Renters’ Rights Bill [HL]
Baroness Grender (LD)
My Lords, the natural consequence of the chronic lack of social housing and the prohibitive cost of buying a home means that we now have a growing number of people who live in the private rented sector. Sometimes it would appear that this ever-growing customer base—almost one in five of the population, one-third of them families with children—have more consumer rights when they buy a white good, such as a fridge, than they do when they rent the home to put the fridge in. That cannot be right. The Bill aims to address that current imbalance. The rising demand for rented homes is pushing up costs and allowing some landlords and letting agents to take advantage of tenants who have relatively little power to object to high prices or poor conditions, or to make choices about which letting agent to use.
The law needs to change to make renting cheaper, safer and more secure for tenants. The Bill will reduce the costs of moving for renters by banning letting agents charging fees to tenants, a practice already outlawed in Scotland. The Bill will also make renting safer through mandatory electrical checks and give tenants greater protections against rogue landlords. The Government have helped tenants by introducing legislation on rogue landlords in the Housing and Planning Act 2016, but they stopped short of giving real power to tenants through information so that tenants know who those rogue landlords are. Under Clause 1, tenants would have access to that information. This change would put transparency and choice into the hands of the consumer, the customer, the tenant. A landlord can require a tenant to provide a reference, yet tenants are unable to apply the same principle to their landlord. If the list of employers who flout national minimum wage legislation can be made public, why cannot rogue landlords be made public, too?
In Clause 3, we return to an issue debated during the passage of the Housing and Planning Bill, which is that electrical safety checks should be compulsory. Clause 4 would prevent a rogue landlord obtaining an HMO licence. The points covered by Clauses 1, 3 and 4 were recently debated during the passage of the Housing and Planning Bill, and my noble friends Lord Foster and Lord Palmer will elaborate on them. I shall concentrate the rest of my remarks on Clause 2, which aims to end letting fees for tenants.
The cost of living for private renters has reached crisis point. Renting is the most expensive form of housing to live in, and with rising rents and increasing demand, renters are trapped, with limited choice. Tenancies are increasingly very short—often of only six months or perhaps 12—so renters often lack security and, as we all know, they constantly have the imminent threat of a rent rise hanging over their heads.
Unlike people in the owner-occupied market, one in four renters moved home in 2013-14. Just under a third of renters have moved three times or more in the past five years, and just under a quarter of them in London. Each time they move, the up-front costs are often the greatest barrier of all. In London, the median amount that renters must pay before moving is £1,500, and in many cases the cost is several thousand pounds. It goes up disproportionately for those on low incomes, who are viewed as a higher risk and so may be required to provide several months’ rent in advance. Indeed, of those who rent on a very low budget, a third have to borrow or use a loan to pay up-front fees and, disgracefully, 17% have to cut down on heating and food to cover the up-front cost of moving.
Costs vary from agent to agent and range from £40 to £780, with the average cost just under £400 per move. Many of those charges seem completely arbitrary. A credit check, for example, costs about £25 today, but some agencies charge a tenant £150 or more to carry one out. Marta, a lady who contacted the Debrief’s Make Renting Fair campaign, had asked to sign a three-year tenancy agreement. The agent said, “Fine, but you’ll have to pay three times the fee”: that was three times £360 just to re-sign. I spoke to a young woman this week who is in a two-bedroom flat. She is the main tenant and happily paid £150 for an inventory check and other things at the start of her tenancy, but every time her flatmate changes, the new tenant is charged a £150 for an inventory check which, of course, never happens—what a rip off!
Citizens Advice, which in the past year has seen 80,000 people with a problem in the private rented sector, has seen an 8% increase in complaints about letting agents. One tenant described a fee of £180 to renew a tenancy agreement that is staying exactly the same, except for a change of dates. It requires a simple printing or photocopying job, and it is the renters who go into the office and sign the form, but they are charged almost £200 for it.
We all accept that letting agents have some genuine costs in moving tenants into a property, but the appropriate payer of these costs is the landlord, not the tenant. It is the landlord who is the client, and most of the fees charged to tenants would be costs landlords would expect already to be covered in the amount they pay the agent. It is the landlord who can choose which agents they use and which is the most competitive agent in the marketplace. The tenant is choosing where to live, what the rent is and whether they can afford the deposit. They have no ability to pick and choose which letting agency they will use. Let us take the example of Jess, a client of Citizens Advice. She found a property that she wanted to rent in her local area, and the letting agent requested £600 to run credit checks and get references—let me remind the House that a credit check costs about £25—which was non-refundable if the landlord did not accept her as a renter. I am sure she would have loved to choose which letting agent she used, but she was not in a position to do that.
These agents are charging both landlords and tenants because they can get away with it. That needs to end, and that is what the Bill does. Imagine if this model were applied in a different market, say, to employment agencies. A company would ask the employment agency to find it a temp. On this model, the temp would be charged a fee as well as the company employing him or her. It just does not make sense.
Fees for tenants have already been successfully banned in Scotland following legislation in 1984, which was clarified in 2012. Research into its impact commissioned by Shelter shows that it has had only minimal side-effects for letting agents, landlords and renters, and the sector remains healthy. Only 17% of letting agents increased fees to landlords, and only 24% reported a small negative effect on their business. Not one agency manager interviewed said it had a large negative impact on their business, while 17% said they considered the change to be positive for their business. Research by Shelter suggests that even if the charges are passed on to landlords, in Scotland this has not led to an increase in rental charges. However, for the sake of argument, let us say it did. Instead of an up-front, prohibitive cost of £1,500 to move, that amount would be absorbed into a weekly or monthly rental sum. There would be no up-front charges, and those on housing benefit would have the possibility of the amount being absorbed into the monthly or weekly rent. Dorrington Residential, one of London’s largest residential landlords, works only with letting agencies which agree not to charge renters any fees. In its words:
“Dorrington is able to run a successful residential investment business and give renters a fair deal by avoiding unnecessary charges, and we can’t see why other landlords—and the Government —do not follow suit”.
There is a clear case for the Government to take action in support of renters and end these fees once and for all.
