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.

Deaths of Homeless People

Melanie Onn Excerpts

Thursday 20th December 2018 Commons Chamber

[Melanie Onn (Great Grimsby) (Lab)]

(Urgent Question): To ask the Secretary of State for Housing, Communities and Local Government what he is doing to prevent the deaths of people who are homeless.

[The Secretary of State for Housing, Communities and Local Government (James Brokenshire)]

Every death of someone sleeping rough on our streets is one too many. Each is a tragedy, each a life cut short. In particular, I share the sadness that every Member will feel on learning of the death of a homeless man close to Parliament only yesterday. As you say, Mr Speaker, while we must allow the investigations to take place, I will be asking Westminster City Council to refer this to its safeguarding adults board to look into the matter and see that lessons are learned and applied.

Today’s publication of Office for National Statistics data on the estimated number of deaths of homeless people is stark, with an estimated 597 deaths of homeless people in England and Wales in 2017. It is simply unacceptable for lives to be cut short in this way. I believe we have a moral duty to act. The Government are committed to halving rough sleeping by 2022 and ending it by 2027. Last week, we published our rough-sleeping strategy delivery plan, which sets out how we will do this. It gives updates on progress we have already made on the 61 commitments in the strategy and sets out clear milestones for activity.

That said, this is about action now. Our rough-sleeping initiative, backed by £30 million of funding this year, is delivering at least 1,750 new bed spaces and an additional 500 outreach workers in areas across the country where rough sleeping is most prevalent. Only this week, we announced the location of 11 rough-sleeping hubs across the country to provide immediate shelter and rapid assessment now, which will help thousands of people over the next two years.

Today’s statistics underline the need to prevent people from becoming homeless in the first place. We are investing £1.2 billion to reduce and prevent homelessness. Much of this funding is already having an impact, providing vital support to help people off the streets for good. Early intervention and prevention are the key, and that has been the focus of the Homelessness Reduction Act 2017, which came into force in April this year. We will continue to work tirelessly with local authorities and partners across the country to ensure we provide the advice and support they need, but I recognise that this cold weather period is a particularly difficult time. That is why I launched an additional £5 million cold weather fund in October. The fund has already enabled us to increase outreach work further and to extend winter shelter provision, providing more than 400 additional bed spaces.

The death of anyone who is homeless is a tragedy. We remain focused and resolute in our commitment to make rough sleeping a thing of the past, and where we need to do more, we will.

[Melanie Onn]

Thank you, Mr Speaker, for granting this urgent question. I share your sympathies with the friends and family of Gyula Remes, the 43-year-old who died two nights ago in the underpass to the entrance to this Palace in which we all sit. I am sure that all colleagues will be as distressed and shocked as I was, but this is not the first time. It is not even the first time this year: in February, another man died in the same place. So what will it take to shake this Government out of their complacency and out of their outsourcing of responsibility?

Today, the Office for National Statistics data tells us that there were an estimated 597 deaths of homeless people in 2017 alone. Not only could the actual figure be much higher, but it is one that has gone up by 24% since 2013. These figures are the result of an increasingly fracturing system of social security and support. They are the result of Government decisions and Government choices. Five thousand people on any given night can be sleeping rough in this country. Crisis estimates that 24,000 will be sleeping rough in cars, tents and makeshift beds this winter, while 120,000 children are without a permanent home. This cannot be acceptable.

When social security payments are delayed, frustrated or stopped; when mental health services are overstretched, with thresholds so high as to be inaccessible; when council budgets are slashed so that outreach services are lost and drug and alcohol support minimised; when we have an explosion of insecure work; and when people struggle to see their GP—all of these combine to leave those at the highest risk of homelessness out in the cold, and that is literally.

Rather than blaming vulnerable people, as the Secretary of State did in his article yesterday in The Guardian, for these failings, saying that it was their fault—relationship breakdowns and irresponsible behaviour—will he say whether he recognises that the welfare state should be a safety net for our society? If he does, will he say that it is not currently working? Will he acknowledge that more support in the availability of and access to health support—mental and physical—is needed, and that homelessness and homeless deaths should be treated as a public health issue, not solely one of housing?

Does the Secretary of State accept that selling off council houses and housing association properties reduces the number of properties available for local authorities quickly to house vulnerable people in? Will he match Labour’s £100 million cold weather plan to give every rough sleeper somewhere to stay during the winter? This place has proved, under previous Administrations, that it does not need to wait nine years to solve a homelessness problem. If previous Administrations can do it, why cannot he?

[James Brokenshire]

I would say to the hon. Lady that I share a great deal of her focus, her attention and the issues she has flagged up to the House this morning. I would challenge her very firmly on what she said, in a direct accusation, about my own viewpoint on rough sleeping. No one—no one—chooses to be on the street. No one chooses that life.

The figures that the hon. Lady rightly highlights are stark, as I indicated in my initial response. What is also stark is the 50% increase in the number of deaths linked to drugs that those figures highlight as well. Therefore, these are complex matters to do with mental health and addiction. Sadly, the evidence does point to the fact that issues such as, for example, the loss of tenancies are factors that lie behind this, as are issues of childhood abuse. There are other factors, too.

That is why we published the rough-sleeping strategy in August, which was to cover all these issues—not just my responsibilities in the Ministry of Housing, Communities and Local Government, but those in relation to welfare and to prisons; we see some of the issues in relation to prisoners simply being released out on to the streets. It is intended to cover, and is covering, all those grounds. I did highlight the action that is being taken now.

