Tenant Fees Bill (First sitting)

Sarah Jones Excerpts

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

[Maria Caulfield]

Q So is there a need to have default fees within this Bill?

Richard Lambert: I think there is.

David Smith: Landlords are always entitled to recover their costs from a tenant’s breach of contract. A default fee is actually where the parties pre-agree what the level of that fee should be, creating a degree of certainty between them so that tenants are going to know that they will have to pay this amount and this amount only, whatever the actual cost of, say, a locksmith. There is a benefit to having a fixed tariff of fees for particular contractual breaches. It is a commonly used mechanism across a wide range of contracts.

[Sarah Jones (Croydon Central) (Lab)]

Q May I just ask for information? Obviously we accept that the majority of landlords are good landlords and do the right thing. You talk about exploitation, variation and some egregious levels of charging, and some exploitation of people. Would you describe what evidence there is as to the numbers of good agents versus bad agents, and good landlords versus bad landlords? We talk about the bogus ones who are charging people but is there evidence of the number, or of where they tend to be? Do they tend to be the bigger ones or smaller ones? Are they in cities or in rural areas? What do we know?

Richard Lambert: It is almost impossible to identify that. Those kinds of landlords and agents do not self-identify, by definition. Somebody once said to me, “The worst tenants tend to gravitate towards the worst landlords.” Often, those kinds of landlords will be housing people with chaotic and vulnerable lives who find it difficult to go anywhere else, or people who may be on the verges of criminality. Quite often, you find that the actual accommodation provision is a sideline of a wider organised criminal activity, and it is a part of something that will involve people trafficking, prostitution, drugs, money laundering and so on. The letting of the property is simply a factor: they need somewhere to house the people.

David Smith: The only way to clarify that would be to look at the number of landlords prosecuted as a percentage of the overall number of landlords. However, the problem with that as a measure is that enforcement is so poor.

[Sarah Jones]

Q Yes. On the agent side, you said you could walk down a street and point the local authority to all the agents who are not displaying their fees at the right level. Do you have any sense of where and who those agents are? Are there any numbers to any of these assertions?

David Smith: Again, you have to distinguish between walking down the street and finding technical breaches of the Consumer Rights Act 2015, for which you could probably find 15-odd per cent of agents, depending on where you are, and agents who wilfully go out to break the law across a wide sweep of things. There are aspects on which some agents are just not very good at keeping up with what is, at the moment, a pretty fast-moving legislative picture.

[Sarah Jones]

Q My question is whether there are any numbers on any of that, or whether it is all just speculation.

Richard Lambert: The closest I can get is to flip the question around. We have regularly done tenant surveys over the past five years, and one question we ask is whether they have ever dealt with a rogue landlord, by which we mean someone who engages in criminal activity. The answer pretty consistently comes back as somewhere between 12% and 16% of tenants having at any time during their renting lives dealt with someone who they thought was acting in a criminal manner.

We always ask after that what the landlord was doing that made the tenants think that. Some of the stories we have heard shocked us, and we are used to hearing some real horror stories about landlords. For others it is low level management problems, such as not repainting a ceiling after a leak or taking three days to get a plumber when the boiler packed up. What people actually understand as criminal activity on the part of a landlord—

[Sarah Jones]

Might vary.

Richard Lambert: Might vary and indeed might not be accurate.

[Sarah Jones]

Q I have two other quick questions, if that is okay, Mr Bone. We have talked a lot about enforcement. Can you describe your ideal enforcement regime that would enable the Bill to be implemented?

David Smith: I would prefer a two-track option with a direct mechanism for tenants to enforce rights themselves, with local authority back-up. I am aware that Ms Onn has tabled an amendment that would allow tenants to enforce in a similar way to tenancy deposit protection. I am not sure I necessarily agree with the three-times-amount penalty, but there is certainly a logic in allowing tenants to have direct enforcement of their rights. That clearly makes sense and would certainly help in potential situations where a local authority is not adequately resourced or is unwilling to carry out enforcement activity itself.

[Sarah Jones]

Q In terms of local authorities, what kind of enforcement do we need there? We talked earlier about needing more resources. What else do we need?

David Smith: It is not just about more resources. The RLA has consistently asked not just for resources, but for a fixed, clear, repeatable sum of money, year on year, that allows a genuine enforcement structure to be built. That is not just little bits of money left over at the end of the year in the budget of the Department for Communities and Local Government, as it was, but an actual fixed sum of money, so that—to flip it around—local authorities can have a clear and understandable plan to execute enforcement, but they need repeatable money that goes on for five years.

Richard Lambert: We would like the Ministry to make it clear to local authorities that enforcement is a priority and should be considered a priority within their budget-setting, and to argue to the Treasury that the resources for enforcement should be enabled through the support grant that goes to local authorities and that local authorities should have the wherewithal that they need. If this is as important as the debate seems to suggest it is—we would say that it is—they need the resources to actually make that happen.

David Smith: A great deal of enforcement interest is targeted towards things that appear to be important because they make the press. They are important issues, but bad housing wrecks lives again and again, every day, because tenants go home to it every day. I do not think it gets the interest and support it needs in that regard.

[Sarah Jones]

Q I completely agree. On the six-week cap on deposits, people have suggested that the majority of landlords charge four weeks’ rent, and that if this piece of legislation goes through as it is, they would automatically put it up to six weeks. What is your view on that?

Richard Lambert: I would say that we are ambivalent. It is true that if you impose a cap, there is always a tendency within the market to move toward the maximum of the cap. Having said that, certainly for the last five, six or seven years the advice that our advice line gives landlords has been, “If you are going to charge a deposit, charge six weeks, because what you want to do is to detach the sense that the deposit is equivalent to a month’s rent, so that the tenant does not get into the mindset that, ‘I can leave the tenancy early; the landlord’s got the last month’s rent in the deposit,’ so the tenancy does not end correctly.” Even so, the vast majority of people still charge one month’s rent, with some flexibility where they need to add some compensation for a tenant’s additional risk, as was described by my predecessors.

David Smith: We find that a lot of our members are charging six weeks for very much the same reasons that Richard has laid out, and that would be our advice to our members. We are concerned that by putting on a six-week cap, you will find that a lot of tenants with pets simply will not get property.

[Sarah Jones]

Q The question is whether people who are on four will put it up to six when this legislation is passed.

David Smith: That is possible, but I do not think a lot of landlords will, because why bother? Why go through the effort? Our bigger concern is that we surveyed some of our landlords towards the end of last year and around 50% of them said that they simply would not rent to tenants with pets if the deposit was capped in a way that they did not feel would allow them to recover the potential cost of that.

[The Chair]

Thank you. I am going to move to Richard Graham very briefly, and then I want the Minister to have some fun.