We have debated many aspects of the housing crisis in this Chamber, and I recognise many faces from those debates. There are many things that are difficult to solve, but this is a simple thing that is very easy to solve. Today on the green opposite Parliament I met a group of young renters. The work that Generation Rent has done to stand up for renters’ rights and the Debrief’s Make Renting Fair campaign have provided a strong voice on these issues. There are more than 250,000 signatures on their Change.org petition. They support this Bill. This is a broken market where the consumer has little or no power, but it is a growing market and one the Government should serve well, like any other. Transparency has been tried, but evidence suggests that it is not enough as little has changed. We should ban these fees, clarify that the landlord pays the fee and make it a fairer marketplace for those who rent. I beg to move.
Baroness Gardner of Parkes (Con)
My Lords, I declare my interests as set out in the register. Since the 1960s, when I had tenants in the self-contained basement of a large house in which I then lived, I have usually been a small landlord. The ideal situation is to have landlords and tenants who have good relations, and neither feels cheated or treated unfairly. Sadly, there are too many instances where that is not the case, and ill will arises and tensions can build up. The aim of the Bill is to set out clearly the position of each party so that each knows and respects the other’s rights. There should be no suggestion of exploitation on either side.
The purpose of the Bill is good but there are many aspects that need detailed thought, and possibly even piloting, to avoid potentially disastrous unintended consequences. The noble Baroness, Lady Grender, talked about making rents cheaper. Although I have not prepared anything in my speech about that, it is unrealistic to think that anything in this world comes down. Stabilising rents and making them fair value for money is the more important feature.
I mention unintended consequences because I recall clearly, at the time when I was letting my basement, the rent freeze that was introduced by the Labour Government in the 1960s. As landlords’ costs rose, restrictions could not be sustained. When the limitation was removed, rents rose dramatically, making things much more difficult for renters, who were faced with a sudden jump in living costs, whereas otherwise the costs would have just gradually increased over that time.
I have read the Bill carefully, along with the excellent briefings from the Library and Shelter. I have a number of points that I wish to place on record for further consideration. Clause 1 could be helpful. We need to have some idea of the cost to the local authority, as all local authorities are hard-pushed for funds at present. What type of information is kept on a database, and is such information open to anyone? If so, what is the cost of that?
Clause 2 lists charges that may not be made. I am concerned about this clause and wonder if the full implications of such changes have been considered. The noble Baroness referred in her speech to an inventory that never happened. Of course, it is scandalous to charge for something that never happened but, on the other hand, why did it not happen and whose fault was that? She also mentioned double-charging, to which I am 100% opposed. It has to be clearly decided who is responsible for a cost, and people need to know that in advance. She quoted £600 being charged for credit checks. I have never encountered that, so it must be that the type of agent she is quoting is a bit slippery. I understood that all letting agents now have to be registered with the Association of Residential Letting Agents, so I do not understand why these cases are not being reported to ARLA, which should be able to check with its members and see why these claims are being made and whether they are justified.
There are costs associated with the creation of any tenancy, and they have to be funded in some way. The law now obliges landlords to carry out checks on any prospective tenant to see whether they are legally entitled to be in the UK. Some have said in the past that landlords are now being asked to act as immigration officers, and there is quite a degree of resentment at that. It can be a time-consuming process. Recently, when I had a tenancy available, I had as many as five would-be tenants who failed to meet the necessary requirements. To have to do this check for tenant after tenant can be quite expensive.
An inventory check is essential for any tenant, so that they have a basis on which to determine any change or damage to the property at the end of the tenancy. It protects both tenant and landlord. It means that the situation is being independently assessed and people are not just arguing one against the other about how things were when they moved in.
To me, an exit fee, which has been mentioned, is a bad phrase, but I am not entirely sure what it means in this context. I associate it with a fee charged to people leaving retirement housing schemes. I know it is being phased out by many major providers of retirement homes, which in fact are trying to persuade all the rest to phase out exit fees.
I return to my earlier point. If these expenses have to be funded and the tenant is not asked to meet the cost, it will have to be met from somewhere. Without doubt, that will result in it being included in the rent element. Sometimes it will be a once-only payment for a tenancy but, in Clause 2, which amends the Landlord and Tenant Act 1985, there is mention of,
“a tenancy extension or renewal fee”,
which would apply on each renewal. I have not come across that myself, but I am interested to learn that it might exist and I take the noble Baroness’s word for it. However, has she considered that if the inventory cost for the landlord is built into the rent, then on every rent renewal the tenant is going to pay an increase on whatever that inventory cost was, whereas if they had paid their inventory bill separately it would not be included in anything that was going to have an increase in the renewal after the first year and every successive year? I am not good at maths, but I am not sure that that quite adds up.
Whatever the terms of a tenancy agreement, it is available for the tenants to negotiate before signing up. It is important that the Government keep up to date the advice that they provide for prospective tenants. I was pleased that during the recent Housing and Planning Act debates, the noble Baroness, Lady Miller, was able to confirm that a correction had been made just at the time when we were all asking for it, and included on the website of information and advice for renters.
The loss of the leasehold valuation tribunals has resulted in a much more costly and difficult situation for both tenants and landlords. This change, under Statutory Instrument 1036, came into force on 1 July 2013. Sadly, I was the only person to speak against that instrument, which could not be amended. Whereas in the past tenants could easily bring their problems to the leasehold valuation tribunal without fear of higher costs, which had a normal maximum of £500, now, the minimum fee to apply to the property chamber of the First-tier Tribunal, to which you now have to apply, is £500. The leasehold valuation tribunals had extensive powers covering the determination of the price to be paid by tenants if they were compulsorily acquiring either a freehold or a lease extension; the determination of whether a service charge was payable; granting dispensations to landlords from compliance with statutory consultation regarding service charges; on a tenant’s application, preventing the landlord treating the costs of proceedings as relevant costs—that is, adding them to the tenant’s service charge; determining the appointment of managers, and so on. They played a lot of roles, and they were readily available for ordinary people. I believe that the re-creation now of some easily accessible and financially possible body to deal with renters’ problems is necessary to make this Private Member’s Bill workable for most tenants and landlords. To push all these matters into the hands of the legal profession is not good; it will certainly be very costly and will probably reduce the effectiveness of the Bill.