The hon. Lady highlighted issues relating to universal credit and the work we are doing with the Department for Work and Pensions to see where further steps may be taken, knowing that some who are vulnerable might find it difficult to find their way through the system. The DWP is providing support and, equally, we are providing additional funding and support through our navigator project and others so that those who are in the most need, the most vulnerable, are able to get the support they need.

There is absolutely no complacency from me or from this side of the House on the need to deal with the urgent issue of rough sleeping and homelessness. It is something that we are taking hugely seriously as a priority, especially in the current cold weather. That is why I have underlined the action that we are taking now. No one chooses to live on the street, and no one should die as a consequence of being homeless or as a consequence of rough sleeping. That is why we are taking action and why I have committed an initial £100 million through the rough-sleeping strategy, in addition to the £30 million that councils are receiving directly this year. That is part of a £1.2 billion effort over homelessness.

There is a sense of action, of purpose and of bringing about change, and that is firmly what I intend to do, and what I am doing, through various measures. I recognise the need for a cross-party spirit, and we are working with the Mayor of London, the Mayor of Manchester and others to ensure that we make rough sleeping a thing of the past and that we deal firmly and in a committed way with the issue of homelessness more broadly.

Protection for Homebuyers

Melanie Onn Excerpts

Thursday 13th December 2018 Westminster Hall

[Melanie Onn (Great Grimsby) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I thank my hon. Friend the Member for Stretford and Urmston (Kate Green) for securing this important debate. I commend the exceptional and knowledgeable contribution that she made in opening the debate, which has taken us far beyond the debate’s title. The contributions have been wide and varied, but they all fall within the subject of justice and fairness for people buying their own homes.

If we are to end the housing crisis, we need to build hundreds of thousands of new homes every year, but what is sometimes lost in a number-focused, target-based approach to house building is the issue of quality. The desire or requirement to complete at speed overshadows the checks and details that people buying brand-new homes expect to have within the system of sign-off before properties are exchanged. Unfortunately, far too many new homes fail to live up to the standards that homebuyers should be able to take for granted.

A YouGov survey commissioned by Shelter found that almost all homeowners of recent new builds experienced some problems when moving in, with more than half of new homes having major faults. As a consequence, there is a crisis of confidence in the quality of new homes, with only two in 10 people thinking that new homes were built to a higher standard than old ones, and only three in 10 preferring to live in a new home rather than an old one.

My hon. Friend the Member for Stretford and Urmston made some alarming statements in her contribution. There was a higher level of danger in some new homes because of poorly installed heating or electrics; a lack of security when front doors did not close; and a public health risk when drainage from bathroom facilities was not properly fitted. We surely cannot consider that acceptable in this day and age, so there is a clear quality problem within some new homes. The worst of it is that homeowners experiencing difficulties suddenly find that they have limited protections and guarantees regarding their new home’s standard.

All political parties accept the need to significantly increase house building output in this country, and that brings with it an urgent need for a more accountable system to check on new builds and restore confidence that buying a new home does not come with a Pandora’s box of problems and headaches for owners. That includes the issue of leasehold, which my hon. Friends the Members for Poplar and Limehouse (Jim Fitzpatrick), for Washington and Sunderland West (Mrs Hodgson) and for Ellesmere Port and Neston (Justin Madders) dealt with in great detail. My hon. Friend the Member for Poplar and Limehouse said that the Government recognise that there are gaps and failings in legislation relating to leaseholders, but no concrete action has yet been taken. I am sure he feels the Government owe it to his constituents to get it sorted.

My hon. Friend the Member for Washington and Sunderland West talked about the lack of information about leaseholds. There is a real lack of knowledge and understanding, so perhaps the Minister will set out what she is doing to make sure that people are aware of their situation when they buy a home. Clear, concise information is needed. When people buy a new home, the amount of information they are sent is enormous, so how can we make sure that leasehold information is at the top of their list of concerns and is addressed and explained properly? My hon. Friend also highlighted the purchase of freeholds. The price is often set far out of the reach of individuals, or the freehold is sold to third parties.

There is also the issue of rip-off fees charged by freeholders. The Minister has overseen changes to rip-off fees in the rental sector to some extent. She took on board many of my comments in the Tenant Fees Bill Committee, and I thank her for that, but when will she take further action? If rip-off fees are not acceptable in the rental sector, we cannot say that they are acceptable in the home ownership sector.

My hon. Friend the Member for Ellesmere Port and Neston talked about the rip-offs around ground rents rising to extortionate levels, making homes unmortgageable and unsellable. He described the valiant efforts of his constituent, Katie, who led a campaign on behalf of leaseholders around the country to highlight that scandal in all our minds. There is an opportunity to take retrospective action, but the Government have been reluctant to talk about it. I have no doubt there are complications, but, as my hon. Friend said, this matter is the PPI of the homebuying and leasehold sector. If we can take action on PPI contracts, why can we not take action on those leasehold contracts?

