Tenant Fees Bill

Rebecca Pow Excerpts

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

[James Brokenshire]

The issue was considered by the Select Committee, and we have considered it carefully. We believe that six weeks’ rent as an upper limit strikes the right balance between providing tenants with greater affordability while ensuring that landlords have adequate financial security for their assets.

[Rebecca Pow (Taunton Deane) (Con)]

I welcome the Bill. It is crucial that we have a vibrant tenant sector and that we aid it in every way possible, but the Bill must not deter landlords or agents who are acting well, assiduously and industriously. We must ensure that the Bill increases transparency and the competitiveness of the market, while still having a viable and vibrant market.

[James Brokenshire]

My hon. Friend makes an important point. Let me be clear: the Bill is not an attack on good agents and landlords. We value the important services that they provide, but it will ensure a fair playing field for reputable agents by making it harder for rogues to operate. Letting agents and landlords who represent good value for money will continue to thrive, while those who rely on charging unfair and unjustifiable fees will have to reconsider their business models. We have also committed to regulation to prevent reputable agents from being undercut or undermined by rogues.

My hon. Friend makes her point very sincerely. The interesting point about some of the experience in Scotland is that the number of letting agents in Scotland, according to Companies House, has increased since 2012, when the ban on tenant fees was clarified there. That demonstrates that innovative and good agents can continue to thrive.

Tenant Fees Bill

Rebecca Pow Excerpts

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

[Mrs Wheeler]

Again, I thank my hon. Friend for his intervention. He is so deeply imbued with knowledge of these issues that I take note of it. I think he will find that later in the Bill there is a clause that might be helpful to him.

There is also a power in clause 3 to amend the list of permitted payments, including the level of the deposit cap and types of default fees that can be charged, should this be required.

Lords amendment 48 clarifies that landlords and agents will still be able to charge for any damages for contractual breaches as they do now. On this point, the hon. Member for Great Grimsby has tabled an amendment seeking to ensure that, where a landlord or agent wishes to charge a payment for damages, they must provide evidence in writing to demonstrate that their costs are reasonable. I would like to reassure her, and other hon. Members, that that amendment is not necessary. It has never been the intention that the Bill affects a landlord or an agent’s right to recover damages for breach of contract under common law. That is why we brought forward Lords amendment 48 to clarify the position and to ensure that such payments will not be outlawed under the ban. I want to reassure hon. Members that this does not create a back door to charging fees. I repeat: it does not create a back door to charging fees. Damages are generally not meant to do anything more than put the innocent party back in the position they would have been in had the contract not been breached. No reasonableness test is therefore needed. There are already large amounts of case law that deal with what is appropriate in a damages case. If an agent or a landlord attempts to insert a clause that requires a payment—for example, saying, “If you do X, you must make a payment”—this will be prohibited under clause 1(6)(b) or clause 2(5)(b). Further, landlords or agents are required to go to court if they want to enforce a damages claim, or they could seek to recover them from the tenancy deposit. In both cases, they would need to provide evidence to substantiate any claim, and they would only be awarded any fair costs.

As such, the hon. Lady’s amendment is unnecessary. It would also not be appropriate for this Bill to start tweaking years of existing case law regarding damages payments. We are more likely to confuse the landscape than to clarify it. We are committed, on this matter, to working with Citizens Advice, Shelter and other industry groups to ensure that tenants fully understand their existing rights with regard to paying and challenging contractual damages. We have already taken steps to update our guidance to make this point clear. I hope that, with those reassurances, the hon. Lady feels able to withdraw her amendment.

Hon. Members will be aware that the Bill introduces a clear set of rules around holding deposits. This will improve transparency and provide assurances from both tenant and landlord around the commitment to entering into a tenancy agreement. To minimise the risk of abuse, Lords amendment 54 introduces a formal requirement for landlords and agents to set out in writing why they are retaining a deposit. This will empower tenants to challenge decisions that they believe to be unfair. It will also ensure that tenants do not continue to apply for properties and risk losing their holding deposit time and again without understanding why.

We also agree that it is not right that landlords and agents accept multiple holding deposits for the same property. That is why Lords amendment 41 ensures that a landlord or an agent can only take one holding deposit at any one time for a property, unless permitted to retain the earlier deposit. Lords amendment 50 will ensure that a tenant receives their holding deposit back when the tenancy agreement is entered into. Previously, it could have been the case that a landlord might have had grounds to retain the holding deposit, and done so but entered into the tenancy anyway. Further, Lords amendment 59 clarifies that a holding deposit must be refunded where a landlord or an agent imposes a requirement that breaches the ban or behaves in such a manner that it would be unreasonable to expect the tenant or relevant person to enter the tenancy. This will, for example, give tenants greater power to object where a landlord or agent has asked them to pay an unlawful fee or to enter into an agreement with unfair terms.

