Tenant Fees Bill

Lord Shipley Excerpts

2nd reading (Hansard): House of Lords
Wednesday 10th October 2018 Lords Chamber

[Lord Shipley (LD)]

My Lords, this has been a helpful Second Reading debate. It has identified a number of issues that we will need to explore further in Committee. Indeed, the noble Baroness, Lady McDonagh, despite the limitations of time, has raised a number of issues that would be worthy of spending a little time on in Committee if that were felt by her to be appropriate. I remind the House that I am a vice-president of the Local Government Association.

I refer first to the contribution by the noble Baroness, Lady Jenkin of Kennington, which I found very helpful. One good thing about a Second Reading debate is that it enables us to identify things that may be a problem or an unintended consequence. She talked about the home-share model. I want to raise with the Minister another one that we need to be clearer about. It relates to local authority incentive payments to landlords which prevent homelessness. On the one hand, a landlord may claim that they do not require a payment; on the other hand, any agreement would reflect the fact that a payment was being made. It would appear, under the Bill as it is currently drafted, that that could well be illegal. When the Minister responds about the home-share model, I hope that he might be in a position to respond about local authority incentive payments to landlords which prevent homelessness.

I want to welcome the Bill and to pay tribute to the work of my noble friend Lady Grender who has campaigned for some time on this matter—it is good to see us in the position that we are—and to pay tribute to my noble friend Lord Palmer of Childs Hill and to the noble Baroness, Lady Hayter, for their work on the client money protection scheme. These are all part of a trend to remove rogue landlords and letting agents from the industry. There is no doubt that the Bill will bring transparency, as the Minister said, to the sector; it will provide protections for tenants and it will prevent double charging. It is good to see the proposed ban on letting fees and most other up-front fees paid by tenants, in particular the proposed cap on security deposits, the new duty on trading standards authorities, and the new penalties on any landlord or letting agent who contravenes them. As my noble friend Lord Strasburger reminded us, “most agents do a decent job”, and, in the words of the noble Lord, Lord Best, “this Bill will end the ‘here today, gone tomorrow’ letting agencies”. I think we need to pause and repeat that we are dealing here with those who do not abide by the system properly. The vast majority of letting agents and landlords operate in a caring and ethical manner, and represent the reputable part of the lettings industry.

One of the problems that we are dealing with is the impact of 4.7 million households in the private rented sector. The noble Lord, Lord Best, referred to the enormous growth which requires the Government to legislate more and more to keep up with the problems which have arisen as a consequence of that growth. Many people in the private rented sector are having to move more often because of the nature of the tenancies they have currently, and when they do, they are having to pay more than they otherwise would if they had longer tenancies. Of course, as the Minister will know, one of the solutions to this problem is to build more social housing. I am absolutely convinced that the problems we now have in relation to the private rented sector are caused by not having enough social homes for rent. There will be other opportunities for us to debate that in the coming weeks.

The Government are to give £500,000 to assist with setting up costs. I want to concur publicly and absolutely with the Minister’s view that this should be self-financing. I think it does need to be. There are other areas, particularly in the treatment of rogue landlords, where local authorities can make themselves cost-neutral in terms of their investment. However, setting this up does require £500,000. It would be helpful if the Minister explained why this figure was selected; it does sound like quite a lot of money. On the other hand, there are an awful lot of local authorities in the country, all of whom will want some of it, I imagine. My suggestion is that there does perhaps need to be sub-regional training and sub-regional structures. The Government need to be very careful about how that money is allocated because I do not think that simply divvying it out to every council would work.

There is a general need for publicity. Presumably, money for that will come out of the £500,000. Perhaps it will, perhaps not, but I think that it will. If so, we need to be careful about ensuring that there is enough publicity for those who need to understand that the law has changed: landlords and letting agents on the one hand and tenants on the other. It needs to be made much clearer to people what their legal rights and responsibilities are. I am very pleased to hear about the new role of the noble Lord, Lord Best, which will be hugely helpful in this respect. There has been a debate about the cap and the figure of six weeks’ rent. That may be right; we will need to explore it in Committee. A five-week figure may be better. I take my noble friend Lord Strasburger’s point about the problem with a four-week figure in months with five weeks and we need to look carefully into that.