The creation of a new homes ombudsman is welcome news for consumers, but when can we expect to see that ombudsman in action? Precisely what powers will they have? The Government must press ahead with greater enthusiasm to give homebuyers the sense of security they need when buying a new-build home. Despite a home being the most expensive and important purchase that most of us will ever make, homebuyers too often do not enjoy the same protections that we enjoy when we buy even the most basic everyday goods and services. If somebody bought a book with missing pages, a box of chocolates with their fillings missing or a TV that did not produce a picture, they would be able simply to return the product for a refund or a replacement. But when it comes to a new house, consumers are left to navigate a complex and inadequate warranty system, the whims of developers and the small print of warranty providers. When problems arise, new homebuyers have to go through toil and stress simply to get what they paid for and what they should rightfully be entitled to as consumers.

My hon. Friend the Member for Kingston upon Hull North (Diana Johnson)—a democratically elected Member of this House who is of some civic standing—said it took her five years to get a meeting with a developer. Developers must understand the potential for embarrassment when being held to account publicly in this place. It should not take a Member of Parliament to have to address this matter. It should be simple and straightforward for an individual to get action from developers, and it certainly should not take my hon. Friend five years to get an audience with these incredibly important people in the developer sector.

[Helen Goodman]

My hon. Friend on the Front Bench is making a strong speech. Does she not agree that the large number of cases presented today and previously shows that the situation is not accidental? We are talking not about one or two mistakes, but about a deliberate strategy by the developers to set things up so that they have all the cards and the homeowner has no rights.

[Melanie Onn]

My hon. Friend is right. Some of the dismissive responses from some developers have been mentioned in the debate: “Have you been doing this?” “Well, yes.” “Has it previously been to the disadvantage of leaseholders?” “Well, yes.” “Have you been able to do anything about it?” “Perhaps, but it is only now that we are prepared to do it.” It just goes to show that highlighting such things and putting pressure on the companies can have a swift effect, not least if they want to save their reputational skins.

It is not acceptable that people have to put up with major problems with their home or delay moving in, or even that they have to move out during belated repairs to bring the house up to scratch. The Government should bring forward a full suite of consumer rights for homebuyers when they introduce the measure on the new homes ombudsman. However, when more than half of new homes are built with major problems, it is clear that problems in providing protection and standards to homebuyers run deeper than consumer rights. There are clear failings across the house building sector, allowing homes to be built systematically in a way that quite clearly falls below the standard that anyone should expect.

That was highlighted well by my hon. Friend the Member for Blaydon (Liz Twist), when she talked about unfinished estates and issues of completion, adoption and delays. She mentioned people living for too long on building sites when there are delays in completing properties, as well as lack of transport and infrastructure, and the failure to provide basic amenities such as shops, play areas and community centres—the things that build a community. Instead, estates are left full of Lego houses, with no centre or heart.

We have a planning permission bidding system with too much flexibility on both affordable housing and standards of building, and bidders can see the building of a home to a high standard as a costly extra. Too often, they fail to recognise that they are not simply building houses; they are building communities, which confers on them a corporate ethical responsibility. They should take pride in the work they do, the homes they provide, and the communities they are building around the country. It sticks in the craw when large companies exploit the system and fail to live up to their moral duty to deliver affordable housing of an acceptable standard, but still pay uncomfortably high bonuses—despite benefiting from the Government Help to Buy system.

We have already heard about Persimmon’s horrendous customer service. My hon. Friend the Member for Kingston upon Hull North may be surprised to learn that it gets three out of five stars for customer satisfaction. Perhaps she would think that that rates it rather too highly. It will no doubt be disappointed that it is not getting five stars in the HBF customer satisfaction ratings, but rather than concentrating on improving building standards or communication with customers, it insists on paying out £75 million in bonuses to its executives. That is alarming.

Last year, I met the new bosses of Bovis Homes, another company that was struggling to meet acceptable standards, because of a combination of over-expansion, too much subcontracting and being too distant from customers. For a long time it had a five-star building rating, of which it was incredibly proud, but it lost it. It was heartening for me—and it did not take me five years to get a meeting—to hear that Bovis bosses were determined to turn things around. They were quite crestfallen that the company’s reputation had been hit so hard. They had been known as a high-quality, trusted home building brand. Customers were pleased at the change of heart, but there were those who had hoped to move into their dream-forever home for whom the game change was too little, too late.

The need to build hundreds of thousands of homes a year should not lead to reduced standards in house building or allow companies to exploit the housing crisis by making a fortune from an under-regulated housing system. The Government should consider the call from the Federation of Master Builders for a licence to practise, to root out cowboy builders who forgo the rules during construction.

My hon. Friend the Member for Stretford and Urmston talked about a single homebuyers code, developers not being able to insist on particular solicitors to be used by homebuyers—who would have a free choice—and an information pack post-sale. She also highlighted the issue of training for subcontracted staff, and looked forward to high-quality apprenticeships in the building sector. Those are issues that it is well worth considering.

My hon. Friend the Member for Poplar and Limehouse talked about safety and retrofitting sprinklers, and that should not be forgotten. The issue is not just about houses; it is also about flats, of course. When we think about high-rises, the Grenfell tragedy and its effects should not soon be forgotten if we want citizens to be safe.

I hope that the Government will take seriously what has been said in the debate, which was a good and helpful one. I hope they will seek to tighten regulation of planning standards and materials quality, and ensure that the homes we build are safe and up to scratch. Like the HomeOwners Alliance, the Government should want better new build, and should take much stronger action, including retrospective action for leaseholders.

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Mrs Heather Wheeler)]

It is a pleasure to serve under your chairmanship, Mr Sharma, as it was to serve under Ms Ryan’s.