[Rebecca Pow (Taunton Deane) (Con)]

This is a very stressful time for tenants; I have had a case raised with me very recently. That is particularly so for those who are forced, for one reason or another, to move frequently, which seems to happen more often in London than elsewhere, including Taunton Deane. Does the Minister agree that these amendments and this Bill are going to make a real difference to their security, particularly the fact that they have redress over the deposit issue, which is incredibly stressful if they have to try to claim it back?

[Mrs Wheeler]

My hon. Friend is quite right. It does seem to be a bit more of a thing in the south-east than anywhere else. Nevertheless, this Bill, which we hope to get through tonight with no ping-pong, will apply across the whole of England, and it will help tenants going forward, so I thank her for her question.

Lords amendments 13, 14, 19, 20, 38 to 40, 51 to 53 and 56 to 58 are consequential to those on holding deposits that I have just described.

I would like to discuss some amendments made to ensure that the Bill does not adversely affect organisations that were never intended to be in scope. We have taken local housing authorities and the Greater London Authority, or any organisation acting on their behalf, out of the definition of “relevant person”. Lords amendments 3 and 4 ensure that those authorities and those acting on their behalf will be able to make payments in connection with a tenancy when acting on behalf of a tenant or guaranteeing their rent.

Local authorities have a duty to help the homeless find accommodation. We recognise that, as part of this, councils may need to provide assistance to applicants—financial or otherwise—to access private rented accommodation. We do not want inadvertently to prevent a local authority from carrying out that vital work.

Further, Lords amendments 24 to 26 exclude certain licences to occupy where advice or assistance is provided in connection with the grant, renewal or continuation of the licence by charities or community interest companies. The types of licence that will be excluded are those that have been granted primarily for the provision of companionship or companionship combined with care or assistance where no rent is paid. This ensures that the important work of schemes such as Homeshare can continue. Homeshare matches a person in housing need—often a young person—with a householder, who is often elderly and needs companionship, sometimes combined with low-level care or assistance. I am sure we all agree that that is a worthy cause that was never intended to be in scope of the ban on letting fees.

Lords amendments 21 to 23 and 27 ensure that the forthcoming client money protection provisions work as intended. We want to give landlords and tenants financial security, but not in such a way as to impose disproportionate and unnecessary burdens on industry, which might adversely impact tenants and landlords. We have clarified that money that has already been protected through a Government-approved tenancy deposit scheme is not required to be doubly protected by a client money protection scheme. That was never the policy intention.

We will also not require schemes to pay out where certain risks are excluded by insurers. Those policy exclusions typically refer to events such as war, terrorism or confiscation by the state. Neither can we expect schemes to hold insurance for every penny held by agents. Our amendments ensure that the level of insurance held by schemes is proportionate to the risk of client money being lost. We are permitting schemes to impose limits per individual claimant and aggregate limits, where they are at least equivalent to the scheme’s maximum probable loss. That is an accepted industry practice, and the Financial Services Compensation Scheme imposes such limits.

The amendments on client money protection also provide for a transitional period of 12 months after the requirement to belong to a scheme comes into force, permitting agents to join a scheme where they are making all efforts to apply for a client account but have not yet obtained one. We want to give agents sufficient time to find a bank that offers a pooled client account. Schemes will be able to work with agents to find an appropriate banking provider where they are having difficulty. I would like to be clear that the 12-month transitional period only applies in relation to applying for a pooled client account and not the requirement to belong to a client money protection scheme more broadly. That is intended to come into force on 1 April 2019, prior to the ban on fees, and as long as we do not have ping-pong.

Lords amendment 27 clarifies that the lead enforcement authority set up under the Bill can also enforce the client money protection regulations, and Lords amendment 60 is a consequential amendment to the title of the Bill. These amendments will ensure that client money protection gives tenants and landlords the financial security that they want and deserve, without imposing unreasonable and disproportionate costs on industry, which could increase costs for tenants and landlords.

Above all, these amendments improve affordability, strengthen protection for tenants and minimise the risk of abuse by the minority of rogue landlords and agents. They ensure that the Bill’s key provisions are clear and transparent on the face of the Bill, offering tenants the certainty and security that they deserve. I hope that Members will welcome the changes that have been made, which I firmly believe address the key concerns raised in this House. I am confident that the measures in the Bill will help to deliver the fairer and more affordable private rented sector that we all want to see for tenants, but also for decent, professional landlords and agents who are providing a vital service.

It is in all our interests to see this crucial legislation become law as quickly as possible and avoid any delay that ping-pong would inevitably cause. We need to allow a short period following Royal Assent to enable agents and landlords to become compliant with the new legislation. We therefore intend the provisions in the Bill to come into force on 1 June 2019, which means that the ban would apply to all new tenancies entered into on or after that date.