Clause 83 - Further sanctions relating to unlicensed
Housing Bill
3:30 pm
Mr Edward Davey (Shadow Secretary of State for the Office of the Deputy Prime Minister, Office of the Deputy Prime Minister Local Government & the Regions; Kingston and Surbiton, Liberal Democrat)
Ms Vera Baird (Redcar, Labour)
The hon. Gentleman makes some troubling and complex points. Would it be more straightforward if the Government considered adding two more offences to clause 82, namely an offence of trying to obtain rent while not holding a licence or an offence of trying to evict while not holding a licence? That might be a more straightforward way of dealing with the problem.
Mr Edward Davey (Shadow Secretary of State for the Office of the Deputy Prime Minister, Office of the Deputy Prime Minister Local Government & the Regions; Kingston and Surbiton, Liberal Democrat)
The hon. and learned Lady makes a valid point, which I should like to study. We are discussing the law of unintended consequences—we devise the law but do not realise its effects. Given the sensitivities in this area, I would want to study her proposal and I hope that the Minister will also do so, because it seems to have some merit and addresses that particular problem.
I know that my opening remarks have been somewhat lengthy, but it is vital for the Government to get things right or there will be those unintended consequences. I conclude by summarising my argument for the Minister. He cannot seriously tell the Committee that the provision of an interim management order is an adequate safeguard for those served with a section 21 notice as a result of choosing not to pay the rent on an unlicensed property. I do not think that the provision to which the Government have turned will help, nor do I think that it will apply to those cases in which the council chooses not to pay the housing benefit on an unlicensed property. One must think profoundly about the unintended consequences of the provision.
What happens when clauses 87 and 89 no longer apply? Would the landlord try to wreak his revenge, perhaps through a retaliatory eviction? He could say to the tenant, ''You've caused me a lot of trouble. I've had to face that interim management order, but now it's gone, I'm going to evict you.''
Ministers must think carefully about that. I understand that it is complex and that they may want to return to it. They might also want to highlight things that I have missed and pick holes in my argument, which would mean a more protracted debate. However, I hope that my point will at least get due consideration.
Mr John Hayes (South Holland and The Deepings, Conservative)
The hon. Member for Kingston and Surbiton has stumbled on an important point. I had wanted to give the Ministers an opportunity to shine, given our audience, but as it has changed a little, they will not need to shine so brightly, although I am sure that that will not prevent them from dealing with the matter with their usual assiduous qualities.
The hon. Gentleman has a strong point: there is a real problem with the Bill's implications in relation to the details of tenancies. As he pointed out, that was clear from the Minister's comments on 27 January, and it is worthy of repetition. The Minister said:
''any tenancy agreement in an unlicensed HMO will be unlawful''—[Official Report, Standing Committee E, 27 January 2004; c. 239.]
That means that the protections that should properly be available to tenants would not have any effect. That is not the Bill's intention, but it may be its consequence.
The problem was highlighted by the Select Committee and the Law Society when they considered the draft Bill. The Law Society said:
''We have particular concerns in relation to the provisions in the proposed licensing schemes allowing for the non-payment of rent for the period during which a property is not licensed''.
The Government themselves accepted the principle that tenants should not be evicted because their landlord is unlicensed. However, as Shelter made clear both in its briefing and when I met representatives today, there are real worries that landlords may use the interregnum during which the protection for tenants is slight to take action that is injurious to the interests of some of the vulnerable people that we are aiming to protect through the process of licensing. That is the ironic paradox at the heart of this part of the Bill: we may be putting tenants who are in the hands of unscrupulous landlords in a more vulnerable position.
I thought of that point when I read the Bill and we considered tabling an amendment, but I do not think that the amendment of the hon. Member for Kingston and Surbiton is the appropriate tool to deal with the problem. By removing the proper powers that landlords have under the Housing Act 1988, we would alter the balance too far against their interests.
Committee members know that the 1988 Act empowers landlords to evict tenants at two months' notice. I agree that this part deals with unlicensed properties, but given that we are uncertain about the speed at which authorities will handle the licensing process, it is not inconceivable that, if amendment
No. 295 is passed, landlords will have few rights to do anything about a tenant while they are properly trying to acquire a licence. A dilatory local authority might not deal with an application in the six to eight weeks that might be reasonably expected, and if that became 16 weeks, a landlord could be left with no legal protection from a tenant whom he might wish to evict for perfectly good reasons. We can all think of a range of reasons that might apply.
