Commercial Rent (Coronavirus) Bill

Debate between Seema Malhotra and Baroness Winterton of Doncaster

Wednesday 12th January 2022 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

Government amendments 1 and 2.

Amendment 9, in clause 2, page 2, line 40, at end insert—

“(6) Notwithstanding subsection (5), the provisions of this Act shall extend to a business tenancy irrespective of whether the property comprised in the tenancy is occupied by the tenant.”

This amendment broadens the definition of business tenancy to cover arrangements in which the property is not occupied by the tenant.

Amendment 13, in clause 7, page 5, line 19, at end insert—

“(2B) The Secretary of State must ensure that bodies approved under subsection (1) have sufficient numbers of arbitrators (whether alone or as a member of a panel of arbitrators) required to conduct arbitrations under this Part.”

This amendment would require the Secretary of State to ensure that the approved arbitration bodies collectively have sufficient capacity to hear all arbitrations under this Part.

Amendment 10, in clause 9, page 7, line 7, leave out from “beginning” to the end of line 8 and insert “25 March 2022”.

This amendment revises the period for a reference to arbitration to be made in order that it is consistent with the Code of Conduct.

Government amendment 3.

Amendment 14, in clause 11, page 8, line 21, leave out “supporting evidence” and insert

“any evidence relevant to the proposal.”

This amendment would require a formal proposal put forward under this section to be made on an open-book basis.

Amendment 15, in clause 17, page 11, line 13, after “practicable” insert

“and no later than 14 days”.

This amendment would require awards in arbitrations which do not have an oral hearing to be made within 14 days.

Amendment 16, in clause 19, page 12, line 6, replace “may” with “must”.

This amendment would require the Secretary of State to make regulations specifying limits on arbitration fees.

Amendment 11, page 12, line 13, before “When” insert “Subject to 6A,”.

This amendment is consequential to Amendment 12.

Government amendments 4 to 6

Amendment 12, page 12, line 19, at end insert—

“(6A) When the arbitrator makes an award under section 13 or 14, the arbitrator may also make an award requiring that a party at fault pays costs which it has caused the other party to incur.

(6B) For the purposes of 6A, a party is at fault where the arbitrator considers that the conduct of the party before or during the proceedings is unreasonable or improper.”

This amendment would empower the arbitrator to make an adverse costs award where the arbitrator considers that a party has acted unreasonably or improperly.

Government amendments 7, 8 and 18 to 21.

Amendment 17, in schedule 2, page 19, line 6, leave out sub-sub-paragraph (a).

This amendment would extend the debt claims over which a party could apply to the court for the proceedings to be stayed to claims made before 10 November 2021.

[Seema Malhotra]

It is a pleasure to speak to new clause 1 and amendments 9 to 17, which stand in my name and in the name of my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury).

A process for resolving commercial rent arrears is very much needed, as dealing with the financial pressures brought on by covid is vital for landlords and tenants alike. Against that backdrop, Labour broadly welcomes the Bill, but we believe that the Government can and should do more on business support. That context is important because covid is not over. Business costs continue to rise, and they are also driven by rising fuel costs and inflation. Economic forecasts for the next three to five years project low growth, high inflation and high taxes. Managing financial pressures and supporting viable businesses to do so—that is the helping hand that we need in place as businesses navigate the uncertain road ahead and as some sectors recover faster than others.

To access the opportunities that we seek to ensure that the Bill provides, we need to be sure of the consistency, affordability and accessibility of arbitration and to ensure that the system operates effectively and fairly. On that basis, we have tabled new clause 1 and our other amendments in a positive spirit, to continue the dialogue that we had at the earlier stages of the Bill, because we support it and want it to work as effectively as possible.

On consistency, the Minister will appreciate that there will be retail and hospitality businesses with numerous landlords, and landlords with numerous tenants; businesses may therefore be party to more than one case under the new system. Predictability and consistency will be vital if those businesses are to have faith in the system, so our new clause 1 would require the Secretary of State to conduct a review of awards to assess whether clauses 15 and 16 have been interpreted consistently. The review would need to be conducted

“no later than three months following the day on which this Act is passed”,

and where the Secretary of State identifies material inconsistencies, he would need to publish or amend guidance to arbitrators as necessary. We believe that such a review would be welcomed by landlords, tenants and arbitrators and would ensure that the system is well understood.

