Tenant Fees Bill (Second sitting)

Neil O'Brien Excerpts

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

[Mr Goodwill]

Indeed, the passporting arrangement that the Opposition mentioned would solve that problem as well. It is interesting to have some statistics behind that. Thank you very much.

[Neil O'Brien (Harborough) (Con)]

Q I have a question for the whole panel. Two days ago, we heard from various landlords’ groups that they did not think that the Bill would lead to net savings for tenants. For complete clarity, could I get a quick answer from each of you on whether you think that the end of lettings fees will lead to benefits to tenants?

Dan Wilson Craw: The Bill will benefit tenants. Yes, we think that.

Rhea Newman: Yes, we do. Is this in relation to potential rent increases? Is that what the question is?

[Neil O'Brien]

Yes, the argument was made that rents would just go up to compensate.

Rhea Newman: We still think the Bill will benefit the majority of private renters, because it will save them money every time they move. In terms of rent increases, we do not expect that all the fees currently charged to tenants will start being charged to landlords, because landlords have the consumer power to shop around and choose the agent that they use, and therefore there will be a competitive pressure on agents to drive down their prices and to offer surpluses at the best value for money.

If we look at the example of Scotland, there is no conclusive evidence that the ban led to a spike in rent increases immediately after it came into force. We conducted some independent research that suggested that there might have been a small short-lived increase in rents, but only one out of 120 landlords had experienced their agents putting up the price and consequently put that on to renters. Similarly, the Office for National Statistics produces an index of rental prices that is now the most authoritative source on rent increases and in the years after the ban, for the first two years, rents increased at roughly the same rate in Scotland and England. Four years later, they had increased much more in England than in Scotland, at 9% to 5%.

[Neil O'Brien]

That is quite the opposite of what we had been told the other day. Katie?

Katie Martin: Overall, we absolutely think that this Bill will benefit tenants, with the changes that we have proposed. If there were to be any rent increases passed on to tenants, which it sounds like there will not be, that would at least be transparent and visible, and that would help to create a competitive market for tenants. So overall, yes.

Izzy Lenga: I was going to echo the point about what happened in Scotland. When the Scottish Parliament banned those fees there was not that much of a spike in an equivalent rise in rent. I also echo the point that ensuring that the guidance is clearer, more transparent and provides a lot more clarity will be really beneficial for students, especially in learning how to manage to budget. As I have mentioned a few times, students can really struggle with money. Clear and more transparent guidance about where their money is going, and when and what they need to pay, will really help students in general.

[Neil O'Brien]

Q If it is okay, Mr Bone, I have a question specifically for Rhea. You just made an interesting point about reasonable charges. I can see your argument that tenants are not able to claim the costs of getting in touch with their landlords, but on the other hand, as you were speaking I was struck by the thought that if it does take months of work, legal effort and endless emails to enforce something, I am not sure how a clause about “reasonableness” would be interpreted. On the face of it, charging for those kinds of costs might be considered reasonable. Could you perhaps say a little more about your idea? I feel sort of left hanging by what you said.

Rhea Newman: Currently, the Bill limits payments in the event of a default to a landlord’s loss, but it is not clear what could be included in that. For example, replacement keys come up a lot. We think that it is absolutely right that if a tenant loses their key they should pay for it to be replaced, but we think that they should pay the cost of having a new key cut, not necessarily other costs that could be added to that such as time, going to get the new key cut and business lost. To draw a comparison, if you broke a glass in a shop you would be very happy to pay for a replacement glass, but I do not think you would necessarily offer to pay lots of additional things on top of that, which you would consider part of the shop’s business costs.

[Neil O'Brien]

Q Just to push you a little on that, in quite a lot of other industries you do pay for the time. For example, if you get a parking charge you will get charged for all the associated legal stuff if you have bailiffs enforced against you. In lots of other industries you do get charged for the time. I wonder how you see your proposal being interpreted. Would it be for the courts to decide what is reasonable, eventually, or would you want a defined list?

Rhea Newman: In regulations we would like a defined list of the types of fees that can be charged. In terms of what comes down to reasonableness, it might be difficult for that to be set out in regulations. I guess there are already some protections in the Consumer Rights Act around what is considered fair or unfair. I think reasonableness is about what a reasonable person would expect to pay in those circumstances, which is the cost the landlord actually incurs.

It is the combination of the reasonableness with the evidence. The landlord sets out the evidence and shows what the costs are. The tenant can then look at that, potentially get some advice, and challenge it. The problem is that by just saying that it is limited to a landlord’s loss, landlords could try to put lots of extra things in there. We have been asking some of our supporters and staff about things that they are potentially charged for at the end of a tenancy. For replacing items such as a dustpan and brush you could be charged £45 because an initial procurement fee was put on to it as well. That is the kind of thing that we are trying to guard against.

[James Frith (Bury North) (Lab)]

Q This has slightly been touched on, but does Citizens Advice, or anyone else who wants to answer this, have an example of landlords taking the mick when it comes to default fees and incidental fees? We have discussed the loss of keys, but there is some concern about incidental fees, as well as the range of fees that are applied, being increased as an opportunity to recoup some of the earnings that agents or landlords might be losing. Are there any examples of that?

Katie Martin: I am sure our advisers see examples of that every day. I am afraid I do not have any off the top of my head—I do not know whether other panellists do. We know that many tenants are being exploited by landlords. Not all of them—many landlords are totally fair and reasonable, but some are not, and we think that the legislation should prevent those unscrupulous landlords from being able to take advantage of tenants. I do not have examples off the top of my head.

Rhea Newman: I was going to pick up on a point that was made earlier. Garden maintenance could be quite a good example: what is expected of a tenant in terms of maintaining a garden? If you give landlords and agents the potential to do so, some—it is only some—might attempt to write in quite creative things that put unfair expectations on a tenant, and then charge them for not meeting them.

The existing examples we see that we are particularly worried about are the letters to chase late rent as well as emails, phone calls and so on. If they are charged at, say, £60 a time and there is no limit on how often a landlord or agent can send those letters or emails, that might be considered an unfair term in the Consumer Rights Act, but as we have said, it is actually quite difficult for a tenant to challenge that. That is why we think there need to be clear provisions up front about what is chargeable and what is reasonable.

Dan Wilson Craw: We have a couple of examples. We asked our supporters for examples like this and someone was required by their landlord to have their chimney swept once a year even though their fireplace was completely out of action.

There was another whose landlord would not fix a broken extractor fan in the bathroom, so the bathroom got very damp. By the end of the tenancy, one of the cabinets had got water damage, so the landlord tried to claim for that. The tenant successfully argued that that was the landlord’s fault because of the extractor fan, and he was awarded his deposit back. But the point a lot of our supporters made was that in these cases they knew their rights and knew that they were in the right, but they felt that a lot of tenants in a similar situation would not have the confidence to take on the landlord, or perhaps could not have a deposit just held in escrow for months on end while that gets resolved.

Katie Martin: In terms of transparency, it is required that any of these incidental fees default fields are written into the contract, but we know from our research that a quarter of tenants receive their contract on the day they are moving. So they have already paid the deposit and committed without having seen the contract. We think that is far too late for those things to be made clear to them.

Rhea Newman: It is also potentially very difficult to identify charges in a contract, depending on how they are written in, and it is very difficult to negotiate. That is a really good point about when you receive the contract, but even if you received it earlier, if you want a particular property and you know that queues of tenants are trying to get it, you are in a very weak bargaining position.