Mr John Hayes (South Holland & The Deepings, Conservative)

I beg to move amendment No. 265, in

clause 51, page 33, line 2, at end insert—

'(2A) An Owner of a property in the process of selling that property shall be entitled to a temporary exemption until it has been sold, and the subsequent owner shall be entitled to a similar temporary exemption in which to make the necessary preparations to obtain a license, if a license is required under the terms of the Act.'.

Mr Peter Pike (Burnley, Labour)

With this it will be convenient to discuss amendment No. 275, in

clause 61, page 41, line 6, at end insert—

'(c) An Owner is in the process of selling a property at the time the requirement for a licence is issued'.

Mr John Hayes (South Holland & The Deepings, Conservative)

It is good to back in the throes of our important and interesting work, and it is good to welcome the hon. Member for Teignbridge (Richard Younger-Ross), a new member of the Committee. It has taken some time for the notification of these sittings to reach him. Whether that is because there are other matters of a personal nature that he places higher on his list of priorities than housing and the concerns about the vulnerable which we have been discussing in Committee, is a matter for him, his conscience and his constituents.

At this juncture, it is important to look closely at the implications involved when someone who manages or controls an HMO that is not licensed is in the process of selling that property. The amendment would insert a new subsection in clause 51. We heard earlier that we are talking about a rapidly moving marketplace, about which the Minister was right to use the word ''fragile''. Given our concerns about that fragility, the need to bring new people into the marketplace, and our knowledge that properties move in and out of the sector and the licensing regime, and—in the case of landlords with a number of properties that they rent out—are added to landlords' portfolios and leave them, it is important that we make provision for properties in transition and landlords who are either selling or buying a property and therefore should not be unnecessarily penalised under the Bill. I do not think that the Bill is intended to penalise them, and the Minister is sensitive to such issues and the messages that we broadcast to landlords.

I hope that this is a sensible amendment that would make provision for landlords to have an appropriate exemption in the case of selling or buying a property. I am talking about an existing owner disposing of a property or a new owner obtaining one. I do not think that the Minister will have any difficulty accepting the amendment in the spirit that he has displayed throughout our proceedings.

The other amendment in this group, No. 275, works in conjunction with the lead amendment. It would allow being in the process of selling a property that should have a licence to be a defence for not having a licence for that property. Some people who are buying a property and are not fully familiar with their obligations on licensing may well be caught out. We have said throughout our proceedings that people who are engaged in the process of renting out HMOs should be subject to proper scrutiny. However, if someone does not have a licence and did not know that they should have one, because they have just bought the property, it is reasonable for them to say, ''I wanted sufficient time to acquaint myself with my responsibilities and to go through the process of obtaining a licence.''

Mr Chris Ruane (Vale of Clwyd, Labour)

I have a simple question: how long is a reasonable time?

Mr John Hayes (South Holland & The Deepings, Conservative)

It is a fair question. I am glad that I have excited the hon. Gentleman into an intervention, because it is good that we all play a healthy part in these affairs. However, it is not for a man of my limited capacity to define that period. The Minister, with his infinitely greater experience, and somewhat greater wisdom, will no doubt want to comment on that when he sums up. When he embraces the amendment, as I am confident he will, he will no doubt describe to the Committee what he believes to be a reasonable time. I think that we could come to a sensible agreement during the Bill's passage about what constitutes a reasonable time. The hon. Member for Vale of Clwyd (Chris Ruane) is implying that if we accept this amendment without a time scale built into it, some people would exploit that loophole. I know that he is worried, and rightly so, that what I am describing as a fair and reasonable defence on the part of someone who might be unaware of their responsibilities could be perceived as a loophole by which an irresponsible person who was buying and selling properties might make an unreasonable defence. If that is the case that he is making, I think it is fair.

Mr Chris Ruane (Vale of Clwyd, Labour)

If a landlord is to buy a new property, surely he will go through his solicitor, who should make him fully aware of his new responsibilities.

Mr John Hayes (South Holland & The Deepings, Conservative)

The hon. Gentleman has an innocent and endearing faith in the law. His experience with lawyers has obviously been an entirely happy one. To that degree he must be a very special person indeed, certainly in my experience of the law.

The hon. Gentleman is right, of course, to say that one would hope that a potential landlord would be made fully aware of all his responsibilities, but it is important that we provide safeguards. My purpose in tabling the amendment—which, incidentally, I had no

idea would excite such a lively and heated debate—is to ensure that we do not target legislation at people who are behaving responsibly in the estimate of any reasonable person, but are perhaps acting outside the law as it is written at the moment.

I am trying not to send out the wrong messages to the marketplace. As I said this morning, I am aware that landlords are concerned about some aspects of additional licensing; indeed, they are concerned about licensing per se. Part of our job is to assuage their concerns, and to assure them that we are building into the legislation the necessary protection for people who are not deliberately behaving in an unacceptable or unreasonable way.