I thank the hon. Member for Stretford and Urmston (Kate Green) for securing the debate and providing an opportunity to debate all the issues. I understand that she and many of us present today want better protection for purchasers of new-build homes. The Government are committed to making the housing market work. We aim to increase house building to an average of 300,000 net new homes a year by the mid-2020s. As we move towards achieving that target, we will not sacrifice higher quality and standards. They must go hand in hand. It is vital that as housing supply increases the quality of new-build homes continues to improve. In our housing White Paper we set out our ambition for a housing market that works for everyone. We expect all housing developers to deliver good quality housing, to do it on time, and to treat house buyers fairly.

I, like other hon. Members, was shocked to hear about the terrible experiences of the poor families featured on “5 live Investigates”, including the home with 354 faults. For families who worked hard to save and buy their new home it should have been an exciting time, as so many hon. Members have said. The programme highlighted the plight of Mr Wakeman and his partner Tracey Bickford. It was heartbreaking to hear Mr Wakeman read the list of issues with their home, and describe the disgraceful disruption to their lives, including having to move out of their home. Although theirs is an extreme example, such cases happen far too often. We all hear of them happening. I have heard it from many constituents who write to me through their Members of Parliament, and also in my own constituency correspondence.

Equally familiar are stories of houses not completed on time and purchasers who are not kept informed, which the hon. Member for Blaydon (Liz Twist) discussed. Families and households save for years to afford a new home. Those of us who are fortunate enough to have bought a home can remember the feeling of excitement and joy at getting the keys. Everyone deserves to be able to enjoy their home and start a new happy chapter in their lives.

We know that mistakes will happen. Building new homes is a complex undertaking, involving many different skills and trades, which necessarily means that there is a higher risk of something going wrong. The critical thing, however, is that when things do go wrong, house builders and warranty providers fulfil their obligations to put things right. The Government have been absolutely clear on that point. In too many cases problems with build and finish quality are not resolved quickly enough. The after-sale service that developers provide must improve. We shall therefore be keeping the pressure up on industry, not only to put things right but to prevent them from going wrong in the first place.

The Government are committed to reforming the process for purchasers of new-build homes to obtain redress. I acknowledge that the current process is complicated, and that the proliferation of schemes and warranties has resulted in varying levels of service and protection. That is why we are taking action.

In October—only two months ago—we announced our intention to bring forward legislation to require all developers to belong to a new homes ombudsman, because it is absolutely right that consumers should have fair, quick and easy ways to get things put right when they have a problem. Earlier this year we consulted on how we could improve redress, not just in relation to new-build homes, but for residents across all housing sectors. I will return to this later, but let me say now that we will be publishing our response to that consultation soon. At the same time as exploring more substantive reforms, we are challenging industry to simplify redress now and to provide proper support for consumers in the early years of a house purchase, when most problems occur, until we have the ombudsman in place.

In November—one month ago—I met the executive chairman of the Home Builders Federation, which is taking forward proposals to implement a better redress system, based on the recommendations in the reports by the all-party parliamentary group for excellence in the built environment published in 2016 and this year. I believe this work is a positive step in the right direction.

The hon. Member for Stretford and Urmston was very agitated, as were many other hon. Members, about the potential conflict of interest with solicitors. It is not acceptable that there is a conflict of interest. The Secretary of State has written to the Law Society on the issue and has also written to the Solicitors Regulation Authority, in the context of leasehold reform and conflicts of interest between developers and conveyancers. I expect those two authorities to take note and come back to us on the matter.

A number of hon. Members mentioned that we often hear that new-build homes are not completed to the standards required under building regulations. These regulations set the standards for the design and construction of new homes. The primary responsibility for compliance rests with the people carrying out the work. Work on new homes is subject to building control either by the local authority or a private approved inspector. However, it is the responsibility of the building control body to take all reasonable steps to assess compliance. It is a spot check process carried out at certain points during the building work. A building regulations compliance certificate issued by a building control body is not a guarantee of the highest standards and the responsibility is not removed from the builder or developer. If a consumer feels that the building control body did not carry out its functions properly, they may complain to the local government and social care ombudsman in respect of a local authority. A complaint about an approved inspector can be made to CICAIR, the Construction Industry Council Approved Inspectors Register, which is the body that approves inspectors.

The hon. Member for Poplar and Limehouse (Jim Fitzpatrick) asked about sections in the Housing Act 2004 and about local authority powers to make developers undertake remediation for unsafe cladding. I will write to him about that and also about retrospective fire sprinklers.

[Melanie Onn]

I recently visited London Fire Brigade to talk about building regulations and the checks that are undertaken. The issue with spot checks is a real concern for safety. The failure to put an insulation sock underneath a window caused a new-build block of flats to be engulfed by fire just weeks after people had moved in. Can the Minister think of anything more that can be done to strengthen the system, to make sure it goes further than spot checks, so that key factors that support people’s safety in their homes are not missed?

--- Later in debate ---

[Mrs Wheeler]

Black pepper or white pepper?

[Melanie Onn]

Or pink?

[Mrs Wheeler]

Or pink—yes, please—or green; we could have green pepper as well. This poor Hansard writer, dearie me.