I read the Official Report of the Second Reading debate of the Housing Act 1988 and the Liberal spokesman, the hon. Member for Southwark, North and Bermondsey (Simon Hughes), made no mention of that kind of intent. He spoke at great length about those matters on that occasion, as he has on many others. I looked at the Official Report of the Committee debates on that Act, held on 26 January 1988. No hon. Member from any side of the Chamber suggested that that should be the intention of the Act. Hon. Members argued about many things in that Act. Many amendments were moved. Nobody sought to reach a conclusion whereby landlords were prevented from having any legal powers to deal with tenants in the way that I have described.
The hon. Member for Kingston and Surbiton raises an important point. He is right that it would be entirely undesirable to leave tenants in the position that I have described and that he described earlier. The amendment is a ''blunt instrument''. That is exactly how Shelter described it to me.
Mr Edward Davey (Shadow Secretary of State for the Office of the Deputy Prime Minister, Office of the Deputy Prime Minister Local Government & the Regions; Kingston and Surbiton, Liberal Democrat)
I am more than happy to accept that there may be other ways to do that. I prefaced my remarks in a probing amendment. The hon. and learned Member for Redcar (Vera Baird) told us that there may be other ways of dealing with the problem.
The hon. Gentleman's criticisms of the amendment are wrong. We are not suggesting that all landlords should have their rights taken away under section 21 of the 1988 Act. Landlords who are unlicensed in an area that has been selectively licensed for a short period should have no recourse to section 21. It is a temporary suspension of their rights under that piece of legislation. If they co-operate with the local authority in order to be licensed, that would not be a long period.
Mr John Hayes (South Holland and The Deepings, Conservative)
It might not be a long period, but it could be an extremely painful one. Committee members are trying to find an appropriate balance of the entitlements and responsibilities of both landlords and tenants. I share the hon. Gentleman's concern that tenants might be harassed by an irresponsible landlord as an unintended consequence of this part of the Bill. If he managed, through his eloquence, to rally the necessary support for the amendment to be agreed, it would leave a gaping hole in the rights of landlords to act properly in the interregnum when a licence is being sought but is not yet in place. It might be the case that a local authority was dragging its feet in dealing with the matter.
I remind hon. Members of the Housing Act 1988. Section 21(1) (a) and (b), which the hon. Gentleman
wants to remove, are not unreasonable. In dealing with shorthold tenancies, the Act states:
''(a) that the assured shorthold tenancy has come to an end and no further assured tenancy (whether shorthold or not) is for the time being in existence, other than a statutory periodic tenancy; and
(b) the landlord or, in the case of joint landlords, at least one of them has given to the tenant not less than two months' notice stating that he requires possession of the dwelling-house.''
The landlord should be able to end the tenancy. That is not unreasonable. The withdrawal of that right—even for a temporary period—would put everyone concerned in an extremely difficult position. The hon. Member for Kingston and Surbiton highlighted that issue, and I have made a case for its consideration. Will the Under-Secretary consider the matter carefully, consider ways of filling the gap at later stages of the Bill and amend it in such a way that landlords retain appropriate rights? The amendment would not allow them to so. Tenants need protection: they are in a situation that could place them in jeopardy.
I am confident that the Under-Secretary has heard my comments and those of the hon. Member for Kingston and Surbiton and equally confident that, with due diligence, they might be taken into account as the Bill progresses through this House and the other place.
Ms Vera Baird (Redcar, Labour)
I was very worried about this issue, which I raised on Second Reading to a limited extent. One of my particular concerns is that although having a property occupied by tenants without a licence incurs a fine, it is a one-off; the continuing punishment is inflicted on behalf of the public authorities by the tenant by withholding their rent. That seems a bad principle because it is a recipe for friction. In my view, if we intend to continue to punish a landlord who does not license their house, it would be better if there were continuing fines so that the landlord would pay a fine every day that they did not license their house.
