant challenges bad practice. However, too often the principle is not matched in practice. This can be seen in the enforcement of the Deregulation Act 2015, which led to the banning of revenge evictions if a landlord was ordered to carry out repairs by a local council. A 2014 study by Shelter estimated that 200,000 private renters had been served with an eviction notice after complaining to their landlord about a problem with their home. The legislation should have led to significant action, given how widespread the problem of retaliatory evictions is, yet more than half of councils in the UK did not use the new powers in the Act a single time within a year of enactment. There is clearly a disconnect between what leaves this place as law and the reality of what is actually enforced.

Protection against section 21 evictions is vital for tenants who fear that standing up to a landlord could lead them to be evicted. It is worth remembering what landlords have to do to be exempt from serving a section 21 notice. These are landlords who do not protect tenants’ deposits, do not provide repairs in a timely manner, and who will charge prohibited fees under this new Bill. So these landlords have, at best, already shown a lack of knowledge as to their rights and responsibilities, and at worst are rogue and exploitative to the point where they will cross legal lines to avoid their obligations. This comes to the heart of why enforcement in this area is so important and needs to be done far better under current housing regulations, and needs to be enhanced in the Bill as it stands.

We know that the vast majority of landlords comply with regulations and discharge their obligations in a timely and professional manner. Those landlords would never threaten retaliatory evictions and would ensure that they followed the rules regarding serving a section 21 notice if needs be, but there are too many rogue landlords who look to shirk their responsibilities and exploit tenants at every opportunity. If a rogue landlord is willing to take a chance on a tenant’s not picking up on and reporting a prohibited fee, or to threaten a tenant with eviction when they ask for repairs, why would they suddenly act in a fit and proper manner when it comes to serving a section 21 notice?

During the evidence sessions, the NUS representative made the point that students often do not know their rights. They are often first-time renters and many will not have the experience of looking over a contract or challenging actions that are unlawful, which means that they may not be comfortable taking action against activities such as charging a prohibited fee or serving a section 21 notice. That could be particularly true if the Act required a tenant to take a landlord to court to prove that a section 21 notice was invalid, so tenants may end up leaving under an invalid section 21 notice when there is no reason for them to do so.

Too many rogue landlords get away with outlawed acts because there is not enough enforcement of the current laws that prohibit bad practice. The Government should consider carefully the evidence we heard in last week’s evidence sessions. It is fair to say there was a general feeling that there is not enough enforcement power in the Bill for it to do all the good it could do.

Enforcement could come through several different channels, such as increasing fines to increase the deterrent that rule breakers face, reimbursing a lead enforcement authority or reducing the barriers that tenants face if they report a landlord. Amendment 15 would mean that tenants were safe from retaliatory evictions that could result from reporting a landlord who charged a prohibited fee, for six months after the final notice of the penalty for the breach is served or the appeal is determined or withdrawn.

The amendment arises from what should be a guiding principle of good law making: in introducing new laws and regulations, we should learn from the mistakes of similar legislation and build a Bill that counters those flaws and pitfalls. To ensure that this Bill hits the ground running, it is important to look at other pieces of legislation that govern landlords to see where they have failed in the past.

We must learn from the effect that a lack of protection from eviction had on the repair of properties that were not in a fit or liveable state. As a result of that, tenants ended up living in houses with no protection from draughts, large damp problems and faulty electrics. No one should live in those conditions in this country, but tenants feared that if they complained about those problems, their landlord would serve them with a section 21 notice rather than carry out the repairs. Tenants were left with a choice between putting up with uncomfortable, unsafe and uninhabitable conditions and pressing their landlord to fix those issues when the landlord held the power to kick them out. No one should have to make that choice, because no one should be penalised for wanting a house that is habitable. Similarly, no one should have to make the choice between flagging a prohibited payment and keeping their landlord happy so that they do not get served with a section 21 notice.

To prevent tenants from retaliatory evictions when repairs are necessary, the Deregulation Act 2015 prevents landlords from serving a section 21 notice for six months after the council orders repairs to be made. Although there are problems with the enforcement of that Act, the principle of it acts to prevent retaliatory evictions. In particular, it prevents the serving of a section 21 notice for six months after the serving of an improvement notice, which gives tenants the same protection as they would have at the start of any tenancy. That is an extremely important addition to tenants’ rights, which helps to remove a barrier to self-reporting. There is too little extra protection for self-reporting tenants if the law simply states that the landlord can serve a section 21 notice the second they have managed to fulfil the obligation that they were reported for. That also covers self-reporting tenants who could be subject to retaliatory evictions if they report a landlord.

Just as it was sensible to extend the provisions concerning revenge evictions for repairs in the 2015 Act, it is sensible to learn from the past situation around repairs now and get the Bill right at the first time of asking, by bringing it into line with the thinking of that previous legislation and adding a six-month period in which landlords cannot serve a section 21 notice after a breach of the Bill.

[Rishi Sunak]

The Bill already protects tenants by preventing landlords from recovering their property via section 21 of the Housing Act 1988 until they have repaid any unlawfully charged fees. This approach is in line with legislation that already applies where the “How to rent” guide has not been provided or a landlord has not secured the required licence for a house in multiple occupation, so there is good precedence for our approach.

Further, clause 4 ensures that any clause in a tenancy seeking to charge tenants a prohibited fee is not binding on the tenant, so we do not consider that further provision is needed. The wording of this amendment would specifically mean that if a landlord appealed against the imposition of a financial penalty and this was upheld, that landlord would be restricted from using the no-fault eviction process for six months after the appeal was determined. That clearly is not fair. I therefore ask the hon. Lady to withdraw the amendment.