I recognise that many freeholders have to pay charges toward the maintenance and upkeep of communal areas on an estate. That is especially prevalent on new estates, exactly as the hon. Member for Blaydon mentioned. Freeholders who are unhappy about the transparency of those charges are becoming an increasingly frequent part of my ministerial postbag, and I understand why they are unhappy. Leaseholders have a whole suite of protections and rights that enable them to hold management companies to account, but freeholders have no such equivalent, even though they may be paying for the same or similar services.

The Government agree that the current situation is unfair to freeholders, and we are committed to legislating to plug that gap. We have set out our proposed approach to implementing those measures in part 4 of the recent leasehold reform consultation, which closed on 26 November. We intend to create a new statutory regime for freeholders, based on the rights enjoyed by leaseholders, which will ensure that maintenance charges must be reasonably incurred and services provided of an acceptable standard, and include a right to challenge the reasonableness of charges at the property tribunal.

Section 21 Evictions

Melanie Onn Excerpts

Thursday 6th December 2018 Westminster Hall

[Ms Buck]

It is a fair point. As always, a balance has to be struck. The private rented sector is important, and as much as we would like to build more social housing to accommodate some of the people in it, that would take longer than we can afford to take to accommodate the people in the pipeline. That has to be considered. It is fundamentally unknowable, because it cannot be taken out of the context of so many other aspects of housing need and supply, including the Government’s 2015 tax changes, which landlords are extremely concerned about, and the overall number of tenants seeking accommodation.

The fact is that if we get the balance right and remove no-fault from the equation, and if we concentrate on providing a means for landlords who legitimately need to recover their property for whatever reason and deal with some of their concerns about the operation of that system, there is no reason on earth people should regard that as unacceptable.

[Melanie Onn (Great Grimsby) (Lab)]

I know that it is unusual to make an intervention from the Front Bench, but the situation that the hon. Member for Cheltenham (Alex Chalk) describes is simply one of displacement, which would not solve the long waiting lists that people are experiencing for social housing and affordable housing, and would not give anybody security of tenure. The issue he describes is not the equivalent of bed-blocking.

[Ms Buck]

That is absolutely right.

--- Later in debate ---

[Alex Chalk]

The hon. Gentleman knows how fond I am of him and his remarks, but his slightly party political point tempts me to intervene. This debate is about whether it is right to update the 1988 legislation. Does he accept that his party was in power between 1997 and 2010 but declined to do so? Does he agree that we ought to consider the matter in a more cross-party, consensual and reasonable way, rather than drawing party political points? [Interruption.] The hon. Member for Great Grimsby (Melanie Onn) is shaking her head, but does the hon. Gentleman agree that this need not be too partisan an issue?

[Melanie Onn]

You’re in the minority here—you should be careful!

[Andy Slaughter]

I thought I was making one of my most conciliatory speeches in the past 13 years. I am sure that when the hon. Member for Cheltenham hears from our Front Bench, a lot more of the Rottweiler tendency will be on show.

--- Later in debate ---

[Melanie Onn (Great Grimsby) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Graham. I start by welcoming the Minister back to her place. This is the first time that we have had the opportunity to face each other in recent months, and I am very pleased to see her.

I pay tribute to my hon. Friend the Member for Westminster North (Ms Buck) for securing this debate, and for her truly exceptional work to help those who struggle to get a long-term decent home in the private rented sector. She has been absolutely tireless in ensuring that the quality of people’s accommodation is sufficient and suitable for people to live in in the 21st century, and she is so persuasive that the Government supported her private Member’s Bill earlier in the year. I congratulate her on that.

For many of the 4.7 million private rental households in England, the risk of being evicted by a section 21 notice casts a looming shadow of insecurity over their time in the private rental market. In as little as two months after being served a notice, a tenant’s life can be turned around. For the one in four families with kids who live in rented accommodation, that can mean moving their children out of the settled environment of their school, where they have friends and connections. As my hon. Friend the Member for West Ham (Lyn Brown) eloquently said, that reduces their potential, limits their life chances and impacts on their healthcare and education. She helpfully set out some of the financial ramifications of failing in housing in the first instance, making those families move into new and strange environments. For many, their ability to raise the money for new accommodation, including deposits that can now stretch into thousands of pounds, is simply a pipe dream.

It is no coincidence that the rise of the loss of a private rental tenancy as a reason for statutory homelessness since 2010 has come in parallel with a rise in the use of section 21 eviction processes, and Generation Rent research suggests that more than 200 households a week are being made homeless through section 21 evictions. The use of section 21 has severe impacts on those who face it, yet there is no oversight of its use to ensure that it is justified, fair or proportional.

Nothing sums up better how deeply unjust the application of section 21 can be than the experience of a number of my constituents who were moved on to universal credit this time last year. During the transition to universal credit in my area as part of the pilot roll-out, a property company that housed the vast majority of universal credit tenants—generally at the lower end of the market and in cheaper properties that are not always in the best condition—sent blanket section 21 notices to people in its properties. While the landlord said that it had absolutely no intention to evict tenants who did not fall into arrears, the form 6A that was handed to tenants clearly stated that they were required to leave their property on 15 January. That action by the property company left people and their families facing homelessness just three weeks after Christmas. Those tenants need not have been in significant debt arrears to end up losing their home. Only the Leader of the Opposition’s raising this matter at Prime Minister’s questions brought home to the agents just how unfair and unnecessary their actions were. On first reading, the letter indicated that the information on the form was final, and the full wording of that letter can easily be interpreted as saying that late payment by even one day would result in eviction.