Another difficulty is that clause 83 states that no rent is to be paid during any period when an offence of being unlicensed is committed. At what point is an offence committed? To be sure that the offence has actually been committed, one has to go to court to get the conviction. What happens in the meantime? Let us imagine that a landlord is unlicensed for a while. They have been summonsed to court, which takes a week or two. Does the tenant carry on paying rent, and get their money back when the conviction comes through and it becomes clear that a criminal offence has been committed? That seems completely unsatisfactory.
In truth, I do not have an absolute solution. I doubt that the tenancy becomes unlawful because of the absence of a licence; I hope that it does not, because that would wipe away important protections. I do not think that the danger of an unlawful use of court proceedings by an unlicensed landlord is likely. It is quite obvious that the court forms would have to be amended so that everyone who brought an action for eviction would have to produce their licence. Therefore, that is not a real worry either.
At the moment, there is no duty on anyone to tell the tenant that the landlord does not have a licence. The tenant has no protection from pressure to pay the rent all the same, or from threats of eviction that they might not be stout enough to rebut because they might not know their exact legal position. Clause 83 requires further thought and I invite the Under-Secretary to consider that that may be appropriate. Some of the ideas suggested today might be helpful, but I do not think that the amendment is the way forward.
Mr Andrew Selous (South West Bedfordshire, Conservative)
I rise to support the hon. and learned Member for Redcar. I agree with the points that she has made, and there is perhaps just one further point to add. If the landlord is not receiving rent during that period, he might get his own back by not effecting necessary and important repairs that need to be done during that period. He could claim that he was not receiving the rent that he needed to undertake them.
Ms Yvette Cooper (Parliamentary Under-Secretary, Office of the Deputy Prime Minister; Pontefract and Castleford, Labour)
This debate has raised a series of interesting issues. First, I want to address some of the simpler points. Clause 83 provides for further sanctions for the period in which a property that should be licensed under selective licensing is not so licensed. That is an offence, and during any such period that a property remains unlicensed clause 83(2) provides that no rent is payable by occupiers and no charge can be made in lieu. That reflects what clause 62 provides for HMOs.
The provision does not apply where a landlord has applied for a licence and a decision has not yet been taken. Clause 82(7) sets out the case for occasions when
''the authority have not decided whether to serve a temporary exemption notice, or (as the case may be) grant a licence, in pursuance of the notification or application''.
We can be clear that the rent provisions in clause 83 should not affect those tenants waiting while their landlord applies for a licence.
Secondly, I refer to the worries that were voiced about whether the tenancy is unlawful. Clause 83(4) states that
''nothing in this Part affects the validity of any tenancy or licence under which a person occupies a Part 3 house during a period to which that subsection applies.''
It affects rent, but clause 83(4) was particularly provided in response to the worries of the Select Committee that scrutinised the draft Bill, for fear that the decision not to provide a licence would have an impact on everything affecting the tenant.
Mr John Hayes (South Holland and The Deepings, Conservative)
I am grateful to the Under-Secretary for making it absolutely clear that my argument about the vagaries of a local authority not granting a licence is covered under the Bill, and I acknowledge the point that she made. Is she saying that an HMO can operate lawfully without a licence? If she is saying that other aspects of the tenancy agreement are ineffective in law, she is arguing that, to a degree, an HMO can operate lawfully without a licence. That is the salient point of the debate.
Ms Yvette Cooper (Parliamentary Under-Secretary, Office of the Deputy Prime Minister; Pontefract and Castleford, Labour)
No, I think that the effect of the Bill is that it is not lawful for a landlord to continue operating and charging rent in those circumstances,
because he does not have a licence and he needs a licence to be able to charge rent on the property. The other matter that I need to clarify at this point is that it is not open to a local authority simply to refuse to grant a licence for a property that has a sitting tenant when the landlord simply does nothing. In those circumstances, it must take out an interim management order.
We are due to discuss interim management orders later, but the local authority becomes the manager of the property. The landlord continues to own the property, but the local authority becomes the manager of it. Detailed provisions will be set out in the orders about what happens to the rent. Some of it will need to be held back by the local authority so that it may conduct the necessary repairs and act as manager. If there were surplus rent, it would be passed on to the landlord.