[Melanie Onn]

I thank the Minister for that response. It is unfortunate that he is not prepared to accept the amendment. It may well be the case that landlords will happily give people back the money they owe them and then still decide that they are troublemakers and seek to serve an eviction notice against them. While I accept the Minister’s comments regarding a landlord’s appeal, I think this is something that he should look at. If the Bill is about increasing and protecting tenants’ rights, this is a prime opportunity to do so. Despite that, I am happy not to press the amendment, but I reserve the right to discuss this issue further on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

Clause 17 has been included following a recommendation specifically from the Select Committee during pre-legislative scrutiny of the draft Bill, and I therefore hope that it commands broad support. It ensures that a landlord cannot evict an assured shorthold tenant via the section 21 no-fault eviction procedure if the landlord has previously required a tenant to make a prohibited payment and failed to repay this payment or apply it to the rent or deposit. We agree with members of the Select Committee that this affords tenants additional protection and serves as a further deterrent to non-compliance for agents and landlords.

Similarly, a landlord cannot use a section 21 procedure if they have breached the requirement to repay a holding deposit. This clause is intended to establish a further layer of protection and security for tenants and to act as a deterrent to landlords. The approach mirrors that used to promote compliance with other housing legislation, such as licensing for houses in multiple occupation and the requirements to give tenants a copy of the “How to rent” guide and valid gas safety certificates. I beg to move that the clause stands part of the Bill.

[Melanie Onn]

We have made our concerns around this clause quite clear, and we reserve the right to come back and discuss it on Report. I sincerely hope that the Minister’s intention does work in practice. I think he is applying some of the principles to landlords who would never wish to be in breach of any of this legislation, and he is not considering fully the issue of rogue landlords, who are the ones we are trying to tackle.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill.

Clause 18

Duty to publicise fees on third party websites

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 19 and 20 stand part.

Tenant Fees Bill (Fifth sitting)

Melanie Onn Excerpts

Committee Debate: 5th sitting: House of Commons
Tuesday 12th June 2018 Public Bill Committees

[Rishi Sunak]

Clause 29 deals with the financial provisions of the Bill, which we have already discussed at some length, so I shall be brief. The Government intend to provide funding of up to £500,000 in year one of the policy to support local authorities in implementation and up to £300,000 per year for the lead enforcement authority.

Clause 30 deals with the application of the Bill to the Crown. The Bill will apply in relation to the tenancies of those Crown interests that are capable of granting an assured shorthold tenancy but the Crown will not be criminally liable for any breach, as is customary. I am pleased to tell the Committee that the Queen’s consent has been granted.

Clause 31 sets out the territorial extent of the Bill, which is, in part, England and Wales, and in part, England and Wales, Scotland and Northern Ireland. As the Bill will apply in relation to housing in England only, and housing is a devolved matter in relation to Scotland, Wales and Northern Ireland, the latter perhaps requires some explanation. The amendments made by clauses 6(6), 7(4) and 24(10) apply the investigatory powers set out in schedule 5 of the Consumer Rights Act 2015 to authorities enforcing the provisions of this Bill. In line with that Act, they therefore have UK-wide extent, although the application of this Bill is England-only.

Question put and agreed to.

Clause 29 accordingly ordered to stand part of the Bill.

Clauses 30 and 31 ordered to stand part of the Bill.

Clause 32

Commencement

[Melanie Onn (Great Grimsby) (Lab)]

I beg to move amendment 20, in clause 32, page 21, line 17, leave out from “force” to end of subsection (1) and insert

“on the day on which it is passed.”

This amendment would bring the Act into force on the day it is passed.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 21, in clause 32, page 21, line 21, leave out subsection (3).

This amendment is consequential on Amendment 20.

Clause stand part.

[Melanie Onn]

The amendments would alter the Bill by making the provisions come into force on the day of enactment, rather than leaving them at the discretion of the Secretary of State and when he chooses to bring a statutory instrument forward. The Government’s rationale behind the Bill was that it would save tenants millions of pounds and make the market fairer and more transparent. That is a principle we have long supported. However, the potential for a delay in the enactment of legislation surely flies in the face of such an intention. Although we welcome the legislation, we cannot see it as the end of the road for measures to improve the situation that private renters all too regularly find themselves in. There are aims in the Bill that all of us in this room support, because we know how much this is costing tenants and how confusing the housing market can be, but we need the Bill to come forward and make a positive change as soon as possible.

Right now, we are in the middle of exam season across our schools, colleges and universities. That means that in around two to three months, hundreds of thousands of ex-students and graduates will be taking their first steps in their new career. For many of those new graduates, that will mean moving away from home and, potentially, facing the rental market for the first time while holding down a full-time job. People in this group are exactly the type that the Bill should do the most good for.

Unexpectedly high fees can cause huge problems for those who are moving for the first time to start a job. For many at the moment, that means finding large amounts of money before they can even start to find employment, as they will have to pay tenant fees on top of a significant deposit and the first month’s rent. That can easily run into thousands of pounds for people who might have had little income to call on to get that sort of money, or even no income at all. That might mean that people in such a scenario have to turn down dream jobs or graduate placements because they simply cannot afford to move close to work. That impacts on the country as a whole.

Those costs are highest in our capital, which is where many of those dream jobs and placements will be, but people from poorer backgrounds in our northern towns and cities, who are unable to call on family for help in affording their deposits, might find that hurdle too high to overcome. That means that some of our best and brightest will miss out on the jobs and opportunities that are afforded to people who are able more easily to commute to London from a relative’s home, or who can call on family to support start-up renting costs.

This process will happen again very shortly: many graduate jobs start in September, although others go straight on the back end of school, college or university and will start as early as next month, so we should ensure that the Bill is in place for that cohort of people to enable us to prevent yet another year of unfair tenant fees and high deposits, which present such an affordability problem for many first-time renters and graduates.

As well as providing a better deal for tenants, setting a fixed date now for the Bill to come into force would provide certainty for landlords and letting agents by giving a clear set date from which they would have to comply. I understand that the decision not to specify such a date in the Bill is not a usual one, so perhaps the Minister will explain. At the moment, that point is simply to be defined by way of a statutory instrument when the Secretary of State so chooses. That means that landlords and letting agents will have no idea when they will have to stop charging prohibitive fees and tenants will have no idea when they will be entitled to challenge a fee.

