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.