On the accessibility and affordability of the new scheme, the definition of “business tenancy” in clause 2 has important consequences. Only tenancies in which the tenant is in occupation of the property fall within the Bill’s scope and can therefore access the arbitration scheme that it establishes. Let me give the House two examples of circumstances that could fall outside the Bill because of that definition.

First, Sir Paul Morgan, a specialist in property arbitration, has set out the case of a tenant who leaves a property unoccupied because of covid restrictions and does not now intend to reoccupy it when the restrictions end. As Sir Paul explains, the tenant may have a viable business but may not wish to reoccupy the particular premises for which the rent was due. Under the Bill as it stands, there would not be a business tenancy in such a case and the tenant would not be able to claim the benefit of the Bill in relation to that property, where the company was a tenant of that property during the period that is protected.

Secondly, there might be a situation where there is a head lease and a sub-lease on the property, for example where there is a franchising arrangement and the franchisee is the sub-tenant. In such a situation, the head lessee does not occupy the property and therefore could not benefit from the reliefs under the Bill, whereas the sub-tenant could.

Labour’s amendment 9 would fill those gaps, broadening the definition of “business tenancy” to cover arrangements in which the property is not occupied by the tenant. Unless the Minister can confirm that in the examples I have given it is intended that the leases would fall outside the new regime, I very much hope that the Government will recognise the gap and support our proposed changes.

We have tabled amendment 10, in relation to the period for reference to arbitration, in the same spirit of constructiveness. Clause 9 establishes a six-month period for a tenant or landlord to make a reference to arbitration, for which the clock starts on the day on which the Act is passed. We recognise and support the need to act quickly, but want to ensure that the full six months is available to tenants and landlords. The code of conduct suggests that the arbitration scheme will be operational on 25 March 2022, but what happens if the legislation passes before that date? Will that mean that parties have less than six months to make a reference? What if the legislation is not passed until a later date? Presumably, the current code of conduct would then need to be amended and existing protections extended. Amendment 10 reflects the suggestion by Bill Chandler of Hill Dickinson LLP that the date for referrals to open be fixed as 25 March 2022 irrespective of whether the legislation is passed. I would be grateful for the Minister’s feedback on that and on the importance of these questions in relation to improving accessibility to and the clarity of the new regime.

Let me turn to the question of cost. The scheme will be a success only if it is affordable. In Committee, the Minister acknowledged the importance of affordability and suggested that he was working with relevant bodies that may be appointed to agree cost schedules. Could the Minister update the House on those discussions? Clause 19 gives the Secretary of State the discretion to specify ceilings for arbitration fees in secondary legislation. Given the concerns of stakeholders and the financial pressures they are facing, the Secretary of State should be required to set a limit on arbitration fees, and that is the intention of amendment 16.

On county court judgments, the Minister will know that many commercial tenants were deeply frustrated that the temporary protections introduced to assist businesses struggling to pay their rent did not include protections against county court judgments and High Court judgments. UKHospitality and others have been calling for this protection for months. While it is welcome that the Government have finally listened to industry and to Labour, and improved the provisions that would stay any debt proceedings made after 10 November, choosing this cut-off date has had some perverse consequences.

As we heard in Committee, the result of this arbitrary date means that any landlord who started proceedings before 10 November is now arguably in a better position than those who held off and pursued negotiations with their tenant. Surely this cannot be the Minister’s intention. As the British Retail Consortium explained, the more aggressive the landlord, the better the position they are now in on county court and High Court judgments. That is why we have tabled amendment 17, which would remove this arbitrary cut-off date. As a result, a party could apply to court to stay any debt claim that is made by a landlord and relates to protected rent debt, pending a resolution whether by negotiation or arbitration. We see this as an issue of basic fairness. Labour does not believe that landlords or tenants should be punished for in effect doing the right thing and seeking to negotiate a settlement.