I cannot consider the reason for delay in implementing the legislation to be justified in any meaningful way. The Minister has said that work is already under way on guidance. Therefore, it must be possible to get the guidance produced, published and circulated in a speedy fashion, so that tenants would be protected at the earliest opportunity. If the Minister feels that that is not possible, he should explain exactly why tenants will continue to be penalised while the Government get their act together. Perhaps trailing an implementation date now—with Government-led advertising and awareness-raising ahead of the duties’ coming into force, a bit like with the general data protection regulation rules—would provide for readiness across the sector and local authorities.

[Rishi Sunak]

We, like many tenants, are keen for the legislation to come into force as soon as possible, but we have to strike a fair balance between protecting tenants and allowing landlords and letting agents adequate time to become compliant with the legislation. The ban is not about unfairly penalising landlords and letting agents or driving them deliberately out of business. Letting agents should be reimbursed for the services they provide, but that must be by the landlord rather than by the tenant.

If commencement began the day the Bill was passed, as the amendment suggests, letting agents would have no time to renegotiate their contracts with landlords, which would have an adverse effect on their business model. We propose that there should be a fair period—a few months—to allow for that renegotiation and adjustment to happen. We are also taking steps now to engage with landlord and agent groups to ensure that they are taking steps themselves to prepare for the legislation coming into force. I ask that the amendment be withdrawn.

[Melanie Onn]

The Minister says he is keen for the legislation to be brought into force, but he does not seem to be taking decisive action, other than offering us a few months, which is particularly imprecise. It is unrealistic to suggest that letting agents cannot start negotiations when they know that the Government’s stated intention is going through Parliament.

[Rishi Sunak]

I gently point out that the Government’s approach is to have a precise date, and allowing them a few months to decide enables them to do that. The amendment specifies that the Bill would come into force on Royal Assent—that parliamentary process could take place be on any particular day—whereas the Government’s approach is to allow some time after Royal Assent so that they can set a specific day for all communications and so on. That provides the sector and tenants with greater precision than having an indeterminate day that is out of the control of Ministers, Government or anyone else. The hon. Lady’s amendment would result in the parliamentary timetable deciding the date of enforcement.

[Melanie Onn]

I am confident the Minister will have the ear of the Leader of the House when it comes to enacting the Bill. He says that he is confident that the sector will be provided with certainty and that that will happen within a matter of months, but perhaps he could prescribe whether it will take six, eight or 10 months.

[Rishi Sunak]

At least a few months.

[Melanie Onn]

The Minister is ready to say a few months. I reserve the right to return to the issue, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 32 ordered to stand part of the Bill.

Clause 33

Short title

Question proposed, That the clause stand part of the Bill.

[Rishi Sunak]

Clause 33 sets out the short title of this legislation, which is to be the Tenant Fees Act, and as such I hope it will stand part of the Bill.

Question put and agreed to.

Clause 33 accordingly ordered to stand part of the Bill.

New Clause 2

Transferable deposits

“The Secretary of State may by regulations made by statutory instrument amend paragraph 2 of Schedule 1 to make provision which enables a relevant person, at the conclusion of a tenancy, to transfer all or part of a tenancy deposit from the landlord or agent with whom that tenancy was held to a second landlord or agent”.—(Sarah Jones.)

This new clause would enable the Secretary of State to provide for a tenant to transfer their deposit from one landlord to the next when moving tenancy, rather than needing to find the money for a new deposit before the old one had been refunded.

Brought up, and read the First time.

--- Later in debate ---

[Sarah Jones]

I have listened to the Minister’s response, and I am glad that there are working groups, roundtables and other such things looking at these issues. As a former senior civil servant, I know well the line that there are still many things that need to be considered, which can be used to push things into the long grass so that they never get completed.

I take the point from the right hon. Member for Scarborough and Whitby that we do not want to delay the Bill and that we need to look at these matters properly, but I urge the Minister to speed up the working groups and roundtables and to try to come forward with something. If he did, I am sure he would have the support of the Opposition. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 3

Report on operation of Tenant Fees Act

“The Secretary of State shall within a period of 12 months from the date of commencement of this Act and annually for the four years thereafter lay before Parliament a report on the operation of this Act, setting out the number of breaches of sections 1 and 2, the number and amounts of financial penalties levied by enforcement authorities, and the number of criminal prosecutions commenced and concluded in each 12-month period”. —(Melanie Onn.)

This new clause would require the Secretary of State to report annually for five years on the effect of the Act

Brought up, and read the First time.

[Melanie Onn]

I beg to move, That the clause be read a Second time.

The new clause is quite clear that it intends the Act to be reviewed and closely monitored by the Minister. There has not been a great deal of discussion around the monitoring of the implementation of this legislation so far. Assessing the effectiveness of the legislation is incredibly important, and I hope the Minister will be able to support it. We know from the experience in Scotland that legislation, even when well intended, may not be effective if the wording is not clear enough, the rights are not precisely defined, the impact is not fully, properly and regularly communicated to those who need it, and the enforcement mechanisms are inadequate. I do not want to let the Minister leave here without allowing for future Ministers and Governments to recognise early the elements of the Bill that are not quite working as intended. From the discussions we have had, it seems that the Bill will probably not come into force for 18 months, which is quite some time away. How it actually pans out in practice will perhaps be well out of our hands.

It is inevitable that there will be clauses of the Bill that, once in action, do not work quite as anticipated. To rectify that, the Government could accept this new clause, which would ensure regular assessments are undertaken of the number of breaches of sections 1 and 2, as well as providing details around the fines—how many have been issued, what revenue has been generated and whether there have been any prosecutions. It would enable the Government to show their demonstrable concern for tenants by making it clear that they were keeping a beady eye on the practicalities of the measures and not simply leaving matters to chance.

No doubt there would be a Select Committee inquiry without these changes. What do the Government anticipate that they might wish to hide? By being proactive, they would be ahead of the curve and would save the Select Committee a great deal of time that it might spend on other inquiries.

I anticipate that the Minister will say he is confident that local authorities will maintain such records. That might be suitable for him, but it would not compel him to collate such data to gain regional perspectives on the implementation. Given the failure on the display of tenants fees rules so far—so much so that they now have to be beefed up through the Bill’s enforcement powers—accepting the new clause would be an honest recognition that legislation does not always work well.