Mr John Hayes (South Holland and The Deepings, Conservative)
I want to be absolutely clear about the issue because it is the salient point of the debate. Is the Under-Secretary saying that, although it is not lawful for a landlord to charge rent in the circumstances she described, other aspects of the relationship between the landlord and the tenant remain lawfully in place even when a licence has not been granted?
Ms Yvette Cooper (Parliamentary Under-Secretary, Office of the Deputy Prime Minister; Pontefract and Castleford, Labour)
What I am saying is that clause 83(4) was drafted to respond to the worries of the Select Committee. It states:
''Except to the extent provided by subsection (2)''—
with regard to rent—
''nothing in this Part affects the validity of any tenancy or licence under which a person occupies a Part 3 house during a period to which that subsection applies.''
Therefore, under clause 83(2) it is unlawful for someone to be charging rent on the property, when that person has been refused a licence. That means, in effect, that if clause 83(4) were not in place, the whole tenancy would become unlawful. As it is in the Bill, the tenancy remains lawful but, under clause 83(2), it is not lawful for the landlord to charge and receive rent if he has had a licence refused.
Let us suppose that the local authority has refused the landlord a licence. What happens next? The landlord must apply for an interim management order and, in those circumstances, the local authority becomes the manager. Just because the landlord is not fit and proper for whatever reason, it does not mean that it is not possible for the tenancy to continue. The tenancy can continue under an interim management order. I shall explain the incentives for the landlord in such circumstances. He does not have an incentive to evict a tenant and get another tenant in, because it would be equally unlawful for him to take rent from another tenant because he does not hold a licence. He might have an incentive to evict the tenant and live in the property himself; in practice, given the types of property and the low-demand areas about which we are talking, it is unlikely that he would want to do so.
The greatest financial incentive for the landlord is probably to allow the local authority to take out an interim management order under which he would continue to receive some income as a result of rent continuing to be paid.
Ms Sally Keeble (Northampton North, Labour)
I shall be grateful if my hon. Friend will reply to the following question—at a slightly later date if need be, because I do not want to delay the Committee. Is there a slight risk that, knowing how landlords will find every scam going, some of the rogue landlords might offload properties for local authorities to manage, given the high management costs of some of these properties?
Ms Yvette Cooper (Parliamentary Under-Secretary, Office of the Deputy Prime Minister; Pontefract and Castleford, Labour)
That is a risk. There is an issue about ensuring that local authorities do not end up holding the baby with a huge series of obligations. We will discuss later the provisions surrounding interim management orders, the way in which they can be turned into final management orders if necessary and the options available to local authorities.
The hon. Member for Kingston and Surbiton raised concerns that tenants will not know their rights: they will not know whether the landlord is licensed, or the implications. However, it is clear that in any circumstances the local authority will know that there is a property at issue because it will have just refused a licence. In the process of refusing a licence it will have to make a judgment about whether the property is occupied by a tenant. If it is, that is when it will have to take out an interim management order.
The local authority will have had to engage with the property and the landlord in some detail. These are not properties that are hidden so that the local authority does not have a clue what is going on because they have not come to its attention in any way. That provides some reassurance that the tenants will not simply be isolated without knowing their rights, and without anyone else knowing where they are and what their experiences are. If the local authority refuses a licence and there is a sitting tenant, the local authority will have to take out an interim management order instead.
The first option that has emerged from the debate is the suggestion by my hon. and learned Friend the Member for Redcar that the landlord should continue to get rent but be subject to continuing fines. It is an interesting suggestion. I am happy to consider it further, but it raises a difficult question. If someone is not a fit and proper person to be a landlord in these circumstances, why should we allow them to continue to get rent on the property? It is difficult to justify why such a landlord, who has failed all the important tests of being a fit and proper person and failed in their duties to deal with antisocial behaviour or whatever else it might be, should continue to receive rent. Therefore the first option, which is to say that they should continue to receive rent, is a difficult one to deal with.
Ms Vera Baird (Redcar, Labour)
I did not make a concrete proposal that that should be permitted; I simply voiced the worry about generating friction and using the tenant as a way of reinforcing the state's displeasure. But the way to deal with that if we want to consider allowing the rent to be paid is to fine the rent off the landlord on a daily basis.