I turn now to Labour’s amendments designed to ensure that the new scheme operates effectively. First, on arbitrators and arbitration bodies, arbitral bodies and their members will be absolutely critical to the success of this arbitration scheme. The Government have taken a market-based approach to the running of the arbitration scheme, which will have a list of approved arbitral bodies, rather than a single provider. In Committee, we heard the concerns of stakeholders who wanted to understand what skills and expertise would be required of arbitrators. While some thought that financial and accounting qualifications were critical, others suggested that legal qualifications would be paramount given the complexity of the cases. I would welcome any update on the Department’s discussions with stakeholders and about the approval of suitable arbitral bodies.

As well as ensuring that arbitrators are suitably qualified, it is vital that there is sufficient capacity. The Government’s impact assessment assumes 8,200 cases going to arbitration in its central scenario. While the appointed arbitral bodies will maintain their own lists of arbitrators, in a system where the Secretary of State may appoint several bodies, it is the Secretary of State who ultimately must ensure that there is sufficient capacity. The intention of amendment 13 is to make that an explicit and ongoing duty on the Secretary of State to ensure that the arbitral bodies appointed have sufficient numbers of arbitrators to hear and report on all cases as quickly as possible. If the impact assessment’s estimate is too conservative, our amendment would require the Secretary of State to appoint additional arbitral bodies to work with those bodies already appointed to increase their list of approved arbitrators.

Stakeholders have also made it clear to me how vital it is that there is consistency across the new system in how different arbitrators interpret the legislation and any guidance under it. For example, an arbitrator must dismiss a reference to arbitration where it determines that the tenant’s business is not viable. As such, how arbitrators interpret viability is of central importance.

On the conduct of parties, it is welcome news from stakeholders that the vast majority of landlords and tenants have already reached agreement on their covid rent arrears. The British Retail Consortium estimated in December that 80% to 90% of its members had reached agreement. For the minority of businesses that are yet to reach agreement, the arbitration scheme provides a lifeline for an independent and binding arbitration. However, we believe that the Bill could be improved to further ensure a fairer arbitration process.

Clause 11 requires a reference to arbitration to include a formal proposal for resolving the dispute. The other party may then put forward their own counter-proposal. Both must be supported by supporting evidence. However, a requirement to submit supporting evidence is not the same as full disclosure on an open book basis. As the Property Litigation Association makes clear, parties are not required to provide any evidence which might be adverse to their proposal. This lack of an obligation to make full disclosure prevents the other party from making an informed counter-proposal and, arguably, ultimately the swift resolution of the dispute. That is why our amendment 14 revises clause 11 and requires a formal proposal to be accompanied by all evidence relevant to the proposal, whether helpful to that party or not.

We are pleased to see the Government table Government amendment 4. Although a 50-50 split is fair in most cases, it is right that the arbitrator has the power to change how the arbitration fees are split, particularly if one party has acted unreasonably. However, we believe that the Bill should go further than that as it is vital that tenants and landlords are incentivised to approach the arbitration process fairly and in the spirit of resolution. That is why we have tabled amendment 12, which would provide the arbitrator with the power to make an adverse cost award, where one party has caused the other to incur costs by acting unreasonably. As Sir Paul Morgan said in his written evidence, that would be nothing new. In the case of many tribunals where the general rule is that each party will bear its own costs, the tribunal is typically given such a power.

On swift resolution, the regime is intended to deliver swift resolutions for disputes, yet the Bill does not do everything possible to secure them. While clause 17 requires the arbitrator to make their award within 14 days in a case in which an oral hearing is held, where no oral hearing is held the arbitrator is required to make their award as soon as reasonably practicable. My understanding from debate in Committee is that the likelihood is that most arbitration hearings will not be oral hearings, but on the basis of paperwork. Can the Minister explain the logic here? Why is there no backstop requiring the arbitrator to make their award within a specific timeframe where there is no oral hearing, which, as I say, we understand is expected to be the majority of cases. Labour’s amendment 15 intends to ensure that awards are made within a specific timeframe irrespective of whether there is an oral hearing.

In conclusion, in the current climate viable firms risk going to the wall. We believe that the Government can and should do more. From business rates to energy costs, the Government have let down British businesses and the impacts are now a part of a cumulative rise of cost pressures on businesses. In the context of commercial rent debt, we welcome the relief this Bill offers to commercial tenants facing the risk of eviction, bankruptcy or debt enforcement, and we welcome the prospect of resolution on covid rent arrears offered to landlords and tenants that have not been able to reach agreement. That is why the Opposition have taken a constructive approach to scrutinising this legislation, and I hope that, in recognising the spirit in which our amendments have been tabled, the Minister will respond favourably on the points we have raised today.