The new clause would provide for an ongoing evidence base from which future improvements could be made. It would show landlords, letting agents, councils and tenants that the Government were taking a responsible approach to a significant piece of new law and showing a keen interest in its future application.

Were it to be found that the funding for new burdens was insufficient, the Government could deal with that rapidly, rather than facing the worst-case scenario of the laws not being used and being completely useless. They could check where the laws were being best utilised, identify why and assist in the sharing of best practice around the country. They could check that the legislative process was quick and that the remedy was proportionate to the breach.

In housing, timing is often of the essence. Those who would be charged prohibited fees are most likely to be those who can ill afford them—those who are forced towards bad landlords or letting agents. Should resolution of the process take too long, a tenant may be two or three properties along since the original complaint was submitted. I urge the Minister to consider this sensible step.

--- Later in debate ---

We also do not intend to review the Bill in isolation. There have recently been a number of welcome legislative changes to the lettings industry, with more planned—notably the regulation of letting agents. Those changes, with this Bill, support and deliver our commitment to rebalance the relationship between tenants and landlords and to make renting fairer. It is important that any future evaluation consider all those important and transformative measures in the round, so I ask hon. Members not to press their new clause.

[Melanie Onn]

The Minister says that the Department will monitor the process and the progress of the enforcement of this legislation. He also says it plans to review in five years. That raises the question of why that should not be included in the Bill. The Minister has diligently described to us all the varying places where that information is kept; the new clause simply seeks to ensure that it will be kept centrally by Ministers so that they do not have to go to various different organisations to retrieve it and will have it centrally, at their fingertips, so that reports and responses are full and accurate. Therefore, we will not withdraw the new clause.

Question put, That the clause be read a Second time.

Tenant Fees Bill

Melanie Onn Excerpts

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

[Melanie Onn (Great Grimsby) (Lab)]

I welcome the Government’s amendments. They go some way towards making the Bill much more meaningful, and we will support them. I remain, however, disappointed at the lack of movement on the requirement for deposits, which will stay at up to six weeks. I believe that that remains a significant financial barrier into the private rented sector for many people. Deposits are currently in the region of four weeks at a natural level. Allowing deposits of up to six weeks is likely to encourage more landlords or agents to increase their length and make it even harder for people to access the private rented sector.

[Kevin Hollinrake]

The hon. Lady makes a point about the length of deposits. Does she not acknowledge that there can be different circumstances? For example, a tenant with pets may damage a property more than a tenant without pets. If we do not allow some flexibility, people in those circumstances might not be able to rent a property at all. Scotland provides a basis for many of the measures in the proposed legislation, and the length of a deposit in Scotland can be up to two months. Does she therefore not agree that six weeks is actually fair and covers more circumstances than simply keeping it at a month?

[Melanie Onn]

I respectfully disagree with the hon. Gentleman’s perspective. Four weeks is an acceptable deposit. Introducing the possibility of an increase to a maximum of six weeks is unnecessary, and I urge the Government to look at that again.

Before I move on to amendments 3, 1 and 2, I would like to return to a number of important issues raised in Committee that have not been addressed in the Government’s amendments. I hope that the Minister will provide more clarification on them. Perhaps they could be considered as the Bill goes through its next stages.

It is about 12 weeks since we last discussed the Bill, which is something like the timeframe that I and many of us had in mind when the Minister said in Committee that its main provisions would come into force in “a few months” after the Bill had passed. However, on her YouTube channel, “Agent Rainmaker—Letting Agent Growth”, Sally Lawson, the former president of ARLA Propertymark, tells us that the measures in the Bill will not come into force until April next year. That seemed to be a fairly definite date. Can the Minister advise the House on whether that is simply speculation, or whether it is the very earliest the Government can manage to bring forward these very important measures?

I would like further clarification regarding erroneous right to rent decisions by the Home Office and their impact on the return of a holding deposit. Will the Minister confirm that, if the Home Office makes a mistake with a right to rent check and misinforms the landlord that a tenant has failed the check, the landlord will not be liable for a financial penalty? Will he confirm that the landlord will simply be required to return the holding deposit to the tenant, as recommended by the Housing, Communities and Local Government Committee?

Despite the need for further clarification on those issues, I am pleased that the Government have acceded to common sense on a number of issues that we in the Opposition raised in Committee. First, I welcome the Government’s acceptance of the amendment we tabled in Committee to give tenants who are owed money following a prohibited payment a choice over how it is repaid. The original wording could have caused problems for tenants in certain circumstances. More widely, it would have contravened the principle that the money belongs to the tenant and that it is for the tenant to decide what to do with it.

Secondly, after a lot of persuasion from the Opposition, the Government are taking steps in a positive direction on their description of a default fee. It is right that it includes the definition of “reasonable” in association with costs and that there will now be a requirement to produce audits or invoices of any costs levied. Those changes will add substantial benefits to the Government’s definition of default fees and help to prevent the very worst offenders from defining unreasonable costs as a loss.

Similarly, requiring landlords or agents to provide invoices for their costs will provide greater transparency for tenants and represents a substantial shift from the Government’s position in Committee. Giving tenants an invoice allows them to account for what they are being charged and provides a platform for an appropriate challenge when the fee is considered unreasonable or prohibited. I am reassured by the Government amendments that the Minister has heard the point that simply relying on guidance, which was the initial proposal, would not be enough to prevent the continuation of tenants being overcharged. The only way to end punitive default fees, which unfortunately have turned into a cash cow for some unscrupulous landlords and letting agents, is to spell out firmly in the Bill what is and is not acceptable, rather than to rely on guidance.

Less than half of renters in this country see their deposit agreement before handing over their money, and a third have signed a tenancy agreement without fully understanding it. The Bill provides a loophole for unscrupulous landlords and agents to exploit that by placing unfair terms in their tenancy agreements. That is why I ask all Members to support amendment 3. It would provide a clear list of acceptable payments that cover a loss to the landlord. It would allow for fees to be charged only when there was a clear and indisputable cost, and it would prevent the use of tenancy agreements as a device through which to include additional charges. Although we set out a limited set of terms for permitted payments in the amendment, it would not stop landlords claiming damages or taking money out of a deposit where needed. The amendment relates only to situations where there is no dispute and there is a real, additional or exceptional cost to the landlord that falls outside usual expected business costs, such as sending a letter or email to a tenant.