My hon. Friend the Member for Hammersmith (Andy Slaughter) mentioned how those possession orders and the letters can literally terrify tenants, which is something that I experienced on a large scale only a year ago. He also commented on tenants being issued with a possession notice and being terrified. If they are deemed to have left the property too early, the local authority considers them to be intentionally homeless. How does that now work with the Homelessness Reduction Act 2017 and the local authority’s duty to prevent homelessness? The two seem to be in conflict, and I shall be grateful if the Minister touches on that in her closing remarks. I am sure that she will absolutely agree that causing families that much stress over Christmas and putting people at risk of homelessness due to Government system changes rather than to individual fault, and when they have no previous rent arrears or a track record of being a bad tenant, is not how we want the eviction process to work in this country in the 21st century, but that is completely legal under section 21.

It is not just the eviction process where section 21 has a devastating effect on tenants in England. Giving landlords the power to play fast and loose with security of tenure creates a power imbalance, which unscrupulous landlords use to intimidate or exploit tenants and to get away with improper and often illegal practices. Some of the most extreme cases of this were made clear in Westminster Hall last week during the debate on sex for rent, which was secured by my hon. Friend the Member for Hove (Peter Kyle). Shelter estimates that this issue affects 100,000 women each year.

When landlords can evict tenants indiscriminately, they can hang the threat of eviction over tenants at any time they see fit. Tenants, who are often unaware of the help that is available to them, and often unaware of their rights and where they can get advice, feel that they have very little right, even if they could afford—particularly in terms of legal support—to challenge whether they had been correctly served with a notice.

[Lyn Brown]

My hon. Friend spoke about tenants not knowing where to go to receive advice. One of the biggest problems we have in Newham is that there is no longer anywhere for our tenants to go for advice—we do not really have that kind of advice and services. We no longer have legal aid to look after our tenants, and we certainly do not have fully functioning and properly funded citizens advice bureaux or housing rights services, which exacerbates everything and makes it so much worse.

[Melanie Onn]

My hon. Friend is absolutely right. I have a personal understanding of that situation, particularly in Newham, because my mum used to work for Community Links, which suffered huge cuts in 2012, resulting in her redundancy. That was precisely the organisation that provided that kind of detailed advice, support and casework to individuals in my hon. Friend’s constituency.

When landlords can evict tenants indiscriminately, tenants do not feel empowered or that they have sufficient knowledge or support. When they think that they have a very slim chance of winning a legal case where a threat is made with no written evidence, they just think, “What on earth is the point?” and look for somewhere else to live, which can often be far out of the area, particularly in London. If a landlord is seeking to move somebody on because they want to receive a higher rent—we know that is the case due to the demand in the city—it can be impossible for people to find similar accommodation in their locality and local community. Landlords can use the threat of section 21 eviction to pressure tenants into sex, and too often they can carry out the threat of eviction, as there are no clear checks that would allow a tenant to challenge an unfair and punitive eviction.

My hon. Friend the Member for Westminster North was absolutely right to talk about the private rented sector as the only housing option available to people, now that the ability to buy is so far out of so many people’s reach. She was also right to talk about how different the private rented sector is from the way that it used to be perceived. We are approaching 5 million people in the private rented sector who will be there for the long term—who will be in that sector, even if not temporary accommodation, for many years. Surely it is right that when circumstances change, we should acknowledge and accept that and say, “Yes, let’s change the policy accordingly—it has to reflect modern times.”

We need a new system of evictions in England, with proper checks and balances to prevent abuse. We know that there are numerous valid reasons why a landlord needs to evict a tenant. None of us wants to do away with a landlord’s right to evict bad tenants, sell their property or move back in, if need be, but it surely cannot be beyond our capabilities to draw up a new system that reflects that while protecting tenants. It is a case only of whether there is the will to do it. Some landlords use section 21 to carry out evictions because the current section 8 process is too slow and complex to evict bad tenants, but we do not need a no-fault eviction process to allow landlords to reclaim their properties legitimately. It is easy to prove that a tenant is in rent arrears or has caused significant damage to a property, easy to prove that you are in the process of selling a rented property, and easy to prove that you have genuinely reclaimed a property for self-use and not to rent commercially to another tenant. So simplifying section 8 and putting in a proper system that means landlords must give a valid reason for eviction—I say again—should not be beyond the means of the Government. If we create a system that provides better checks and balances, there seems to be no reason at all to keep a no-fault eviction clause that causes so much hurt for thousands of tenants around the country.

Before I finish, I want to say that my hon. Friend the Member for Easington (Grahame Morris) deserves a visit from the Government. I hope the Minister will rapidly flick through her diary to find an available date to go and look at how integral security of housing, quality of housing, availability and affordability are to people’s wellbeing and strength in his local community. A visit would be greatly appreciated.

If the Minister recognises that we have to root out bad and exploitative landlords; that we need to try to professionalise the private rented sector; that we want to tackle discrimination of renters and improve communities by ensuring that people feel invested in their properties as homes and not somebody else’s investment; and that the private rented sector is a valued and necessary part of the housing mix in this country while we wait for councils to be able to start building more social homes, hopefully she will agree with what my hon. Friend the Member for Westminster North has proposed today.

--- Later in debate ---

[Mrs Wheeler]

We will indeed; I would be delighted to have that conversation.