Clause 2 contains a list that is unclear, in that it says:
“A letting agent may not charge”.
I agree that there should be no double charging, as I have said, but what is a chargeable expense to the tenant is as agreed in the terms of the letting agreement. Such agreements are amazingly complicated. For any letting I receive 10 or more pages of small print covering a huge range of items, prepared by a solicitor specialising in property matters. That is in contrast to the system in Australia, where I still have my flat that I let, and one person has occupied it for many years now. A tenancy agreement out there is something that you buy from the local paper shop. The last price that I recall was 7 Australian dollars and 50 cents, although I am not up to date with the current pricing. However, the terms are as considered necessary for the legal letting of any property, and are easily understood by most people. If a large legal bill does not have to be paid for preparing a special agreement, that reduces the landlord’s costs and therefore helps to reduce the tenant’s costs. On what is about the size of an A4 double-fold of printed terms, a two-inch white space is left for any special condition agreed by both parties. Why can we not have something equivalent to that system? It would mean that renters would be in no doubt about the terms of their tenancy.
Meanwhile, it is in the interests of all good landlords and good tenants to co-exist and ensure that properties are maintained in a good condition, with occupancy providing a fair tenancy for both parties. I hope that the Bill will help and I support it.
Lord Palmer of Childs Hill (LD)
My Lords, I thank my noble friend Lady Grender for producing this Bill and allowing us to have this debate, which furthers all the things that we dealt with during the passage of the Housing and Planning Bill. I support the Bill and draw attention to my interests in the parliamentary register.
I would like to link this Bill to our debates and decisions during our recent consideration of the Housing and Planning Bill. One of the successes of that Bill was the decision to include a power to require property agents to join client money protection schemes. I remind noble Lords that a manuscript amendment was agreed with Ministers to require a property agent to be a member of such a scheme, thus protecting tenants and landlords from an agent not keeping safe the rent paid or the repairs money received and held by the agent. It was an enabling amendment, so it said:
“The Secretary of State may by regulations require”.
As I said during the debate on that amendment, I would have preferred “must” rather than “may”. However, I am confident that we will get there, subject to the successful conclusion of the review to be conducted by the noble Baroness, Lady Hayter, who has not been able to be present today, myself and others. Similarly, my noble friend Lord Tope put forward an enabling amendment on electrical safety checks containing the word “may” rather than “must”.
With the Bill before us today, we try to tackle further the rights of renters. How can there be any doubt that anyone seeking a tenancy should have access to a database of rogue landlords? If necessary, it could be a database where one enters the name of the landlord or agent and there is a response as to whether the person or company is on the “Danger: beware” list. Why should that be made secret and not be available to tenants? Of course, as another noble friend pointed out at Second Reading of the housing Bill, we have to clarify the definition of “rogue”, which could mean many things.
I turn to the part of the Bill concerning letting fees for tenants. As my noble friend Lady Grender said, often tenants are not affluent but it is hoped that they can meet the monthly rent. They may also have to put up a deposit, which should now be covered by ombudsman schemes. They may be required to put up rent in advance, which is what we seek to protect, as detailed in the Housing and Planning Act. However, the question that this Bill raises is whether the often impecunious prospective tenant should also be asked to pay up front—I shall list them again, although the noble Baroness, Lady Gardner, set them out clearly—a registration fee, an administration fee, an inventory fee, a reference check fee, a tenancy renewal fee and a so-called exit fee. Why should these fees be paid by the tenant and not the landlord, or—this was not mentioned by the noble Baroness, Lady Gardner—be subsumed into the fees or commission received by the letting agent?
At the moment, the consumer law position on fees is that they should be transparent, fair and not excessive and that they must be proportional to the work undertaken. I think it is fair to say that a letting agent will take a commission from a landlord, so why are these additional fees necessary? Why should a tenant pay a fee to register, or pay an admin fee to the agent, who in reality acts for the landlord? There is an argument for a fee being charged for an inventory check—I have some sympathy with the comments that have just been made—which would then contractually give the tenant ownership of the inventory list. If it is done for the tenant rather than just for the landlord, there is therefore a contractual arrangement. Perhaps that could be explored further in Committee. A modest reference check fee could also be appropriate, but who should pay this—the landlord or the prospective tenant? Fees have been banned in Scotland. Shelter says that there is no evidence that this has increased rents, although it has to be said that the suggestion worries some in the industry in England.
I return to the subject of electrical safety, which I mentioned in my opening remarks. On 3 June, my honourable friend Tom Brake in the other place asked the Secretary of State for Communities and Local Government,
“when he plans to bring forward regulations on the testing of electrical installations in rental properties”.
Yesterday we on these Benches gave the Minister notice of the following question, and when he sums up we would like to hear what progress has been made. Electrical Safety First received a letter from the noble Baroness, Lady Williams, explaining the Government’s amendment just after the Bill received Royal Assent. That encouraged the organisation to continue correspondence with the DCLG at an official level. Since then, however, it has had no response to its queries on the state of play concerning the regulations or to its offer to help draft them. It is asking two things: first, when the work on the regulations will start—a reasonable request—and, secondly, what the Government now think about mandatory checks, given the “may” not “must” issue, to which I have already referred.
Electrical Safety First has decided to push ahead with drafting its own regulations on this and will present them to DCLG. The Scottish model for this has been law since December of last year and this matter should not just be put—if noble Lords will excuse the expression—on the back burner.
I trust that the Minister will agree that no one, regardless of age, income or where they live, should be put at risk of electrical faults in their home. There is also concern that amendments made during the passage of the Housing and Planning Bill to include electrical safety checks are to be introduced through regulations. Will any regulations that are brought forward make electrical safety checks mandatory every five years or thereabouts? Very often a tenant believes that because checks are mandatory for gas, electrical checks are also mandatory, but they are not.
My noble friend quite rightly ended, according to the protocols of this House, with the words “I beg to move”. When considering the Bill, noble Lords need to know that renters more often “beg to stay”—they cannot afford to move. I support the Bill.
The Lord Bishop of Derby
My Lords, I too wish to offer some thoughts about the importance of the issues raised by the Bill and the sense of direction in which it seeks to travel.