[Kevin Hollinrake]

Are the fair conditions in amendment 3 examples of charges that may be levied or a definitive list? One thing the hon. Lady has neglected to put in the amendment, for example, is what happens if a tenant breaks the terms of the agreement and wants to leave early or change the sharer. That can result in significant costs to a landlord or agent. Is she excluding that possibility with the amendment?

[Melanie Onn]

I accept what the hon. Gentleman says. The amendment would serve as an example. I would be happy for it to be adopted and then to be taken on further by the Lords. It sets out examples, rather than being a full definition of the circumstances in which a tenant could be charged.

In principle, putting in place a simple paragraph such as that in amendment 3 would make it far clearer to tenants when a breach had taken place. As it stands, the Bill will still be extremely confusing for any tenant trying to tell whether a breach has taken place. That, in turn, will inhibit the right and opportunity of a tenant to properly challenge a landlord or letting agent at a tribunal. Providing clarity on the face of the Bill would remove the ambiguity. Under amendment 3, it would be easy for a tenant to tell if they had been charged an unfair fee, and they would be better able to self-enforce their rights.

Such self-enforcement may be necessary. The Minister talked about it in very positive terms, but I am not sure it is so positive. It reinforces the point that the Bill does not carry the weight of enforcement behind it to take landlords and letting agents to task properly when they continue to break the law. For the Bill to succeed, it must be backed by sufficient enforcement power.

That is why we propose amendments 1 and 2, the primary aim of which is to allow trading councils the freedom to apply higher fines to those who break the rules. That would improve the enforcement of the Bill twofold. First, it would deter landlords and letting agents from taking the chance of applying prohibited levels of fines towards tenants. Even with strong legislation, we know that tenants can often end up in illegal renting situations owing to a lack of knowledge, a lack of confidence to challenge an unfair decision or the fear that a complaint or relationship breakdown could leave them without a house and on the street. We can see this in the Citizens Advice report “Touch and go”, which highlighted the fact that 44% of tenants did not complain about a category 1 hazard in their house.

Secondly, the Opposition are worried that unscrupulous landlords and letting agents may still be tempted to charge prohibited fees in the belief that they will not be challenged until they have taken well over £5,000 in prohibited fees, and that as a result they will see those fines as a business cost. As the hon. Member for Harrow East (Bob Blackman) pointed out, it is just the cost of doing business, rather than the real deterrent it should be. I echo his point that some of the people who local authorities have been enforcing against are not genuine, upstanding, licensed and registered, above-board landlords and agents, but criminals and crooks, and the fine of £5,000 will simply not be enough to deter them.

The Minister had concerns about the £30,000 fine, but amendment 2 states only that it “must not exceed” £30,000. That need not necessarily be the first fine—that would be for the enforcement agency to determine, given the circumstances and an understanding of the situation. Still, to provide a full deterrent would certainly increase the odds against those who take the chance and charge prohibited fees.

[Mr Goodwill]

I do not for one second wish to defend the actions of some of these unscrupulous letting agents, but the fine will be £5,000 for each occurrence, so if they are serial offenders, they are likely to get serial penalties. At the same time, of course, some landlords may inadvertently fall foul of the law, and it would be unfair to impose on them fines as big as £30,000. As I said to the Minister, it might result in properties having to be sold and tenants losing their house.

[Melanie Onn]

I hear what the right hon. Gentleman says, and I thank him for his intervention, but I repeat the point that the fine “must not exceed” £30,000 but need not necessarily be £30,000 in the first instance.

[Daniel Kawczynski]

The hon. Lady is eloquently highlighting the importance of protecting tenants, but I am a little concerned that in all her points there is little reference to protecting landlords and letting agents. I hope she will come on to that. When ARLA Propertymark surveyed Members of Parliament, one newly elected Member informed it that there should be no private sector rentals, that they should be abolished and that we should have either owner-occupier homes or social housing. I hope she does not agree with that and that she will put on the record her support for the private sector in providing jobs.

--- Later in debate ---

[Melanie Onn]

There is absolutely no suggestion in my comments that we should do away with the private rented sector, but the balance to date has been too far in favour of a private rented sector that has grown exponentially over the last 10 to 15 years and left tenants in a tenuous situation when it comes to their properties. When properties are just being used as commercial entities, with no consideration for the fact that they are people’s homes, that is where the difficulty lies, and it is absolutely right that the Bill is primarily designed to shift the balance a little more in favour of tenants, who so far have had a very bad deal.

[James Cartlidge]

Further to the intervention by my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski), while we all agree that the Bill is a positive measure to help tenants, is there not a danger that if we start ramping up fines and so on, instead of a positive measure to help tenants, the Bill will look like an attack on many small businesses, the vast majority of which conduct their businesses entirely in accordance with regulations?

[Melanie Onn]

I thank the hon. Gentleman for his contribution. If the Government were to adopt my amendment, I am absolutely sure that that is not the message that they would want to send out to the private landlord sector. This is not about people who are operating legitimately, who do a good job for their tenants, who are supportive of tenants and who are doing everything in their power to assist them when problems arise; it is about the minority of landlords who do not care about the standard of accommodation that they are providing or about the concerns that tenants may raise with them. If we are to have legislation that has some teeth and that does what it intends to do, which is to try to prevent those people from entering the market in the first place, we should have potential fines of significant figures. That would be a positive thing, and legitimate landlords and agents would welcome it.

[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.

[Several hon. Members rose—]

--- Later in debate ---

[Melanie Onn]

I thank the Secretary of State for his words and my colleagues who have taken part in the debates and assisted in Committee. The conversations that we have had have been very helpful, and were certainly heard to some degree by the Minister, and I thank him for that. I am pleased that the Bill is leaving the House in a better state than when it was introduced, after pressure from Labour to improve specific elements of it. But there is still more that the Bill needs to include to stop this being a missed opportunity for 4.7 million tenants in England. Those tenants often end up in the private rented sector not by choice but because of the lack of social housing, especially in high-demand areas.