As I stressed at the start of my speech, property is a valuable asset and landlords may need to gain possession quickly for various reasons, perhaps because they wish to sell the property, or to enable them or a family member to move in. As I said, there is a clear legal protection for tenants, and a clear process that landlords must follow when carrying out a section 21 eviction.

I appreciated hearing what the hon. Member for Easington had to say about selective licensing and borough-wide licensing, and about enforcement of property standards. Selective licensing is meant to be a targeted tool that can deliver improved standards and safety in the private rented sector for areas suffering serious problems. It can be used at local authorities’ discretion, but where it covers more than 20% of the private rented stock, confirmation by the Secretary of State is required. That is to ensure that local authorities focus their activity on the worst areas and avoid an adverse impact on good landlords. Local authorities have an array of powers at their disposal for enforcing property standards. We expect them to use those to maximum effect and have set up a £2 million fund to help them kick-start enforcement and share best practice. Having said all that, the offer that I would like to make to the hon. Gentleman is that my officials will contact his local authority to talk about an application for licensing.

The 2016-17 English housing survey found that only a tenth of private tenants, when asked about their most recent move, said that they were asked to leave or were given notice by their landlord. There were 1.1 million moves into and within the private rented sector in 2016-17, with private renters making up a larger proportion of movers compared with other tenures. However, there has been an overall decrease in the number of private landlord possession cases since 2014. In England and Wales there were 20,590 private landlord possession cases in 2016-17. That shows that only a small percentage of moves in the sector end in the courts. Of course, where that does happen it can have a devastating impact on the tenants involved. The Government acknowledge that the end of an assured tenancy in the private rented sector can cause homelessness.

I want to make it clear that we have one of the strongest safety nets in the world to prevent homelessness, and we recently strengthened it through the Homelessness Reduction Act 2017. The Act came into force in April and brought in a new prevention duty, extending the period for which an applicant is “threatened with homelessness” from 28 days to 56 days. That will ensure that those served with a valid section 21 notice that is due to expire will be classed as threatened with homelessness and supported until their situation is resolved—to answer a question that was put during the debate—with no gap between prevention and relief duties, if they have nowhere else to go. If the landlord intends to seek possession and there is no defence to the application, the local housing authority must take reasonable steps to prevent a person’s homelessness. Local authorities must work with applicants to develop personalised housing plans, tailored to the needs and circumstances of the household.

[Melanie Onn]

I thank the Minister for her further explanation of the point about the Homelessness Reduction Act 2017. Can she confirm that, were someone to leave their property early, having received the possession notice, and were they to attend the local authority, they would be deemed homeless, and not intentionally homeless, and given the same support as someone who was homeless as a result of another set of circumstances?

[Lyn Brown]

No, she cannot.

--- Later in debate ---

[Mrs Wheeler]

Fortunately, as I go on with my speech, the hon. Lady will hear even more good news.

We are going further, delivering the homes that the country requires. The Government are committed to building more affordable homes, supporting the different needs of a wide range of people. The Government are committed to increasing the supply of social affordable housing and have made £9 billion available through the affordable homes programme to March 2022, to deliver 250,000 new affordable homes on a wide range of tenures, including homes for social rent. Furthermore, we abolished the housing revenue account borrowing cap on 29 October. That will help to deliver a new generation of council homes. We expect it will help local authorities to double their building from around 5,000 to 10,000 homes per year by 2021-22.

[Melanie Onn]

The Minister is being incredibly generous in giving way. On the lifting of the HRA cap, which has been well received on the whole, what is the Government’s plan for those local authorities that do not have an HRA account because they disposed of their stock wholesale, at the time when housing associations became involved, about 10 years ago?

[Mrs Wheeler]

From memory, if a local council wants to go back into the market, as long as it builds a minimum of 100, it can. Obviously, I shall write to the hon. Lady to confirm that.

The change will diversify the house building market, as councils are better able to take on projects and sites that private developers might consider too small. To help further, we are providing a longer-term rent deal for five years from 2020 that provides housing associations and local authorities with a stable investment environment to deliver new homes. That will help to deliver the new generation of council house building that the Prime Minister announced recently.

Our position on retaliatory eviction is clear. To answer the hon. Members for Blaydon (Liz Twist) and for Leeds North West (Alex Sobel), no tenant with a genuine complaint about the condition of their property should be fearful of retaliatory eviction. That is why we have already taken steps on the matter, legislating to protect tenants from retaliatory eviction through the Deregulation Act 2015. As we are all aware, the vast majority of landlords provide well-maintained properties, and thankfully only a small number of tenants encounter the threat of retaliatory eviction. We share the ambition of ensuring that tenants are properly protected from retaliatory eviction—I shall begin to call it RE, as I cannot get my teeth around it.

We want to take a strategic approach, empowering tenants to raise issues with their landlords through greater security of tenure. Our recent consultation on overcoming the barriers to longer tenancies in the private rented sector included a question seeking views on the effectiveness of RE provisions. That ensures that we have the most up-to-date information to inform our thinking. We are currently analysing responses. We are supporting the private Member’s Bill promoted by the hon. Member for Westminster North, the Homes (Fitness for Human Habitation) Bill. It adds a new dimension to the fight against rogue landlords, empowering tenants by allowing them to seek redress from their landlords if their rented house or flat is in an unacceptably dangerous condition. Tenants will be able to seek that redress without having to rely on their local authority. Of course, they will still be able to report problems to their local authority if they prefer, and will then be protected from unfair eviction by the 2015 Act. We are also exploring how we can strengthen redress in the housing market and are committed to requiring all private landlords to join a redress scheme as part of that. We will be publishing the response to our redress consultation shortly.