First, I note the point made by the noble Lord, Lord Palmer, regarding a definition of so-called “rogue” landlords. The Housing and Planning Act has introduced a database of rogue landlords and property agents, which is to be made available to local authorities so that they can check for compliance, but there is a question over whether tenants should have access to that kind of information.
I recognise that there may be some reluctance by the Government to demonise landlords who may be on a register for relatively minor issues, and it might be important to consider some kind of two-tier system so that anonymity is lost at the point of conviction. If a landlord were convicted of a serious banning order offence, for instance, it would seem very proper that any would-be tenant should know that that was part of the hinterland, whereas if there had been a fine for a more minor offence, that might not require to be so readily available in the public domain. We could think imaginatively about the degree of seriousness of malpractice and making very serious malpractice available as a matter of right to would-be tenants.
I have a second thought about Clause 2 and the issue of so-called letting fees. It seems to me that the major point, as stressed by the noble Baroness, Lady Grender, is that, very often, we are talking about extremely vulnerable people in vulnerable situations with very limited resources. It is a matter of balance between recognising the legitimate costs of letting agencies and needing to charge for that, and not subjecting people to unpredictable and often unaffordable fees.
I also read the report on the Scottish system and the fact that the withdrawal of fees there does not seem to have raised rents, according to Shelter’s research. However, if there is a case for a fee, it would help the folk involved if it was a fixed fee of a modest nature, rather than a fee that seems to go up and down. Two weeks ago, one of my colleagues in the diocese where I work wanted to secure a property and was asked to pay £380 just to be able to go and view it. As the noble Baroness, Lady Grender, said, the variety of fees is unacceptable. The Government should look at what has happened in Scotland and perhaps consider not allowing that particular fee. And, if it is allowed, it needs to be controllable, predictable and modest.
My third point is about the clause that deals with mandatory electrical safety checks, which the noble Lord, Lord Palmer, has just mentioned. It seems strange to those of us who are not experts that gas checks are mandatory but electrical safety checks are not. Currently, there are about 70 deaths a year involving electricity and only 18 involving gas. Therefore, the risk is equally, if not more, substantial. If there is a proper case for mandatory gas checks, I hope that the “may” will go in the direction of “must”. We are very concerned with proper standards of health and safety, and electricity is a potentially very dangerous factor in homes if it is not checked and operated with care. A tenant who is paying rent is entitled in their contract to a proper system of mandatory checks and standards.
The proposals in the Bill are very worthwhile and I endorse them warmly. I hope that the Government will look very seriously at the rights of a tenant to know whether a prospective landlord has had a serious conviction and to have a predictable and low letting fee—or perhaps the Scottish system could be looked at. The Government must take very seriously the dangers of electricity and I hope that we can pursue making that check mandatory.
Lord Foster of Bath (LD)
My Lords, like others who have spoken, I am delighted to support my noble friend’s Renters’ Rights Bill. It builds on the work done by Liberal Democrats and others during the coalition to improve renters’ rights. Measures at that time included protections for renters against “revenge evictions”, so that landlords could not simply evict a tenant because, for instance, they had asked for an electrical safety check to be carried out. Also introduced was a new model tenancy agreement giving tenants a much clearer guide to what should be included in a rental contract. There was also the £1 billion investment in the Build to Rent fund to provide equity finance for purpose-built private rented accommodation. After all, we all acknowledge that, if we want to reduce rents, the very best thing that we can do is have more properties made available. The measures also included £4.1 million to tackle rogue landlords and £2.6 million to tackle “beds in sheds”. They also introduced something that I thought was very important at the time: new requirements on the energy efficiency standards of private rented accommodation.
That work started to address one of the issues raised in my noble friend’s Bill, which the right reverend Prelate and others referred to: fees. At that time, transparency regulations were brought in for letting agent fees requiring agents to publish their fees on their website and in their main offices so that consumers had an opportunity to complain and seek compensation if agents’ fees were not transparent and they were hit by an unexpected fee.
All these actions were a very good start in giving more rights to renters. I am the first to acknowledge that further improvements have come, not least in relation to rogue landlords, in the Housing and Planning Act, which we recently debated in your Lordships’ House. However, more can be done, and my noble friend’s Bill is a move to achieve just that.
As I said, the Housing and Planning Act has made further improvements in relation to rogue landlords. However, as my noble friend Lady Grender said in her opening remarks, it stops short of giving real powers to renters. That is why, during the passage of the Bill, my noble friends and I argued that the register of rogue landlords should be available to potential renters so that they can identify rogue landlords and letting agents and protect themselves from taking on a new tenancy with a landlord, or through an agency, who, based on past actions, may well cause them problems.
After all—this relates to the questions asked by the right reverend Prelate—it is worth remembering that people who are on that register have already been identified by local authorities as either banned, convicted of housing offences or issued with two civil penalties relating to housing, which are all quite serious reasons to be on the register. These are the very people whom renters need to know about to avoid choosing them and being caused significant misery by them in the future.
Clause 1 empowers renters so that they are better equipped to identify rogues and limit the risk of being exploited. The noble Baroness, Lady Gardner of Parkes, asked the obvious question: what is this going to cost and who is going to pay for it? I remind her that during the passage of the Housing and Planning Bill we agreed to the establishment of a database. I assume—the Minister will perhaps confirm it—that the cost of this will be covered by government funding to local councils through the new burdens principle, so the only additional cost would be the modest one of making the register available to rather more people than is currently planned. I do not think that a significant cost would accrue from that.
There are other very good reasons why the measure should be welcomed. First, the ability of a tenant to discover more about a landlord or letting agent’s history would serve as a deterrent to those who attempt to operate with low standards. Secondly, as my noble friend pointed out, it would right an imbalance, because at present a landlord can obtain a lot of information about a potential tenant and whether to accept them, but the reverse simply does not apply—a prospective tenant cannot get the information about a landlord. Clause 1 would balance the situation.
Clause 3 on electrical safety checks is also important, as is Clause 4, which prevents rogue landlords gaining a house-in-multiple-occupation licence, but I believe that Clause 2 is by far and away the most important. As we have heard, this measure has already been accepted in Scotland, where the charging of fees to tenants by letting agents has been outlawed, and we should do the same in England.