The Government need to consider further the impact of their policy, which allows default fees to continue to be open to abuse. More than half of tenants do not see their tenancy agreement before putting money down for a tenancy. Much emphasis is still placed on the ability of a tenancy agreement to signify a mutually understood and fair relationship, but that is very often not the reality for tenants. The Bill continues to place reliance on guidance, so much so that the Chair of the Delegated Powers and Regulatory Reform Committee, Lord Blencathra, has said that, since the guidance will play such an important part in the functioning of this Bill, it should be subject to parliamentary scrutiny, but we are yet to see even a hint of a first draft. I hope that the Government reconsider the current provision regarding default fees and bring in regulations to tie down tenants’ rights. If they remain steadfast against that idea, will they at least follow the advice of Lord Blencathra?

Members on both sides of the House have raised continuing issues regarding deposits and enforcement. However, Labour fundamentally supports the Bill because it will tackle many of the unfair fees that tenants face when they rent a property, and will help to build a more professional, transparent and fairer private rented sector across England. I am pleased that years of Labour pressure have finally twisted the Government’s arm on this issue and brought forward a Bill that starts to do genuine good for tenants. But the battle to create a private rented sector that works for the 4.7 million renters in this country is far from complete.

The most recent English housing survey made for hard reading for many of England’s private renters. The rental marker is affecting more and more people from a wider variety of groups. The proportion of families in our rental market is going up, with 20% more families in the private rental sector since 2010. More and more children—not just young adults and students—are growing up in rental accommodation. Although the short-term nature of rental accommodation offers flexibility for some, it can have a devastating effect on others. Families in rental accommodation are nine times more likely to move than those who own a house, incurring repeated deposits and fees. Despite today’s efforts, rental regulation in this country still leaves a lot to be desired, and tenants need far more long-term security when they rent a house.

We had hoped that this Bill would be broadened to make longer tenancies a reality, and to ensure that families do not face yearly moves and get hit with repeat fees and costs. However, despite the Prime Minister’s protests at Prime Minister’s questions today, there were reports last night that suggested that the Government are afraid to take that measure to further help millions of renters around the country.

As this Bill moves to the other place, there remain issues that could be explored further to improve rights and access to rights for renters, and to ensure that suitable deterrents and enforcement are in place to improve the private rental sector in the UK. I trust that genuine issues raised by Members today will be given closer consideration to reflect the hopes of those in the private rented sector.

Tenant Fees Bill

Melanie Onn Excerpts

Ping Pong: House of Commons
Wednesday 23rd January 2019 Commons Chamber

[Mrs Wheeler]

Like my hon. Friend the Member for Harrow East (Bob Blackman), the hon. Gentleman is prescient about what I am about to say. We are working with National Trading Standards to appoint the lead enforcement authority under the Bill. That will be a local trading standards authority appointed by the Secretary of State, and we intend the body to be in place ahead of implementation.

In conclusion, I very much hope that Members will support the amendments made by the Government and look forward to seeing the legislation implemented. I also hope that the hon. Member for Great Grimsby, having heard and accepted my assurances, will withdraw her amendments.

[Melanie Onn (Great Grimsby) (Lab)]

It is a pleasure to speak in this important debate. I would like to thank the Minister for her approach and the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Richmond (Yorks) (Rishi Sunak), who steered the Bill through Committee and was open to hearing the Opposition’s views on this small but very important Bill.

I shall speak in support of amendment (a) to Lords amendment 36; amendments (a) and (b) to Lords amendment 37; and amendment (a) to Lords amendment 48. I shall also pay tribute to the work that has been done in Committee, where there was a lot of fruitful conversation and consideration, and in the other place, which has resulted in the Bill arriving back in the Commons in a far better state. It is not just my hard work or the Minister’s hard work that has gone into the Bill. We are backed up by an enormous number of people, including charities, members of the Housing, Communities and Local Government Committee, who are listening keenly to our debate, and civil servants, who have put in many hours to make sure that the Bill is fit for purpose. I am very grateful to all those people who have participated.

In Committee and on Report, we discussed at length the default fee clause. Originally, the Government fought very hard against opposition from Labour and charities such as Shelter to remove a gaping loophole, which would have left the definition of a default to the discretion of those drafting tenancy agreements. It is interesting that Lords amendment 47 bears a striking resemblance to amendment 3, which I pressed on Report. Back then, the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Richmond (Yorks), said:

“We believe it is for the tenant and the landlord to determine what it is necessary and fair to include as default charges, on a case-by-case basis. There are other potential default charges besides those for late payment of rent and lost keys.”—[Official Report, 5 September 2018; Vol. 646, c. 208.]

It is welcome that the Government have rowed back on that, despite being so bullish about it during the Bill’s passage through the Commons. I do hope that they bear that in mind when considering amendments to future housing Bills, in which I hope to play a role, and are more thoughtful. If amendments are tabled in good faith, I hope that Government Members would accept that, and if they are worth adopting, do so at an early stage, so that we do not appear conflicted on measures that are positive overall, particularly in this case for people in the private rented sector who are seeking a home and trying to access one.

As the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for South Derbyshire (Mrs Wheeler), pointed out, Labour always welcomes Government acceptance of the principles and details of our ideas, and we welcomed their acceptance of a Labour proposal in Lords amendment 47 to enshrine what counts as a default fee in the Bill. We believe that that will close a significant loophole in the Bill, moving it far closer to the type of tenant fees Bill that Labour has been proposing since 2013.