Points of Order

Debate between Seema Malhotra and Baroness Winterton of Doncaster

Tuesday 25th May 2021 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

On a point of order, Madam Deputy Speaker. Last week, the Secretary of State for Health and Social Care announced, without making a separate statement, that Hounslow and other local authority areas would be added to the new surge areas, rolling that announcement into his response to the Queen’s Speech debate. My hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury) and I appreciated a call from the Secretary of State’s Minister while the Secretary of State was in the Chamber, but we were subsequently shocked to find out that Hounslow Council had not been directly contacted about the statement at all. The council found out about it when it was phoned by the Evening Standard at lunchtime, ahead of the Secretary of State’s statement. The tone of the conversation sounded not like a journalist fishing but that a journalist knew what was coming.

Today, Hounslow residents have woken up to see the news that the guidance on the Department of Health and Social Care’s website was updated without announcement, causing confusion, and again without communication to the council. One playgroup found out when the staff went to a hall and set everything up and then had to shut it down after 10 minutes. The council leader has said that the

“current communication from Government on our national covid response is woefully lacking”

and impacting on the council’s work to inform and protect local residents. That is despite the Minister saying today, at least twice, that communication between health leaders and councils is essential in keeping people safe and tackling the spread of the virus.

This is no way to treat our constituents. Could you advise me, Madam Deputy Speaker, on how MPs can have a proper chance to ask questions on behalf of their constituencies if the Secretary of State is not making statements on significant changes in policy to this House?

[Madam Deputy Speaker (Dame Rosie Winterton)]

I am grateful to the hon. Lady for giving me notice of her point of order. While the Chair is not responsible for the content of statements, Mr Speaker has made it clear that important announcements should be made to the Chamber first. Clearly, what constitutes an important announcement is a matter of judgment, but the hon. Lady has placed her views on the record, and I am sure that Ministers and Whips on the Treasury Bench will have heard her concerns. As she said, Mr Speaker did grant an urgent question earlier today in which similar points were made, but her points will have been added to those, and I am sure she will find other ways to make her concerns known.

Point of Order

Debate between Seema Malhotra and Baroness Winterton of Doncaster

Thursday 22nd April 2021 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

On a point of order, Madam Deputy Speaker. I am grateful to be able to raise this point of order in relation to the operating of the quarantine exemptions process. An effective quarantine system is vital to protecting our borders, but there has to be some consideration and compassion for those who are vulnerable, who have disabilities or who have complex health conditions and have medical evidence to prove it. There has been little opportunity to debate these exemptions. This week, guidance appeared on the Department of Health website, but the Commons Library confirms that there has been no written or verbal statement regarding this guidance, which we need to support our constituents’ cases.

Despite representations with medical evidence, one of my constituents with complex health conditions who was forced to quarantine alone ended up being rushed to hospital over Easter. Doctors there said that she should not have been in a hotel at all. I now have a 16-year-old constituent, Ms Malik, who went urgently to visit her ill father in Dubai while her mother was at home with her sisters. She has now been stuck in Dubai for weeks, terrified to return. She is a minor, and it is not safe for her to quarantine in a hotel on her own; nor would she be allowed to by law. Her father is in Dubai, and her mother has two other children to look after. She has no one who can quarantine with her. She has a history of self-harming and her GP has asked that she be allowed to self-isolate at home with protections. She is due to come back on Saturday. We had first a rejection and since then nothing but delays and a lack of compassion and support from the Department of Health.

Could I therefore ask your advice, Madam Deputy Speaker, on what process the Government are following? How experienced are the staff making those decisions? I would be grateful to put this on record and seek advice so that we can scrutinise the Government on what is going on, including with those who are fasting due to Ramadan not getting food at the right times, so that there can be some accountability and support for our constituents.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I thank the hon. Lady for her courtesy in giving notice of her point of order. She raised a number of issues about details that I am not in a position to answer, but she is an experienced member of the House and knows the various ways in which she can question Ministers. If there is any doubt about that, she can consult the Table Office. She has obviously made her concerns known about these important matters and cases and brought that to the attention of the House. She has put it on the record. With regard to further information or statements that may be made, I am sure the Treasury Bench will have heard her view that she would like that to happen.