Mr Matthew Green (Shadow Minister, Office of the Deputy Prime Minister Local Government & the Regions; Ludlow, Liberal Democrat)

The hon. Gentleman makes a reasonable point. However, I am concerned at the way in which the amendment is framed, because the Government's approach is to say that the local housing authority has to convince them

''that the house is no longer required to be licensed''—

it will not be an HMO under the regulations. My concern is that if, say, an extended family owns properties, selling them every couple of months between themselves, they could escape licensing as a result of the fact that the property in question was ''being sold''. I am concerned that the amendment opens a loophole to such a situation.

Mr John Hayes (South Holland & The Deepings, Conservative)

Like so many well-intended amendments this could close one loophole but open another. I would never want to plead entirely innocent to that, because it takes a very skilled draftsman not to do what the hon. Gentleman implies. However, it is a bit fanciful to assume that there are masses of extended families just waiting to sell their properties every one or two months. There may be such people in Ludlow, but I do not know many of them in Lincolnshire. We would close the loophole that could lead to a person who became a landlord finding themselves outside the law and being prosecuted because they did not have the time, the wherewithal or—I take the point made by the hon. Member for Vale of Clwyd—good enough advice to obtain a licence. That is not the intention of the law, and we are trying to seal that loophole.

The hon. Member for Ludlow makes a sensible point, but we have got to be careful about its implications. However, I am absolutely confident that when the Minister adopts the amendment we can find a way of dealing with that potential problem in a more sensible way than that proposed in the Bill. I tabled these amendments on that basis, and I will be interested to hear the Minister's response, which I am sure will be as entertaining and well informed as ever.

Mr Robert Syms (Poole, Conservative)

I shall comment briefly in support of my hon. Friend, who has made a very persuasive case. The important thing is that we may reach a situation in which, because of the licensing regime, owners with several substandard HMOs do not want to invest a lot in these properties. However, they have tenants, and the solution may be not to invest in the property but to

sell it on to someone else who will invest in it to bring up the standard. Would the people involved want the tenants, even in those properties that may have problems, thrown out in the street in the intervening period because the property was not licensed?

Such matters would not make a great difference in respect of one property, but if the housing authority wanted to improve several substandard properties in an area, part of the solution might be to have more responsible people to purchase the properties. In such cases, it might be sensible not to turf people out on the streets, but to allow a transfer of ownership to effect the investment to bring the property up to standard. That element of the amendment would make sense.

The hon. Member for Vale of Clwyd made a very good point. How long is reasonable? Under the Bill, it is within the discretion of a local authority to vary a licence for three months and then a further three months, which might be long enough. The Bill may already provide latitude for a local housing authority to make such a variation. However, the general point made by my hon. Friend the Member for South Holland and The Deepings is that it may not be sensible to remove a licence and put people out on the street during the interval between the control of a landlord who may not have the money or the will to invest in a property and someone else who may have both. I apologise for being late in Committee; I was having a good lunch.

Mr Andrew Selous (South West Bedfordshire, Conservative)

I apologise to you, Mr. Pike, and the Committee for not being at this morning's sitting. I was dealing with housing matters in my constituency with the Minister's colleague, Lord Rooker.

I support the amendment tabled by my hon. Friend the Member for South Holland and The Deepings. It is sensible because it is not right to apply the full rigour of the licensing system to people who are genuinely just about to get rid of the property. I wish to probe him a little about the words

''in the process of selling that property''

in the amendment. I am sure that he would agree that, were someone abusing the system by merely putting up a ''for sale'' sign and not genuinely intending to do anything about it, that should be open to a reasonable challenge by the relevant local authority.

Mr Keith Hill (Minister of State (Housing and Planning), Office of the Deputy Prime Minister; Streatham, Labour)

Let me begin, in marked contrast to the hon. Member for South Holland and The Deepings, who extended a somewhat critical welcome to our new acquisition, by giving a warm welcome to the hon. Member for Teignbridge. I wish to add a slight note of regret to our debate: it seems that his local authority, like that of his colleague, the hon. Member for Ludlow, did not introduce an HMO registration scheme under the Housing Act 1996. It looks as though that may be a bit of a habit of Liberal Democrat authorities. However, the hon. Member for Teignbridge may not share the regulating passion of his more northerly colleagues.

Ms Sally Keeble (Northampton North, Labour)

Have any Liberal Democrat councils organised discretionary licensing schemes?

Mr Keith Hill (Minister of State (Housing and Planning), Office of the Deputy Prime Minister; Streatham, Labour)

I almost regret to say that they have. Fortunately, in this case, we have identified two members of the Committee whose local authorities have possibly been remiss in such matters.