Ms Yvette Cooper (Parliamentary Under-Secretary, Office of the Deputy Prime Minister; Pontefract and Castleford, Labour)
That may be something that we could address. When my hon. and learned Friend suggests that we are creating a tension between the
landlord and the tenant on a daily basis, we should bear it in mind that the interim management order will have come into place. There will not be a long pause before the local authority takes any further action; it will have had to introduce an interim management order.
Ms Vera Baird (Redcar, Labour)
This is supposed to be a helpful intervention; I hope that I am not getting in the Under-Secretary's way. The interim management order duty comes in not only in this position but also when there is no reasonable prospect of the property's being licensed, which is another decision that the local authority has to take. Let us suppose that the landlord is unlicensed for a while and, when he or she is taken to court, says, ''All right then; I will in due course apply for a licence''. Will the local authority be able to put an interim management order in place at that time? What happens to show that he is committing the crime of being unlicensed in the six months it takes for the case to reach the magistrates court? One cannot put an interim management order in place at that stage, because the evidence of the conviction would be necessary to show that the landlord was operating unlicensed. Therefore I do not think it is quite as straightforward as has been suggested.
Ms Yvette Cooper (Parliamentary Under-Secretary, Office of the Deputy Prime Minister; Pontefract and Castleford, Labour)
My hon. and learned Friend raises important points. We can address many of these points in the debates on the next part of the Bill, which concerns the interim management orders and the way in which they would come into force. I will, if I may, fail to answer her points at this stage and we will come back to them later.
Ms Yvette Cooper (Parliamentary Under-Secretary, Office of the Deputy Prime Minister; Pontefract and Castleford, Labour)
A delay—I thank the hon. Gentleman for his helpful suggestion. As part of resolving this debate, we do need to have a detailed discussion on the way in which the interim management orders will work.
Mr Richard Younger-Ross (Shadow Minister, Office of the Deputy Prime Minister Local Government & the Regions; Teignbridge, Liberal Democrat)
The points raised by the hon. and learned Member for Redcar regarding what happens to rent and the non-payment of rent are valid. If there is, from the tenant's perspective, a rent-free period, it creates a perverse incentive for them to stand in the way of a resolution of the antisocial behaviour, or whatever issues are holding up the licence. Would it not be better if, in such cases, the rent were paid to the local authority, rather than having a period in which the tenant did not pay anything?
Ms Yvette Cooper (Parliamentary Under-Secretary, Office of the Deputy Prime Minister; Pontefract and Castleford, Labour)
In practice, that is exactly what should happen as soon as the interim management order is in place. Once that occurs, the tenant should then continue to pay rent to the local authority, which effectively becomes the manager of the property, and the local authority then takes responsibility for deciding whether the rent needs to be used to repair the house in any way, or whether there is surplus rent that can be passed on to the landlord. The length of the period is a matter for debate during consideration of part 4, in which we will have plenty of opportunity to discuss in detail the periods concerned, and how
long it is likely to take to get an interim management order in place.
The first issue is that it is quite difficult to argue that the landlord should be able to continue to receive rent directly from the tenant in circumstances where they are simply not a fit and proper person to hold the licence and to be a landlord. However, the second issue is whether, having failed to meet the test to become a licence-holder, people should then lose a whole series of property rights and not be able to exercise their rights under section 21 of the Housing Act 1988. Requiring that to happen would be going considerably further. It might be, for example, that the landlord was not dealing with antisocial behaviour, and that this was a tenant who should be evicted.
This measure would give that tenant considerable security in the property by saying that the landlord could not exercise his rights under section 21 of the 1988 Act. It would also prevent a landlord from saying ''Okay, I could not hold the licence, so I will live in the property myself'', should he wish to do so, and exercise his rights under section 21 of the 1988 Act to give proper notice and to repossess the property in that way. I think that is difficult to argue that because the landlord is not a fit and proper person to hold a licence, the tenant should be given the security of tenure that would challenge a much wider range of property rights than we have previously discussed.
I recognise that there are difficulties raised by the situation, and that is why the provisions to which I referred in clause 83(4) were put in, responding to the Select Committee's concerns, and also why the provisions surrounding the interim management orders were put in place. We do recognise the concerns, but to go as far as the hon. Member for Kingston and Surbiton has suggested in his amendment would bring in a much wider set of questions concerning the property rights of the landlord, who remains the owner, even though they are an unfit person to rent out the property in this area.