The issue of default fees is becoming more important. They must not permit agencies to bring in hidden extras that cannot be challenged. When people sign a lease, they need to be clear about what they are committing themselves to. My noble friend Lady Grender asked why such fees are needed at all, which we will need to explore in Committee. Equally, we have had several briefings on the Bill, but I was particularly taken by what was said by Citizens Advice:

“The default fee clause has the potential to fundamentally undermine the Government’s aim to end tenant fees and prevent unfair practices … The Government must significantly tighten this clause with a clearer definition of when a default fee is legitimate. Leaving this to non-statutory guidance risks inconsistent outcomes for renters”.


That is true. We need to be very careful about that danger.

Will this measure result in higher fees? The evidence I have read from Scotland suggests that it will not, but it may. I was taken by two comments: first, that rents are set by the market, as was said by the noble Lord, Lord Best. That is an important consideration. The second was the comment made by my noble friend Lady Grender that many tenants would prefer to pay monthly if they had to pay a higher sum overall. Again, I hope that we will explore that further in Committee.

I will make two final points. First, it would help enormously if the draft regulations, given their importance, were made available to us prior to Committee stage, which I understand may be on Monday 5 November. I hope that this will not be one of those Bills where the draft regulations appear at or around Third Reading, or occasionally not at all. Our deliberations will be detailed so it would be helpful to have them made available. Secondly, the Minister said something about electrical safety checks; I am trying to recall his words. He rightly identified that this is part of an overall package of improving conditions in the private rental sector. He said that the legislation for electrical safety checks would be forthcoming, the parliamentary timetable permitting. Can he tell the House what might prevent that timetable undertaking something substantial that really matters? Overall, the Bill is welcome and I commend it on our behalf.

Tenant Fees Bill

Lord Shipley Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 20th November 2018 Lords Chamber

[Lord Shipley (LD)]

My Lords, I support the noble Lord, Lord Kennedy, in these two amendments, which would help to tighten up the Bill. As he said, paragraph 8 of Schedule 1 is very open-ended, and he referred to a loophole potentially lying within it as it is worded. I think his amendment will tighten it and will do so partly because it is in the interests of the tenant, who may secure a cash saving in the amount they pay for a utility even though they may have to pay a fee to achieve it. I therefore hope the Minister might be willing to look at that carefully. As paragraph 8 of Schedule 1 is currently drafted, it simply refers to the fact that the tenancy agreement may require the payment to be made, but it does not define why it would have to be made. That is why the amendment in the name of the noble Lord, Lord Kennedy, is so helpful.

[The Earl of Lytton]

My Lords, I have great sympathy with this amendment but I would have more were it possible to ensure that utility providers themselves acted reasonably. While I will not name any names, one particular well-known supplier of electricity, with what is generally regarded as an extremely cheap and competitive tariff, has gained for itself an extremely poor reputation because of what happens when one wants to change to another supplier. Indeed, so tortuous are its processes—of which I have had direct experience—that many landlords specify in their agreements that the tenant may not change to that supplier, and with good reason.

I had a situation myself concerning the commercial supply of electricity to an agricultural building. My wife and I were faced with a demand from this company for over £30,000 for a period of some 15 months, when the only thing that happens in this shed is that for a period of about three weeks a series of low-wattage lights are used to assist with lambing, and for a period of about 10 days in another part of the year they are used for a sheep-shearing operation. By no stretch of the imagination could the fee have totalled that amount. When, finally, the company rang up my wife and said, “We’re going to take you to court”, her answer was, “Make my day”. It was not until the matter was referred to its lawyers that it became apparent that there had been a complete muck-up. It had simply not got an initial reading and was trying to steamroller that payment through in the hope that we would crack and pay it. I know that other landlords in the private rented sector are sometimes faced with the same situation.

These people run up the most appalling costs. While I have great sympathy that this should not be laid solely at the door of tenants, it is none the less an occupational hazard that afflicts both parties to this arrangement. That is the only reason why I have a reservation about the amendment in the name of the noble Lord, Lord Kennedy—because there is another dimension to this, where certain suppliers are acting utterly unreasonably and unconscionably.