Clause 51 provides that a local authority may, if it thinks fit, serve a temporary exemption notice on managers or owners of licensable HMOs who notify it of their intention to take particular steps to ensure that their HMOs no longer require a licence. If a temporary exemption notice is served, the HMO is not required to be licensed under part 2, which covers licensing of HMOs, or part 3, which covers selective licensing. A temporary exemption notice lasts for three months but is renewable for another three months in exceptional circumstances. No more than two exemption notices may be served.

The local authority will decide when it is appropriate to grant such an exemption notice, but one example of when that could be used would be when a landlord is in the process of converting a house to single occupancy when the requirement to obtain a licence commences. That is not quite the same as the case to which the hon. Member for Poole (Mr. Syms) referred, but is on the same lines. Clearly it would be absurd in such circumstances for a landlord to be required to obtain a licence if it was clear that it would be needed to cover no longer than a matter of days or weeks. When the exemption is not granted, the local authority must notify the applicant of its decision, the reasons for it, the right of appeal and the period for appealing.

Yet again, I find myself speaking to an amendment that would remove flexibility from local authorities. Amendment No. 265, which was tabled by the loyal Opposition, would entitle the owner of a property to temporary exemption from licensing when it was in the process of being sold. Similarly, the purchaser of a property would be exempt from the licensing requirement to make the necessary preparations to obtain a licence. Amendment No. 275 would amend clause 61 and provide a defence for the owner of an HMO against the offence of operating without a licence when that property is being sold.

I remind the Committee that the purpose of licensing is to ensure that higher-risk HMOs are properly managed to ensure the welfare of their often vulnerable tenants. As has been mentioned, such an amendment would allow a potential loophole in the legislation. The owner of the property could simply put the property on the market, and thus not require a licence until it had been sold; and the unscrupulous would simply ensure the property was never sold. I think that that is what the hon. Member for Ludlow was grasping for in his example of the extended family. The same sentiment was voiced by the hon. Member for South-West Bedfordshire (Andrew Selous).

Mr Andrew Selous (South West Bedfordshire, Conservative)

Does the Minister accept my contention that it would be quite easy to establish a reasonableness test to determine whether there was a genuine intention to sell? We could all spot a seller who was not genuine—one who placed one small advertisement without doing anything about it, for

example. I would have thought that it would be easy to get around the problem that the Minister presents.

Mr Keith Hill (Minister of State (Housing and Planning), Office of the Deputy Prime Minister; Streatham, Labour)

I hope to be able to demonstrate that the reason for temporary exemptions is to avoid regulation when it is not necessary. If, in the medium to long term, a property remains a licensable HMO, it should be licensed. If there were clear evidence that a property would not continue to be a licensable HMO, a local authority would grant temporary exemption from the licensing requirement. However, we recognise that there may be a potential anomaly when the licensing requirement is introduced. For example, it would seem a little unfair to require a landlord to have a licence when there is clear evidence that a sale is proceeding and a licence would only be in force for a matter of weeks.

This is very much an implementation issue. When licensing has been in force for a number of years, the owner of an HMO that is in the process of being sold should already possess a licence. We accept that we may need to consider point further and I trust that that gives some comfort and reassurance to the Committee.

Clause 204(8) already provides the power to make transitional provisions. We will therefore consider if it might be expedient to provide for some form of exemption for certain categories of HMO which are in the process of being transferred at the time when the licensing requirement comes into force. A temporary exemption for a purchaser would not be granted unless they could show they were no longer going to operate that property as an HMO. That also corresponds to the point made by the hon. Member for Poole. Where a purchaser plans to continue to manage their property as an HMO, it is right that they should be subject to the licensing requirement. There should be sufficient time during the sale process for the prospective owner to take steps to obtain a licence. Clause 61(4) provides that such a person will not be committing an offence of operating without a licence if they have made an application for a licence that is yet to be determined or which is still subject to appeal.

I have attempted to respond to the points made during our brief but helpful debate. I hope that my explanations have satisfied the hon. Member for South Holland and The Deepings and I ask him to withdraw the amendment.

Mr John Hayes (South Holland & The Deepings, Conservative)

The Minister has given an assurance that measured discretion will be used. Given the proper remarks of my hon. Friend the Member for Poole and the hon. Member for Ludlow about the danger of the proposal opening a further loophole, I think that the Committee and the Minister have heard our concern about operating the new regime with discretion in relation to people who are buying and selling houses. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 37, in

clause 51, page 33, line 28, leave out 'county court' and insert 'residential property tribunal'.

No. 38, in

clause 51, page 33, leave out line 35.

No. 39, in

clause 51, page 33, line 36, leave out 'court' and insert 'tribunal'.

No. 40, in

clause 51, page 33, line 39, leave out 'court' and insert 'tribunal'.—[Keith Hill.]

Clause 51, as amended, ordered to stand part of the Bill.