Finance (No. 2) Bill

Debate between Seema Malhotra and Baroness Winterton of Doncaster

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op) [V]]

[Inaudible.]

[The First Deputy Chairman]

We are having some difficulty hearing Seema Malhotra, I am afraid. Do you want to try again, Seema?

[Seema Malhotra]

[Inaudible.]

[The First Deputy Chairman]

I think what we should probably do is go to our next speaker and come back to Seema. We will go now to Sir John Redwood.

Financial Services Bill

Debate between Seema Malhotra and Baroness Winterton of Doncaster

Report stage & 3rd reading & 3rd reading: House of Commons & Report stage: House of Commons
Wednesday 13th January 2021 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op) [V]]

I support amendments 1, 2 and 8 and the remarks made by our Front-Bench team to oppose any post-Brexit race to the bottom in regulation. It is also vital that we move towards a deal on equivalence in financial services with the EU.

Financial regulation has to adapt to market innovations to ensure that consumers are well protected, and it is under this call for consumer protection that I also speak in support of new clauses 24 to 26. These push for a fair deal for the 250,000 mortgage prisoners stuck for 10 years paying high interest rates. The all-party parliamentary group on mortgage prisoners, which I co-chair, has been contacted by hundreds of mortgage prisoners, who describe the worry and the stress that comes from being trapped as they are. The Minister suggested that the SVRs paid by mortgage prisoners are just 0.4% higher than SVRs at other lenders. Our case studies, which include nurses, teachers, members of the armed forces and small businesspeople, tell another story.

It is inappropriate to compare the rates that borrowers with inactive lenders are currently paying with those paid by SVR customers at other active lenders. If mortgage prisoners were with an active lender and up to date with payments, they would have access to a product transfer giving them a lower fixed rate. I will illustrate this through two constituents. The first is with an active lender. Last year, when she contacted my office, she was paying an SVR of 4.14%, but as she was with an active lender, we were able to help make representations. She is now on a two-year fixed rate of 1.79%, and saving over £5,000 a year in mortgage payments.

The second constituent’s Northern Rock mortgage was sold to Landmark and is ultimately owned by Cerberus—a mortgage with a fully regulated high street bank sold off to a vulture fund. The family are not being offered any new deals, costing them over £6,000 a year more than if they were with an active lender. I cannot put into words the stress that this has caused the family, who have nearly lost their home more than once.

When the Government sold these loans to Cerberus, UK Asset Resolution told Lord McFall that returning these mortgages to the private sector would result in their being offered fixed rates. In a “Panorama” investigation two years ago, a UKAR spokesperson said that Cerberus had the ability to lend to former Northern Rock customers and that they had believed they intended to do so. They said:

“The reply to Lord McFall sent on behalf of the UKAR board of directors was based on information presented to UKAR and the board had no reason to disbelieve this at that time.”

If UKAR was misled by Cerberus, to date there have been no consequences, and today we have Landmark refusing to offer my constituent any fixed rates. Capping SVRs for mortgage prisoners is an issue of consumer protection.

I turn briefly to new clauses 24 and 26. Expanding the regulatory perimeter to help mortgage prisoners is supported by the APPG and the UK Mortgage Prisoners campaign group, and there is support from the Building Societies Association, which has said:

“It is essential that the FCA and the Government take action urgently to ensure that consumers whose mortgage is sold to an unregulated lender have robust consumer protections extending to interest rates.”

An expansion of the regulatory perimeter would give the FCA all the power it needs, in the words of the Governor of the Bank of England to the Treasury Committee in his appointment hearing, to “conclusively address” the question of mortgage prisoners. New clause 26 says that consumers would need to consent before their mortgage is sold on to an inactive lender. Supporting these amendments provides immediate help to mortgage prisoners who have suffered far too long and are now hit harder by the pandemic.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Before I call Andrew Jones, I should say that after Stella Creasy I will reduce the limit to three minutes.