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[Lord Shipley]

My Lords, I agree with the noble Lord, Lord Best. It is important that we are able to discuss this matter through the amendment moved by the noble Baroness, Lady Gardner of Parkes, but there is an issue of principle here, which is that it should be a charge not on the tenant but on the landlord and the letting agent, who is not mentioned in the amendment.

The principle is that, if a service is contracted for formally between a tenant and a landlord, a payment can be required. However, that should not be required for either reference checks or identity checks, where the responsibility lies with the landlord or the letting agent. The basic problem here is that the Bill attempts to eliminate up-front tenants’ fees but the amendment might reinstate some tenants’ fees that would not be justified as a charge on the tenant.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

I thank noble Lords very much and particularly my noble friend Lady Gardner for bringing forward this amendment. She does much work in this area.

I cannot accept the amendment because, as the noble Lord, Lord Shipley, has just indicated, it would fundamentally undermine the policy intention of the Bill, which is to ban letting fees paid by tenants and to ensure that the party that contracts a service pays for that service.

This issue was dealt with under Section 22 of the Immigration Act 2014. It was very clear then that this was to be a liability for the landlord, not the tenant, to discharge. Therefore, the amendment would effectively drive a coach and horses through the intention of that legislation. I am not sure what the collective term for a coach and horses would be. It would probably be a stampede or possibly a cavalcade of coaches and horses, but it is clearly not the intention.

Despite the very good arguments put forward by my noble friend and the noble Earl, Lord Lytton, on this point, I very much agree with the noble Lords, Lord Best and Lord Shipley. A landlord should be responsible for the costs associated with these checks. As I have indicated, they are required under the Immigration Act to undertake these checks to verify that a tenant has the legal right to reside in the United Kingdom before progressing with any tenancy agreement.

The Home Office produces detailed guidance for landlords and agents carrying out these checks, and I will certainly ensure that it is circulated to my noble friend and the noble Earl, and indeed to everybody who has participated in the debate.

Although the onus is on the landlord to verify a tenant’s right to rent, we have made provision in the Bill that, where a holding deposit is sought and a tenant fails a right-to-rent check, landlords and agents will not be unfairly penalised if the tenant is at fault. I hope that that gives some comfort to my noble friend and the noble Earl. With those assurances, I respectfully ask my noble friend to withdraw her amendment.

Tenant Fees Bill

Lord Shipley Excerpts

Report stage (Hansard): House of Lords
Tuesday 11th December 2018 Lords Chamber

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I will first speak briefly on Amendments 1, 2, 5 to 12, 16 to 19, 33, 35 to 41, 60 and 66, which are minor and technical and are intended to bring consistency and ensure the Bill best delivers on its policy intent.

First, while unlikely, as the Bill is drafted a letting agent could conceivably require a tenant to enter into a contract for services with themselves for additional services related to letting, such as providing an inventory. Amendment 5 clarifies that letting agents are prohibited from requiring a tenant or other relevant person to enter into a contract with themselves.

Secondly, it is possible that a relevant person other than a tenant might be a party to a tenancy agreement or an agreement with a letting agent. We have made amendments to Clauses 1 and 2 to be clear that, where a person is acting on behalf of a tenant or guaranteeing a payment of rent, that person cannot be charged a default fee unless otherwise permitted by the Bill.

In the same vein, Amendments 9 to 12 to Clause 4 provide that a term of agreement which breaches Clause 1 or Clause 2 does not bind a relevant person. Similarly, Amendments 33 and 35 to 41 replace the references to “tenant” in Clause 28 as it applies to pre-commencement tenancy agreements and agreements with letting agents with references to “relevant person”.

Finally, we want to ensure that we use consistent language and terminology throughout the Bill. Amendment 66 changes a reference to “incorrect and misleading information” to “false and misleading information” to align with other references in Schedule 2. Amendments 16 to 19 ensure that the language on day and date in Clause 11 is consistent, and Amendment 60 makes it clear that the definition of a television licence in paragraph 9 of Schedule 1 applies to the entire Act.