We have a number of concerns about the Lords amendments, as the Bill still does not reach its full potential to protect tenants from unscrupulous landlords who want to charge unfair fees. We are very keen to point that this is about the unscrupulous few, not the fair-minded, reasonable and proper many who exist out there. First, Lords amendment 48 adds a new permitted payment of damages to the Bill. The Minister touched on that, so I may have to revise what I am going to say—I hope that hon. Members will bear with me. We tabled an amendment because we are concerned about Lords amendment 48, but that does not extend to a belief that damages in principle are fundamentally wrong. Landlords should not have to pay for repairs when tenants cause damage to their properties, but we do not understand why the Lords amendment is necessary, and why it seemingly misses out a number of protections that are present in other parts of the Bill.

[Richard Graham]

When we discussed this matter in Committee the hon. Lady was very reasonable, and seemed perfectly happy with the five-week proposal that the Government have made in the Lords amendment. It would be much easier if the hon. Lady did not press her amendment, so that we may secure confirmation across the House that this is the best way forward, especially given that there is not a single Labour Back Bencher present to support the hon. Lady’s amendment

[Melanie Onn]

It is a busy day in other parts of the Palace of Westminster; we should give colleagues credit for the fact that they have other work to do. I shall come on to the detail of my amendment and the issue of five weeks. I think that the hon. Gentleman has misremembered the extent of my acceptance of the five-week period. It was a reluctant acceptance at the time, with a view to tabling a further amendment if we thought that necessary. Having heard the Minister’s explanation, I think that it is still necessary to press that point, and I shall address it further in my speech.

I am discussing the damages that landlords can claim if a tenancy agreement is breached, rather than the issue of deposits. I urge the hon. Gentleman to bear with me and allow me to finish making that point. The fact that this is the first reference in the Bill to claiming damages shows that the Government were confident until recently that the Bill as originally drafted would not interfere with the current system. Indeed, the Government’s draft guidance, which we received from the Minister on 5 November, said:

“The Act does not affect any entitlement to recover damages for breach of contract…If a tenancy agreement does not permit a landlord or agent to charge default fees, the landlord or agent may still be able to recover damages.”

It continued:

“What is the difference between a default fee and damages? A default fee is a payment that can be required by a landlord or agent under an express provision in the tenancy agreement and would therefore be permitted under the Tenant Fees Act.”

Finally, it said:

“Can a landlord or agent recover costs for damages if they didn’t write them into the tenancy agreement? Yes. The Act does not affect the landlord’s entitlement to recover damages”.

The draft guidance that we received from the Minister’s Department only two months ago indicated on multiple occasions that the Bill would not impact on a landlord’s ability to claim damages, and it spelt out the difference between a default and a deposit. There is therefore a concern, because what was seemingly settled has become unsettled as the result of an addition which, to all intents and purposes, and given the explanation that we received, does not need to be made. What is the purpose of that? However, the Minister’s assurance on the intention to reassure landlords and innocent parties that they are simply going to be in the position that they were in before any such harm was caused perhaps gives me reason to reconsider.

[Kevin Hollinrake]

Does the hon. Lady think that good tenants who comply should subsidise poor tenants who do not comply?

[Melanie Onn]

I think it is absolutely right that if a landlord experiences a breach of tenancy, those tenants are considered responsible for the situation. It should not rest on others who adhere to the tenancy agreement that they signed, so I concur with the hon. Gentleman.

I really do not see why Lords amendment 47 on default fees necessitates change, as the Government clearly defined damages as separate from defaults. I therefore wonder why Lords amendment 48 is necessary in the first place. Without it, would the Bill impede the current system? Would it prevent landlords from claiming damages through deposits or the courts? Can the Government reassure me—I would say that perhaps they have done so to some extent—that Lords amendment 48 will not create powers for landlords to bypass current systems and charge as they see fit? I certainly hope that the Minister believes that to be the case. If Lords amendment 48 is not necessary, perhaps it is in the Minister’s gift to reconsider the position and remove the provision, rather than adding confusion, as it is not necessary, and previous statements have made it clear that it is not necessary.

My amendment (a) to Lords amendment 48 would bring that into symmetry with powers in the Bill and add a requirement for charges brought under the amendment to be reasonable, and to be evidenced by invoices. That is just to ensure that no loophole is sought. Throughout the debate we have discussed the need for permitted payments in the Bill to be subject to rigorous checks and balances, to ensure that unscrupulous landlords and letting agents cannot continue to charge unjustified amounts for things such as a lost key. Thanks to the hard work in both Houses, we have closed a number of loopholes that could have been exploited to allow some landlords to profit from tenants by unfair and unjustified means.

Lords amendment 48 does not contain those protections and seemingly could allow for open-ended charges without mind to the cost to the landlord, and to whether the charges could be backed up by evidence. I do not intend to press the amendment to a Division, but I would welcome additional reassurances from the Government that the principles discussed throughout the Bill will not be undermined by the Lords amendment, and that it is not a new loophole that landlords and letting agents can exploit for profit.

[Mrs Wheeler]

I am always willing to give the hon. Lady greater reassurance. Lords amendments 42 and 47 ensure that landlords and agents can charge default fees only in specified circumstances, which are listed in the Bill. Lords amendment 48 permits landlords and agents to recover costs for damages only in breach of contract.

[Melanie Onn]

I thank the Minister for that very helpful further explanation.

Another Opposition concern about the Lords amendments is that the Bill still does not go far enough to remove the barriers that high deposits pose to millions of renters across the country. Our amendments seek to address two points. The Minister says that reducing the deposit cap from five weeks to three would not help tenants, but I believe it would. A reduction of two weeks’ advance payment will of course help tenants to access properties. It would reduce barriers for private renters and enable them to access the rental markets, including for the first time. Turning that into a negative takes some extraordinary creative gymnastics, on which I congratulate the Minister.

[Mr Prisk]

The Select Committee looked at the Bill in detail in pre-legislative scrutiny. We all signed up to five weeks, including six distinguished Labour Members, including the Chairman, the hon. Member for Sheffield South East (Mr Betts), who knows the subject well. Why does the hon. Lady believe they are wrong?

[Melanie Onn]

Having served on that Committee with the hon. Gentleman previously, I absolutely support its work and congratulate it, but it is always in the interests of a Select Committee to achieve consensus whenever possible and to try to agree a report that has unanimous support. That is the purpose and intention, and this case is a demonstration of excellent chairmanship and co-operation.