I mentioned earlier the requirement that letting agents publish information—the transparency rule that has already come in. When that measure was introduced in 2015, Liberal Democrats argued with Conservative colleagues in the coalition that we should go further, but the Conservatives argued—and they put a good case—that all we needed was transparency and “the market” would then sort out the problem of sky-high fees. Yet, to date, that “transparency” has not brought about any significant change. My noble friend Lady Grender has already given many examples of rip-off fees being charged. I was particularly taken with the example that she referred to, since it came from near my old constituency of Bath. It was of Cherie, who said, “Just moved into a rented property near Bath. Paid £300 just for a credit check. Ridiculous. You can do a credit check yourself for just £20 online”. There is huge variation in fees around the country and within different localities, which demonstrates just how arbitrary they are. There is not the predictability that the right reverend Prelate referred to, and people simply do not know.
A further point, which has not yet been referred to, is that it appears that the requirements of existing legislation are simply not being adhered to anyway. Some excellent work is being done by the Association of Residential Letting Agents, which constantly reminds its members of the importance of the transparency law. It has even gone so far as to provide some helpful templates for agents to use to make the process easy, yet all the research that has been carried out by various groups indicates that in many cases agents are simply not abiding by the law.
Last October, a campaign group in Brighton and Hove found that 80% of letting agents in its area were in breach of the law, as were 35 agencies in Tower Hamlets. The organisation Generation Rent, which has researched 720 agency websites, has found that 96 have no fees published and that 240 do not list, as they should, which redress scheme they belong to. A Guardian reporter recently looked at highly-respected letting agencies and found that, even where fees appear somewhere, they are often buried within websites and do not meet the requirement of being prominently displayed. I would be interested to hear from the Minister what action the Government are taking in light of the fact that many agencies are not even abiding by the transparency requirements of the 2015 legislation.
More importantly, it is increasingly clear that, because so few properties are available to renters, even if all the data were made clear and transparent, renters would not have much choice. They could not do anything with the data. We simply have a supply-and-demand problem; there is no choice, so very often renters are forced to take the hit of those exorbitant fees, whether they like it or not, simply so that they can have a roof over their head. The market will not fix it, so the Government have to do so. I do not believe, as the then Housing Minister, Kris Hopkins, said in 2015, that the measure would be a gimmick leading to rocketing prices and rocketing rents. As my noble friend said, the evidence in Scotland is clear; even though fees have been abolished, there has been no huge hike in rents. Like my noble friend and others, I accept that there are some legitimate, limited costs—for example, the check-in inventory, which is very important because it gives protection to both landlord and tenant—but it is quite clear that if those costs were added in small amounts to the monthly rent, it would not lead to a huge increase in the rent and for many would be far better than taking a huge hit at a time when they are most vulnerable and trying to get a roof over their head.
This is a small but important Bill that will build on work already done. It will further improve the rights of tenants, and I hope that it will have the support of your Lordships’ House.
Lord Kennedy of Southwark (Lab)
My Lords, I refer the House to my registered interests and declare that I am an elected councillor of the London Borough of Lewisham.
I join other noble Lords in congratulating the noble Baroness, Lady Grender, on securing her Private Member’s Bill so high up in the ballot. It is an excellent Bill which these Benches fully support. We wish it well as it begins its journey through this House.
The issues in the Bill will be familiar to noble Lords. They occupied a considerable amount of time when we debated the Housing and Planning Act in the last Session. During those discussions we were unable to persuade the Government of the merits of all the areas covered by the Bill and it is fortunate that we can return to them so soon.
The first part of the Bill seeks to give private renters access to the database of rogue landlords and property agents. It is a welcome provision but the Government have resisted it. The database contains a list of people identified by the local authorities as either banned, convicted of housing offences or issued with two civil penalties relating to housing. Local authorities can access the database and use it to more effectively monitor those at risk of breaking the law. By allowing prospective tenants access to the database, they can check if the landlord from whom they are considering renting is on the list. The landlords would know that prospective tenants could check to see if they were on the list, and that could serve as a deterrent. It could also help drive up standards as landlords would not want to be on the list in the first place. It is disappointing that the Government have not accepted this, but with this Bill they have the opportunity to look at the matter again.
The next section of the Bill seeks to end certain fees that letting agents charge tenants. These fees add hundreds of pounds to the cost of moving home and they are not fair. As we have heard, the tenant is the customer of the landlord and pays rent, while the landlord is the letting agent’s customer and pays various fees. To seek to levy further charges on the tenant as well is not fair. The fees that tenants are charged are listed in the Bill. Moving home is expensive and these unnecessary charges can add hundreds of pounds to the bill at the start when tenants do not have much money.
The third part of the Bill strengthens the Housing and Planning Act. Progress was made on the question of mandatory electrical safety checks, and that is welcome, but this Bill strengthens the measures further through the replacement of the word “may” with “must” and makes the checks mandatory every five years. When we last discussed these matters the Government said that they were going to introduce these checks and I hope that the noble Viscount will confirm that today. Given that expressed intention, it is surprising that the Government have been so resistant to having the word “must” in the Housing and Planning Act.
Privately rented homes and those built before 1919 are more likely to have a higher risk of fire. The figures are stark: 350,000 people injured through contact with electricity, around 70 people killed and approximately 20,000 house fires every year; and there are around 300 injuries and approximately 18 deaths each year from carbon monoxide poisoning, gas leaks, fires and explosions. The evidence is there for all to see. There is support from a range of organisations and we need to make clear that this important safety check has to be carried out.
The final provision relates to houses in multiple occupation. It prevents a landlord from being granted an HMO licence if they are on the database of rogue landlords. Tenants who live in houses of multiple occupation are often some the most vulnerable people and the Government should support this measure to prevent rogue landlords from getting a licence to operate in such premises. This, again, was resisted when it was suggested during the passage of the Housing and Planning Act. I do not understand the Government’s resistance to this measure. Perhaps the noble Viscount will explain the reason for it when he responds to the debate.
This Bill is most welcome. It has the full support of noble Lords on these Benches and we wish it every success in its passage through your Lordships’ House.