I hope that my remarks today demonstrate the Government’s commitment to building a private rented sector that works for everyone—one that supports good landlords to deliver the homes the nation needs and provides safe, affordable and secure homes for tenants. We do not shy away from the challenges facing us and are aware that we need the support of the entire private rented sector if we are to achieve those goals. It is in that spirit that I thank all hon. Members for their speeches and questions. I hope the hon. Member for Easington survives his cold—he has just toddled off. It would be a pleasure to talk to him about organising a visit to his area. I look forward to working with the hon. Member for Westminster North and other hon. Members in the coming weeks and months on this very important issue.

Oral Answers to Questions

Melanie Onn Excerpts

Monday 5th November 2018 Commons Chamber

[Mrs Wheeler]

The hon. Gentleman is an assiduous Member and does such a good job of chairing the Housing, Communities and Local Government Committee —[Interruption.] Do you mind? We are trying to get there; let us have a bit of civility, shall we?

I have written again to the hon. Gentleman, and the important thing is that we have now had frank words with the local authority in Peterborough to say that it should have informed the receiving authorities—it has now done that. The team we have put together to help with homelessness is having a special word with Peterborough and other councils that were thinking of placing homeless people out of borough.

[Melanie Onn (Great Grimsby) (Lab)]

Homelessness has risen in each and every one of the past seven years. In the last year alone, 440 homeless people have died. The Budget pledged nearly £10 billion to a poorly targeted help-to-buy scheme, but it failed to mention homelessness once. Now the Secretary of State has scrimped together a measly £15,000 each for councils to tackle winter pressures. Will that guarantee that we will not see any rough sleepers on the streets this winter?

[Mrs Wheeler]

Sadly I do not have a crystal ball, but what I do have is a team of fantastic advisers who are making sure that councils have put in really good bids to help rough sleepers. Secondly, there is money: £40 million, £30 million, £75 million and, now, another £5 million. This Government take homelessness and rough sleeping extremely seriously, and we are the only Government who have put it in our manifesto that we want to halve homelessness and rough sleeping. We will be looking after the most vulnerable people in 2020, and we will finish this altogether in 2027. The answer is that the Government and the money that taxpayers are providing are doing their best.

Homes (Fitness for Habitation) Bill

Melanie Onn Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Friday 26th October 2018 Commons Chamber

[Melanie Onn (Great Grimsby) (Lab)]

I pay tribute to my hon. Friend the Member for Westminster North (Ms Buck), whose hard work and dedication to improving the lives of tenants has got this Bill to where it is today. We need no more stark reminder of the dangers of housing hazards and unfit properties than the Grenfell Tower disaster, as my hon. Friend the Member for Warrington South (Faisal Rashid) mentioned when he spoke up so determinedly for his constituents about the difficult situation in which many of them are forced to live. No tenant should be allowed to live in housing with such fire safety hazards, and no tenant should ever be ignored when they make a complaint about the severe risks that they see in their property. This disaster cannot be allowed to happen again.

The Bill can be the foundation of ensuring that we never see tenants housed in such unfit accommodation ever again. It gives tenants direct rights to compel social and private landlords—my hon. Friend the Member for Kensington (Emma Dent Coad) just highlighted the importance of including social landlords in the measure, and her comments also brought to the fore the importance and imperative nature of the Bill, which comes not a moment too soon—to carry out repairs if their accommodation is not fit for habitation and presents a serious and immediate risk to their health and safety. My hon. Friend the Member for Reading East (Matt Rodda) rightly highlighted that, given the number of private rented sector properties in his constituency. He also talked about the growing issues that will come as the sector looks only to expand.

The Bill is undoubtedly a positive step for tenant safety, but the Government must do more to empower tenants to challenge unfair conditions if the Bill is to reach its full potential. The Government must ensure that tenants do not fear retaliatory action when they complain about unfair conditions, as the hon. Member for Walsall North (Eddie Hughes) rightly pointed out in his intervention. Unfortunately, a study by Citizens Advice showed that the current measures against retaliatory evictions are simply not working, with local authorities not reporting a downturn in evictions as a result of the Deregulation Act 2015. Protection against retaliatory eviction is vital to the Bill’s success, so will the Government listen to groups such as Citizens Advice and Shelter, and introduce a Bill on the back of their consultation to make three-year tenancies the norm and to give tenants the security they need, which was mentioned by my hon. Friend the Member for Hammersmith (Andy Slaughter)?

We saw news this week about the fact that despite the introduction of the Government’s rogue landlords register, some landlords who have been deemed in law to be unfit to let properties continue to be rewarded with rental income, including from the public purse as a result of housing benefit. The landlord register is not being properly used as it might be, and it is also not public. Is this not an opportunity to give that mechanism real meaning, to use it properly and to give consumers their full rights by enabling them to see where rogue landlords are in operation? Such measures would have made the Bill even stronger, but we are very pleased to see it finally reach Third Reading. We hope that it will put an end to the scourge of unfit housing once and for all.

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 (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.

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[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 (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.

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[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.)