[Lord Shipley (LD)]

My Lords, since we have begun Report I should declare my vice-presidency of the Local Government Association. I simply say that these are helpful and relevant amendments that have our support.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, as this is the first time that I have spoken on Report, I draw the House’s attention to my relevant interest as a vice-president of the Local Government Association, as the noble Lord, Lord Shipley, did. I thank the noble Lord, Lord Bourne of Aberystwyth, and his officials for a number of the amendments we will discuss, in this group and others. Generally they are very helpful and improve the Bill. That is good news for tenants, and I am genuinely very grateful for that. That is not to say that I agree with everything in the Bill, but I am pleased to say we are making progress. I am very happy to support these amendments and I concur with the noble Lord’s comments.

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[Lord Bourne of Aberystwyth]

My Lords, we are all clear that the purpose of the Bill is to ban agents and landlords from charging unfair letting fees to tenants. However, in achieving this objective it is crucial that the legislation does not have an adverse impact elsewhere. Amendments 3, 4 and 29 to 31, in my name, ensure that the Bill does not prevent vital work supporting tenants more broadly.

First, Amendments 3 and 4 exclude local housing authorities or organisations acting on behalf of a local housing authority from the definition of “relevant person” under the Bill. I am most grateful to the noble Lords, Lord Shipley and Lord Beecham, for raising this issue during Second Reading. Local authorities have a duty, as housing authorities, to help the homeless to find accommodation. This is set out in the Housing Act 1996, the recent Homelessness Reduction Act and the homelessness code of guidance. We recognise that, as part of this, councils might need to provide support to applicants—financial or otherwise—to access private rented accommodation. This is vital work, and Amendments 3 and 4 ensure that it can continue. These amendments will ensure that local housing authorities can make payments in connection with a tenancy when acting on behalf of a tenant or guaranteeing their rent.

Secondly, Amendments 29 to 31 ensure that the important work of Homeshare schemes, and its parent network in the UK, Shared Lives, can continue. I have said on multiple occasions that the Government strongly support the work of organisations such as Homeshare in matching a licensee, usually a young person in housing need, with a licensor, usually an elderly householder in need of companionship, sometimes combined with some low-level care or assistance. I know that support is shared throughout the House.

The Bill would have unintentionally prevented Homeshare organisations operating by banning payments made by the licensor in respect of the advice and support received from Shared Lives. I reiterate that the intention of the Bill is not, and never was, to undermine or prevent this important and innovative work continuing. I thank in particular my noble friends Lady Jenkin and Lady Barran for taking up this issue and bringing it to the House’s attention.

The Government recognise that we must take this opportunity to amend the Bill to ensure that such work is not adversely affected. To do this, our amendments provide for changes to Clause 26 to exclude from the Bill such licences as those granted under a Homeshare scheme. We have specified that an excluded licence will be one granted to the licensee by a licensor who resides in the housing, where particular conditions surrounding the grant, renewal and continuation of that licence are met. These conditions include a requirement for a charity or a community interest company to give advice to the licensee or licensor in connection with the grant, renewal or continuation of the licence and where the licensee provides companionship or companionship and low-level care or assistance, together with one or more payments in respect of council tax or utilities, for example. Such arrangements are indicative of Homeshare organisations.

The amendments will therefore ensure that excluded licences that meet the conditions I have just set out are exempt from the tenant fee ban. I hope that my noble friend Lady Barran will agree that these amendments address the concerns she raised in Committee and that this achieves our shared ambition—one we can all surely support—which is that organisations such as Homeshare can continue doing their fantastic work well into the future.

[Lord Shipley]

My Lords, the Minister referred to what I said at Second Reading and he is entirely right. I welcome Amendments 3 and 4. They are hugely helpful because they give local housing authorities the flexibility they need to do their job properly, and for that reason they have our support.

[Lord Beecham (Lab)]

My Lords, I join the noble Lord, Lord Shipley, in supporting these government amendments. It certainly is an important function for local authorities. I have to confess—and I refer to my interest as a sitting local councillor—that I am not entirely sure where the funding for this comes from. Do the Government support this financially, or is it left entirely to local authorities? In the latter event, will he look into the extent to which authorities are financing this important element of support for tenants? We certainly support both amendments.

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[Lord Flight]

My Lords, I similarly would like to speak to Amendments 42, 43 and 44, on tenancy deposits. The objective for everyone is to have a fair balance that works. I note that, at Second Reading in the Commons, the Secretary of State referred to the then proposal of six weeks as,

“a balance of greater protection to tenants while giving landlords the flexibility to accept higher-risk tenants”.—[Official Report, Commons, 21/5/18; col. 642.]