Viscount Younger of Leckie (Con)
My Lords, I thank the noble Baroness, Lady Grender, for setting out the purpose of her Bill about the rights of renters. I know she is concerned about this issue and I congratulate her on bringing the Bill before this House.
The noble Baroness may not be surprised to hear that the Government have some reservations about the Bill, some of which have been raised already by noble Lords, and I would like to explain these for the benefit of the House. I have listened carefully to the debate. Of course, many of these issues were discussed at some length during the passage of the Housing and Planning Act, as the noble Lord, Lord Kennedy, has stated. I welcome the opportunity to debate these issues further and offer clarification where I am able to do so, and of course to answer a number of questions that have been raised.
The Housing and Planning Act 2016, recently before this House, introduces a strong package of measures that will enable local authorities to do more to improve standards in the sector and ensure that rogue landlords are forced to either improve or leave the sector. Measures include establishing a database of rogue landlords and property agents, for the first time introducing banning orders for the most prolific offenders, as well as enabling powers on electrical safety and client money protection.
The Bill before us contains five clauses, although for the sake of avoiding too much bureaucracy I shall leave out the fifth clause on the Short Title at the end. The first clause provides for tenants to have access to the database of rogue landlords and property agents. As the Government explained when introducing provisions for the database in the Housing and Planning Act, the purpose of the database is to allow local authorities to use the information to protect tenants, targeting enforcement action and promoting compliance. Giving tenants or potential tenants access to the database might be fine if the purpose of the database was to blacklist landlords and drive them out of business. However, that is not the purpose of the database. Where a landlord should not be in business, the local authority should apply for a banning order.
The proposed database is primarily for the purpose of ensuring that those landlords and property agents who have committed banning order offences can be monitored by local authorities to ensure future compliance with the law. It also ensures that where necessary those authorities can target enforcement against them. The database will help local authorities to drive up standards in their areas and ensure that those landlords entered on to it raise their game, so that their properties are safe and well managed for the benefit of tenants.
My noble friend Lady Evans, who is not in her place today, made a good analogy during the Report stage of the Housing and Planning Act that I should like to use. Rather similar to penalty points on a driving licence, a person will remain on the database for a specified period—a minimum of two years. Also like someone who has incurred penalty points, continuing to breach the law may result in a ban. While it is important that people who commit banning order offences should be liable to be monitored through their entry on to the database, this does not mean that the public at large should have a right to know about those offences, especially if they are not so serious as to warrant the local authority immediately seeking a banning order. Again there is an analogy with driving offences because there is no right for the public at large to know whether a person has received penalty points on their licence. The information on the database will relate to criminal records and is highly sensitive. Releasing this information to tenants or prospective tenants could jeopardise individuals’ rights to privacy and cause unnecessary anguish. I have heard noble Lords’ strength of feeling about this, but it is right that a tribunal should consider the evidence and decide whether a ban is appropriate. A tribunal will look at the seriousness of the offence, which can vary considerably, as noble Lords will be aware, as well as evidence of the likelihood of reoffending. This is the appropriate route for a ban, not effectively blacklisting landlords by publicising their convictions.
I move on to Clause 2, to which most of the comments of the noble Baroness, Lady Grender, were addressed. This concerns banning letting agent fees. The Government are clear that the vast majority of letting agents provide a good service to tenants and landlords and that most fees charged reflect genuine business costs. I note that the noble Baroness did acknowledge this briefly in her comments. I do not believe that a blanket ban on letting agent fees is the answer to tackling the small minority of rogue letting agents who exploit their customers by imposing inflated fees for their service. However, I did listen carefully because several examples were highlighted by the noble Baroness. It is true that there are such examples around and I do not want to dismiss them.
While landlords and letting agents are free to set their own charges, under existing consumer protection legislation they are prohibited from setting unfair terms or fees. The noble Lord, Lord Palmer of Childs Hill, went into more detail on this, for which I am grateful. However, we have gone further through the Consumer Rights Act 2015 by requiring letting agents to publicise a full tariff of their fees, and by saying whether or not they are a member of a client money protection scheme and of which redress scheme they are a member. These details must be displayed prominently in their offices and on their websites, and for the first time a fine of up to £5,000 has been introduced for agents who fail to do this.
I have taken note of the comments raised by the noble Baroness, Lady Grender, and the noble Lord, Lord Foster, and in particular by the right reverend Prelate the Bishop of Derby, all of whom alluded to the experience in Scotland. As mentioned, the Scottish Government clarified rent laws a little while ago in 2012, banning any letting agents’ fees beyond rent and a refundable deposit. I believe this was raised by the right reverend Prelate, but the research conducted by Shelter since this clarification suggests that only 18% of letting agency managers believe that the enforcement or penalty measures for non-compliance were robust enough. In August 2015, Shelter Scotland reported that around 1,500 people have tried to reclaim nearly £250,000 since the law was clarified. Its research suggests that around 10% of letting agencies do not comply with the ban. We should take note of that. The right reverend Prelate suggested that the fee should be predictable and ideally moderate. I acknowledge that. He also suggested the possibility of a fixed fee and the House should take note of that. My overall conclusion, however, is that the Scottish experience may not be a panacea for the way forward.
The Government want to strengthen the hand of consumers to tackle the minority of agents who offer a poor service and engage in unacceptable practices. Since 1 October 2014, it has been a legal requirement for letting and managing agents in England to belong to one of the three government-approved redress schemes, which offer a clear route for landlords and tenants to pursue complaints, to weed out the so-called cowboys who give agents a bad name, and, of course, to drive up standards, which we all want.
Banning letting agent fees would not make renting any cheaper for tenants. Tenants would still end up paying, but through higher rents. That is why the Government believe that ensuring full transparency is the best approach, by requiring letting agents to publicise a full tariff of their fees, giving consumers the information that they want and supporting the majority of reputable letting agents. Such transparency will help to deter double charging by letting agents—my noble friend Lady Gardner alluded to this issue—and enable tenants and landlords to shop around, encouraging agents to offer competitive fees. I also took note of the comments made by my noble friend Lady Gardner about the Australian experience. If I read her correctly, this is the opportunity for consumers to go and buy a generic agreement in an Australian post office. I thought the costs rather high, but my maths might be bad in trying to convert Australian dollars to the UK. I hope my noble friend will forgive me. However, and this might help answer the question raised by the noble Lord, Lord Foster, we still believe that it is too early to say how successful these measures are. They need time to bed in and the Government have committed to reviewing the impact of letting agent fee transparency later this year.