I congratulate the hon. Gentleman on playing his part in that, but it is the Opposition’s role to speak up for tenants. If we can make the process better, and if there is an opportunity for the Government to go further in assisting tenants—tenants are hard-pressed and this is a very expensive period of their lives—it is right that we speak up for them. We should try to encourage the Government to accept that they can reduce the barrier of high deposits to assist people directly. I just cannot support the view that charging more will assist renters in any way.

The Minister mentioned that I welcomed the Government’s reduction. I am delighted that they have listened to common sense and reasonableness, and that they have reduced the cap to five weeks from six, which was far too high, but it is not enough. If the Government can go further, I believe they always should.

[Kevin Hollinrake]

rose—

[Richard Graham]

rose—

[Melanie Onn]

I will move on because I am absolutely convinced that hon. Members will want to address these points in their speeches—they are committed to the subject and have taken a close interest, whether in the Bill Committee or in Select Committees. I look forward to hearing their comments in the remainder of the debate, but I will move on if that is okay.

[Richard Graham]

rose—

[Melanie Onn]

I have already given way generously.

The first point that our amendments seek to address is the financial staggering for the cap level that landlords are allowed to impose. I have sympathy with the Government’s aim of prioritising a reduction of the deposit burden on those at the cheaper end of the market, but the specific provisions in Lords amendment 36 could mean that those in joint tenancies end up being subject to the higher cap, despite individually paying significantly less in rent than is used as a threshold in the amendment. It is counterintuitive to create a cap that allows deposits to be relatively higher for someone paying £5,000 a year in rent in a 10-bed large house in multiple occupation than for someone paying £45,000 in an individual rent, so I would welcome reassurance that joint tenants will not be short-changed by the differential cap. If they will be, I would welcome an explanation of the logic behind the decision to allow those in joint tenancies to be charged relatively more.

Regardless of the functioning of the differential cap, the Lords amendment will do little for the majority of tenants in this country. The cap will have a negligible effect on the majority of deposits in the country and will allow the current system to function virtually unchanged. For the graduate who cannot afford the up-front costs to move to a city for a new job, or for the family given just two months to save enough money to find a new flat and avoid homelessness following a section 21 notice, the system is simply not fit for purpose and needs urgent change.

According to the English housing survey, a five-week rental deposit will set new tenants back an average of almost £1,000 across the country, and over a staggering £1,500 in London. For many in society who are living pay cheque to pay cheque, saving that sort of money would take an enormous amount of time, and certainly far longer than the two months that tenants are given when they are served with section 21 notices. That means that many struggle to access the flexibility that renting should offer. They fear being served notice to vacate because that could result in homelessness. That is simply not how the private rented sector should function.

Our amendments would change that. Lords amendment 36 introduces an ill-thought-through staggering system. Amendment (a) in lieu would reduce the cap on deposits from five or six weeks to three, and our amendments together will reduce deposits to three weeks for all, closing the loophole that could be opened by Lords amendment 36.

I was interested to hear the Minister’s announcement of the enactment date. A written statement is due today, which I look forward to reading. I was also interested to hear her comments in response to my hon. Friend the Member for Manchester, Withington (Jeff Smith), who is no longer in his place, on enforcement and trading standards. She said that the consumer money protection measures in the Bill would be in place before enactment. I would appreciate clarity on whether she meant enactment on 1 June 2019, which is rapidly approaching, or whether she was referring to the commencement date of April next year.

Labour’s amendments would give private rented sector tenants a very welcome helping hand at a very expensive time. If passed, the amendments would reduce the deposit barrier by almost £400 across the country, and by over £600 in London, offering significant change to tenants from all backgrounds and building a better private rented sector for the many.

[Bob Blackman]

I draw the attention of the House to my entry in the Register of Members’ Financial Interests.

It is a pleasure to follow the hon. Member for Great Grimsby (Melanie Onn). I had the opportunity to chair—and the challenge of chairing—the Housing, Communities and Local Government Committee during pre-legislative scrutiny in the absence of the elected Chairman of the Committee, the hon. Member for Sheffield South East (Mr Betts), who unfortunately was undergoing health treatment at the time. I take absolutely the praise that the hon. Lady pours on me for reaching the judgment of Solomon—[Interruption.] It was possibly unintended at the time. From the outset of our pre-legislative scrutiny, on an all-party basis, we sought to balance good landlords and tenants, who are the overwhelming majority, with the small minority who are rogue landlords and rogue tenants. The risk here is the balance that is struck.

I do not intend to go over all aspects of the Bill but, clearly, I am absolutely delighted that the Government have seen fit to endorse all the Select Committee’s recommendations, especially the reduction of deposits from six to five weeks’ rent. I will again set out why we came to that conclusion. As Members might recall, we had a long discussion about it in Committee. Some promoted the concept of a six-week deposit and some a four-week deposit. No one but no one on the Select Committee promoted less than four weeks, for very good reasons.

Our view was that a six-week deposit was clearly too onerous for tenants. I accept what the hon. Member for Great Grimsby says about the cost to tenants of a six-week contribution, but there is also a clear risk with only a four-week deposit—or, worse still, her proposed three-week deposit—because we might get to a position in which, in the last month before the end of a six-month assured shorthold tenancy, a tenant has no incentive whatever to pay their last month’s rent. Tenants could just skip, and the landlord would then have to pursue them through the courts, bearing incredible costs unreasonably.

The issue for us was that four weeks would lead to a position whereby the tenant had an incentive to say, “Okay, I won’t pay the last month’s rent—just take it out of the deposit,” and then if the landlord could reasonably wish to claim money from the deposit because of damage or other reasons, they would have to pursue court action to recover it. That would be grossly unfair on good landlords, who are the vast majority in this country. Other members of the Committee promoted six weeks, so we ended up with the view that five weeks struck a balance between giving tenants an incentive to pay their last month’s rent, in the knowledge that they would get back their deposit had they been good tenants, and landlords being forced to go through a proper claim process to recover moneys as a result of damage by a tenant.