I also note that Scotland has an eight-week as opposed to a six-week arrangement.

I urge the Government to think again on this issue. Reducing the security deposit to five weeks’ rent rather than six leaves scope for unfairness to landlords. There is always the risk that, at the end of a long tenancy, the tenant will leave the property in a poor state or will have had pets. Cutting the deposit to five weeks’ rent will quite likely leave the landlord out of pocket. In turn, that will make landlords more cautious about the tenants they take on, at a time when the need for more rented accommodation is acute. This is not a huge issue, but the Government’s previous proposition of six weeks was the sensible and fair balance. I do not understand why they have moved to five weeks, and nor does the industry—having not been consulted or advised about this, it feels somewhat mistreated by the Government.

[Lord Shipley]

My Lords, if I might, I will intervene at this stage to speak to Amendment 43, which is what we are currently talking about. In the flurry of amendments not being moved, no debate took place, but the issue has now been raised by two noble Lords.

My name is attached to the amendment that refers to five weeks, and I think it is the right conclusion. I want to thank the Government for having agreed a change from six weeks to five. At Second Reading and in Committee, we went through every option: from the Scottish model of eight weeks to my probing amendment proposal of four weeks. As I recall, the Government at that stage said the figure would be between the four weeks we requested and the eight weeks that apply in Scotland.

There is a lot of money at stake here for tenants. Having heard from the perspective of landlords, I would like to speak on behalf of tenants. For a large number of poorer people, a change from five to six weeks could make finding that level of deposit a strain. Anything that can be done to minimise that strain is a good thing. The figure was described as being “up to” six weeks, but the fact that it is now five weeks will be of benefit to a large number of tenants. Because it covers the difficulty that, in some months, four weeks may not be a month and many people operate tenancy agreements on a monthly not weekly basis, it is legitimate for the Government to propose that we go to five weeks. I want to express our support for the Government’s decision.

[The Earl of Lytton]

My Lords, I beg to differ slightly from the conclusions of the noble Lord, Lord Shipley, although I well understand that this involves a cash-flow issue for tenants. I pay tribute to the noble Baroness, Lady Gardner, for bringing us back to this set of amendments. The Minister himself defended the Government’s long-standing line that a six-week deposit was fair. However, as the noble Lord, Lord Flight, said, we seem to have moved away from that without apparent pause for breath.

I declare a non-interest here, as I do not charge deposits for tenants and have not done for a number of years due to special personal circumstances. The industry standard has been six weeks for a considerable time. In my part of Sussex, six weeks’ rent represents a figure between £1,200 and £1,800 in general terms. That does not go a long way if, in addition to non-payment of rent—bear in mind that defaults tend to have many heads—the tenant also leaves the property in a damaged condition, including damage to carpeting, kitchen units and electrical wiring.

Given that situation, can the Minister explain why it is now five weeks? If you strip out non-payment of the last month’s rent, under this proposal you are left with a single week’s rent to cover any other form of loss. Does that represent a fair balance? I am not sure that it does.

Tenant Fees Bill

Lord Shipley Excerpts

3rd reading (Hansard): House of Lords
Tuesday 15th January 2019 Lords Chamber

[Lord Bourne of Aberystwyth]

My Lords, I will make a few concluding remarks. It has been clear throughout that this is a Bill that we all support, and one that will deliver important changes to the private rented sector, improving lives for millions of tenants. I am grateful to all noble Lords from all parts of the House who have engaged so thoroughly and passionately during the proceedings in this House.

Specifically, I thank the noble Baroness, Lady Grender, for her work to date in promoting a ban on letting fees, which has been notable. I also thank the noble Lords, Lord Kennedy and Lord Shipley, for their significant contributions during our debates. I thank the noble Baroness, Lady Hayter, who is not in her place at present, for helping to ensure that the client money protection regulations work as intended and the considerable work that she has done on this, as well as the noble Lord, Lord Palmer of Childs Hill. Finally, I thank my noble friends Lady Barran and Lady Jenkin for raising the important issues of home share schemes, which I think we all value.