Clause 3 is an important clause on electrical safety. After listening to the strength of support from the sector, and in this House during the passage of the Housing and Planning Act, the Government now have an enabling power to allow and enforce requirements to protect private sector tenants from electrical hazards in the home. I remind noble Lords that this is secondary legislation subject to the affirmative procedure. This is a very important issue and the Government are committed to ensuring that private sector tenants are protected. However, it is also a highly technical area and we need more time to explore appropriate options with the relevant experts in the sector to test the most effective approach. We plan to conclude further research as soon as possible, but we must ensure we take sufficient time to work with the sector so that any requirements are properly assessed. However, we are mindful of the need to ensure any requirements are beneficial and strike that important balance between protecting tenants and not overburdening the sector.
I took note of the comments raised by the noble Lord, Lord Palmer of Childs Hill, and I thank the noble Baroness, Lady Grender, for writing to me on electrical safety in advance of the debate. I reassure the House that officials have spoken to Electrical Safety First, following a letter written by my noble friend Lady Williams of Trafford. We will be in touch in due course. In other words, there is something happening, but we want to involve industry experts in ensuring detailed options. Electrical Safety First is one of the key stakeholders we will involve.
Before I address some questions that were raised, I turn to Clause 4 on the licensing of houses in multiple occupancy, so-called HMOs. Local authorities fully consider the past behaviour of landlords and agents who apply for a licence for an HMO. A local authority is already required to have regard to a range of factors when deciding whether to grant a licence under the Housing Act 2004. These include: whether the applicant has committed any offence involving fraud or other dishonesty, violence or drugs, or certain serious sexual offences; whether they have practised unlawful discrimination; or whether they have contravened any provision of the law relating to housing or of landlord and tenant law. These factors would be likely to include all the offences leading to inclusion in the database.
The database will be a key source of information for local authorities when taking decisions on whether to grant a licence. These safeguards are important as it is clearly essential that the local authority can be confident that a licence is granted only to a landlord or agent who is a fit and proper person to operate a house in multiple occupancy, or a property subject to selective licensing, and will not pose a risk to the health and safety of their tenants, many of whom may be vulnerable. That issue was raised earlier in the debate. It is right that local authorities use the information on the database and other evidence to take a decision that reflects all the individual circumstances, rather than requiring a blanket ban. A blanket ban might have unintended consequences. For instance, it could mean that local authorities include landlords on the database for a shorter period, reducing its longer-term effectiveness.
Focusing on that issue of vulnerable tenants, the noble Baroness, Lady Grender, may like to note—this is not any form of complacency on our part; it is just a fact to present to her—that 82% of private renters are satisfied in their accommodation and 78% of private renters moving in the last three years ended their tenancies due to their wish to move, not for any other particular reason. Clearly there is more to do but that is just of interest.
The noble Lord, Lord Palmer of Childs Hill, raised briefly the issue of the definition of a rogue landlord. Anticipating that this question might crop up, I reverted to Hansard because my noble friend Lady Williams was asked this as a Written Question. I can only repeat what she said, which to me sounds quite plausible. She said:
“The term ‘rogue landlord’ is widely understood in the lettings industry to describe a landlord who knowingly flouts their obligations by renting out unsafe and substandard accommodation to tenants, many of whom may be vulnerable”.
That is not the definition but it is a definition, and I hope it can be built upon.
The noble Lord also asked what we think about mandatory electrical safety checks, which comes to the core of Clause 3. Any regulations introduced must balance protecting tenants with not overburdening the sector. That is why we are taking time to explore the appropriate options with experts in the sector. It would not be appropriate to pre-empt the results of our planned further research. That takes account of what the noble Lord said earlier on whether electrical checks should take place every five years. Maybe that should be four or three, but these issues take time to work through. We realise that we should expedite this as soon as we can. He also asked when the work on introducing regulations would start. We are already making arrangements to set up a working group to explore the appropriate options with experts in the sector. That group is expected to meet later this summer.
My noble friend Lady Gardner of Parkes and the noble Lord, Lord Foster, asked about the cost of the database. Local authorities will be able to keep charges for civil penalties and use them for housing-related purposes. We are working with the stakeholders to develop this database on that basis. We have said that we will keep this under review. We will keep in touch with the noble Lord, Lord Foster, on that particular point.
The noble Lord also raised the issue of letting agent transparency, some of which I perhaps covered earlier, and the fact that the fees legislation is simply not working, as he put it rather succinctly. The regulations are enforced by local authorities, which are able to recoup fines from successful prosecutions and can use them to carry out their housing functions. We think this acts as an incentive to enforce the regulations. The maximum fine is set, as I said earlier, at £5,000.
I hope that I have covered all, or nearly all, the questions that were raised. If not, I will be very happy to write to noble Lords. In closing, I applaud the principles behind the Bill. I have much appreciated discussing these matters further so soon after the passage of the Housing and Planning Act. However, as noble Lords will expect, I express my reservations given the measures recently passed by this House during the passage of that Act. We need to allow time for many of these measures to bed in and take effect.
Baroness Grender
My Lords, I thank all noble Lords who have participated in this debate, particularly the Minister. This Second Reading on the Bill occupies the third slot on a Friday and I much appreciate his contribution. I greatly admire the noble Baroness, Lady Gardner of Parkes, who is a champion of leaseholder rights, and I wish her more power to her elbow as she continues to seek clarification on the mess here. Australia sounds very interesting in that respect. I quite agree with her that this issue needs considered thought and piloting, although I believe that we have a very strong pilot. Scotland has always been reluctant to pilot certain things for the United Kingdom, but there has been a highly effective pilot in this case. I will come back to that.