Mr Robert Syms (Poole, Conservative)
I raise a small point concerning the person who may have loaned money to the individual and who may also have rights in this matter. That will no doubt be dealt with at a later stage, but there may be a series of events, including an interim management order, that leads the mortgage company to take on the property because the money is not flowing through to pay the interest or the repayments.
Ms Yvette Cooper (Parliamentary Under-Secretary, Office of the Deputy Prime Minister; Pontefract and Castleford, Labour)
The hon. Gentleman is right. This is perhaps not the place to deal with all of the consequences of the relationship between the mortgagee and mortager. I would conclude by saying to the Committee that the situation is complex. We have tried to provide a series of safeguards, including the interim management orders, to be used where appropriate to support tenants. However, to go as far as the provisions in the amendment would be to raise a wider and more difficult set of questions that are not really appropriate. We have a chance to debate later the interim management orders and how they would work.
Mr John Hayes (South Holland and The Deepings, Conservative)
I hear what the Under-Secretary says about the debate that we shall have later, but would she go as far as to say that she is prepared to consider the matter because of the points raised by the hon. Member for Kingston and Surbiton, the hon. and learned Member for Redcar and myself, which are also supported by other Committee members? I am not asking for any guarantee, but will she look at the matter again because there are important issues that warrant further examination?
Ms Yvette Cooper (Parliamentary Under-Secretary, Office of the Deputy Prime Minister; Pontefract and Castleford, Labour)
As I have said, I am happy to look further at the matter. Interesting questions have been raised as part of this debate, and as part of the previous debate. They will be elucidated further during the next debate. We shall look further at the issue, but it would be inappropriate to go as far as the amendment would, and I shall ask the hon. Member for Kingston and Surbiton to withdraw it.
Officials have also asked me to make a clarification. When we were debating clause 77, I said that I would return to the Committee on that point. Given that we cannot yet be precise about how long it will take us to respond to that, and I cannot guarantee that I will do so in Committee, I shall certainly ensure that I write to Committee members when we have made further progress on clause 77. On that basis, I ask the hon. Member for Kingston and Surbiton to withdraw the amendment.
Mr Edward Davey (Shadow Secretary of State for the Office of the Deputy Prime Minister, Office of the Deputy Prime Minister Local Government & the Regions; Kingston and Surbiton, Liberal Democrat)
I can assure the Under-Secretary that I am not going to press the amendment to a Division. It was designed as a probing amendment, and it has been very helpful in provoking the debate. It was good that the hon. Lady gave assurances to the hon. Member for South Holland and The Deepings that she would go away and consider the matter again. I have begun to understand the issue a little more as the debate has progressed, as other hon. Members have spoken. I have begun to understand the complexities that we are dealing with. Nevertheless, that does not mean that the provisions are quite right yet, although I now understand a little more about how the interim management orders will relate to the licensing regime.
Concern was raised about the time period, and how quickly the interim management orders will come into place. Are we talking about a matter of days and weeks? Are we to allow a landlord to have several months to decide what action he will take during the period that he is not receiving any rent? The practical considerations will be absolutely key to whether or not the problems we have been discussing actually occur. I hope that the Under-Secretary will be able to discuss the interim management orders and give some clarity on their timing.
The Under-Secretary talked about incentives, and I understood the force of her argument, but I wonder whether there will be incentives for the landlord to offload the property to another landlord. I know that there are provisions in the Bill covering associates of landlords which are intended to prevent the continuing shuffling of property between different people, perhaps in the same family, to avoid regulations. However, there may be an incentive to offload property between different landlords, and the Under-Secretary must be clear that that will not be possible.
The other incentive is sale. The Under-Secretary may say that the seller would not receive a high price. Perhaps not, but the incentive will still be there, particularly if the house has appreciated a little. There are some incentives for landlords to act in a way that would be deleterious to tenants' interests. This is a serious issue.
I am glad that we have had this debate and that the Under-Secretary gave us assurances. We will need to return to the matter, probably on Report, because it is important and perhaps the hon. Lady, through written communication with members of the Committee, could give us a little more reassurance that the perverse incentives that we are concerned about will not happen. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 83 ordered to stand part of the Bill.
Clause 84 ordered to stand part of the Bill.