I firmly believe that all the amendments made in this House strengthen the Bill and offer greater protections for tenants while not unfairly impacting on landlords and agents. I thank industry groups and local authorities for their constructive engagement and support in strengthening the Bill’s provisions and offering feedback on our draft guidance.

We will continue to work closely with stakeholders to ensure that the ban is properly communicated to tenants, landlords and agents, particularly with regard to contractual damages, which were the subject of debate on Report. I reassure the House again that there are already large amounts of case law that deal with what is appropriate in a damages case. Damages are generally not meant to do anything more than put the innocent party—“innocent party” being a legal term—back in the position they would have been had the contract not been breached. They are not a back door to default charges. I will repeat that: they are not a back door to default charges.

We are committed to working with Citizens Advice, Shelter and other industry groups to ensure that tenants fully understand their rights with regard to paying and challenging contractual damages. I know that it is in all our interests to ensure that this vital legislation becomes law as quickly as possible.

Implementation is, of course, subject to parliamentary timetables, and amendments we have made need to be considered in the other place. We also need to allow a period of time following Royal Assent to enable agents and landlords to become compliant with the new legislation. We therefore intend for the provisions of this Bill to come into force on 1 June 2019. This would mean that the ban on letting fees would apply to all new tenancies signed on or after this date.

I conclude by thanking officials who have worked diligently on this Bill and have performed massive tasks in ensuring that we are in the position we are now. I thank Becky Perks, Rosie Gray, Tim Dwyer, Nigel Bousfield, Elly-Marie Connolly, Laurence Morton, Jane Worthington and, from my own office, Lucjan Kaliniecki. I beg to move.

[Lord Shipley (LD)]

My Lords, I thank the Minister for his statement. He said that the Bill would improve the lives of millions of tenants, and he is absolutely right. It is a much better Bill as a consequence of the close cross-party co-operation it has undergone in your Lordships’ House.

I thank the Minister for his willingness to give a great deal of time, meeting regularly with us to identify outstanding issues. From these Benches, I thank my noble friend Lady Grender, whose assiduous campaign over a substantial period has led to fruition in this Bill, which is indeed a significant milestone in the support of tenants’ rights. I also thank Sarah Pughe, in the Liberal Democrat Whips’ Office, for her help. I also extend my thanks to the Bill team and all the officials who gave us a great deal of time in recent weeks while the detail of the changes that were being made in your Lordships’ House was finalised.

We lowered the level of the deposit cap to five weeks’ rent, listed default fees on the face of the Bill, introduced greater transparency around holding deposits, removed local authorities—I declare that I am a vice-president of the Local Government Association—and those acting on behalf of local authorities from the definition of a “relevant person”, and we addressed deficiencies in the client money protection scheme, among a number of other changes. Some of those changes are very important, and enable the Minister to say that the Bill will indeed help financially a large number of tenants.

I thank the Minister for his co-operation throughout this process. The last few weeks have been very productive, making sure that the Bill will stand the test of its application.

[Lord Kennedy of Southwark]

My Lords, the Bill before us leaves this House in a much better state than when it arrived. It has had a positive consideration across the House, and I thank every Member who has contributed to our debates and discussions, bringing their expertise and ideas. We have made a real difference and, as the noble Lord, Lord Shipley, outlined, some improvements to the Bill, so we have made progress. We have certainly made a positive contribution to the rights of tenants in the private sector, and it is important that we do that. I also thank the Bill team from the department, who have been courteous, helpful and informative, and have engaged with me and my noble friend Lord Beecham at any time. I am very grateful to them for that.

I thank the noble Lord, Lord Bourne, for whom I have great respect. We spend a lot of time on these Benches batting things back and forwards, and I have always found him courteous, friendly and engaging, and always willing to talk to me both inside and outside the Chamber. I also thank my noble friend Lord Beecham for his support and hard work, and I thank Rhian Jones from the opposition office. She has supported me with research and draft amendments and has helped me to understand the Bill—she understands it much better than I ever would—sending me out to battle with the right papers at the right time, fully briefed, so that I can raise things here. I am very grateful for all the work she does for us in our office, and I thank her very much for that. I am delighted that the Bill is where it is today, in a much better place.