The noble Baroness also raised the issue of rent. I do not want us to go too far down a cul-de-sac on this. She is right that rents may not come down, but the overall cost of renting will. I emphasise again that the biggest point I want to convey to the Government is the financial shock at the beginning of a tenancy, which is almost unaffordable for a lot of people. As I said earlier, the poorest 17% have to decide whether to eat or heat their premises after paying some of these exorbitant and, I believe, still very arbitrary, sums.
I turn to the ability to complain about an inventory that is not forthcoming and the ability to shop around to avoid slippery letting agents. I can shop around for a landlord and for the area where I am going to live. I can shop around for the rent and the deposit. However, the letting agent is imposed on me, because that is the landlord’s decision. The arbitrary sums they may charge are also imposed on me. The Property Ombudsman may fulfil many of the roles to which the noble Baroness referred, but complaints in this area have gone up substantially. That may be a sign of its success as an organisation, but it is also a sign that people are making complaints. Surveys by organisations such as Citizens Advice reveal that a lot of people do not know that they have that opportunity to complain. We are all familiar with that conundrum in public policy. I thank the noble Baroness for her support for the Bill. We can tease out and examine some of these areas. I completely agree, for example, that an inventory is a really important document that enables a landlord to check what remains in a property when a tenant moves out. However, it is perfectly possible for the letting agent to charge the landlord for that.
I thank the noble Lord, Lord Palmer, the noble Lord, Lord Tope, who is now in his place, and the noble Baroness, Lady Hayter, for their continued resilience in campaigning on the deposits issue and on electrical safety checks. We think that the little word “must” would be a very good thing to include. The Minister said that the DCLG has now contacted Electrical Safety First. I will work on an assumption that that took place in the last 24 hours, unless he indicates otherwise. He nods assent, so I assume that is correct. It is good that this debate has generated that kind of involvement, because there has been a very clear promise to work with Electrical Safety First. That body is very keen to get shifting and to help out in this area, so that is good news.
I thank the right reverend Prelate the Bishop of Derby for his comments. Like him, I have heard stories about landlords everywhere charging people £380 for the pleasure of viewing a property, with the implication that they may or may not take that person on as a tenant. We are not plucking these arbitrary sums out of the air—they actually exist. If anything, the sums are arbitrary on the part of these letting agencies, which think that they can get away with this.
He has also asked whether we can explore the impact with regard to rogue landlords—a definition, by the way, that I never want to debate again. I was here for the original debate; I thought that it was ridiculous and I do not want to participate in any debate of that nature. For me, they are rogue landlords and I completely agree with everything that the Minister at the time said. I am very clear on that; let us never debate it again. But we do need to explore this and Committee stage is the perfect opportunity to do so.
I thank my noble friend Lord Foster for describing some of the achievements that were made under the previous Government; revenge evictions were an excellent example. I have a friend who made a complaint about her landlord and was then taken down a very nasty route. This is an incredibly important issue. You are so powerless in that situation; if you are on a very low income, you cannot shop around and you cannot make a choice, yet you have a landlord who is making your life almost impossible—and, for my friend, that was with two young schoolchildren who needed to be near their school. I am delighted that revenge evictions are now outlawed.
Regarding the transparency issue, I refer to some research done by Citizens Advice. It asked some of these questions, now that we do have transparency and are trying to go down that route. The vast majority of agents, even when asked, do not supply financial information. It is correct that complaints should be made about that and there is a simple, straightforward way to deal with this. I have already described a very large, residential private sector landlord who said that they employ only letting agencies which do not charge a fee to tenants. As a private sector, residential landlord, they expect to pay a fee and they expect it to be transparent. They can negotiate, shop around and make a decision about which reputable letting agents to use. The tenant has no power and no choice in that matter—that is the most important principle that I would like to convey. Given that there are 4.4 million—and increasing—customers in this market, it is also the particular area that I think the Government would do well to take another look at to see whether there is potential for change. I thank the noble Lord, Lord Kennedy, for his support in all these areas. I share his surprise that a little word such as “must” is not included regarding electoral checks. This is an excellent opportunity, with a very small four-clause Bill, to look at some of these issues, especially on landlords and letting agents.
With regard to what the Minister said about signing up and the database, I hope that in Committee we will be able to explore in more detail how a database could be accessed. It does not mean that you know where a person lives, who their children are or any of that kind of detail, but you might know that there is a traffic light scoring for that person and, at the moment, they have a red light. It might be as simple as that. The friend of mine who had very substantial issues with her landlord cannot for the life of her understand why it is not possible to get a reference check on a landlord, given the experience that she went through. As I said before—I do not think that there was a response on this—if it is possible that employers who flout the national minimum wage legislation can be included on an open register, it must be possible to explore this for landlords.
On Clause 2, regarding what was said about transparency, in the Citizens Advice survey, 81% of agents’ offices are not publishing full information about their fees. I agree—we could all go to the Property Ombudsman and make a complaint about every single one of these examples. But there is a very simple solution: no letting agent fees to tenants and the costs absorbed by landlords.
Why was there no impact in Scotland? Why was there no substantial increase in rents? Why was there no substantial problem with the letting agency industry, which, by the way, is an entirely uncredited and unqualified industry, and pretty much unregulated? It is the difference between £25 and £150. It is thin air. Will it have an impact on letting agencies? At the moment it costs them only £25 to do a credit check and they charge £150 for it. No, because it is such a mark-up. That explains why in Scotland, according to the research from Shelter, there has been no hike in rents, no reduction in the letting agency sector and no increased costs to landlords as a result of this. The difference seems to be because the sum is so arbitrary.
I know that there was some talk about fixed costs. My understanding, having read up in this area, is that under trading standards that is a little bit complicated. Again, I am happy to explore that but I think in a free market and under trading standards fixed costs in this area might go against some of the other things that the Government may hold dear. It would be worth making sure that we are clear in that area.
In conclusion, this is a very simple single principle that I am pushing here with regard to the letting agents. It is perfectly possible to do. The impact is minimal, if not non-existent, where it has been done before in Scotland. It is worth very serious consideration by this House. There is very little that we can do about some of the more significant housing issues but this is something that with a very small change in legislation we can implement and make a massive change. As I said at the outset, the substantial up-front costs of moving for people who have very limited resources are what we need to focus on when we are considering this Bill.