Orders of the Day — Private Rented Housing

– in the House of Commons at 10:33 pm on 19th November 1990.

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Motion made, and Question proposed, That this House do now adjourn. —[Mr. Nicholas Baker.]

Photo of Mr Ian Lloyd Mr Ian Lloyd , Havant 10:34 pm, 19th November 1990

From time to time most of us receive representations from constituents which, though they describe a grievous personal situation, raise matters of general principle and application which demand urgent attention from the legislature or the Government

Although the debate has been termed the "private rented sector", it should be described as the case of Miss Hayward and another. Miss Hayward, who is one of my constituents, has no objection to my disclosing all the details of this appalling case, all of which have been sent to my hon. Friend the Under-Secretary of State for the Environment. That is because I hope that the Government will conclude, when they have considered the matter, as I have done at some length, that a society in which events such as these can occur is one which should set about redressing a general imbalance in the law, and not because I expect him to be able to do much for Miss Hayward. That redress is what my constituent sought when she came to see me. No personal redress was possible, and I believe that she was fully justified in seeking it.

I do not propose to name the other party. It is not necessary to do so, and I shall refer to her as Miss X. If the owner of an occupied dwelling is to be described by that medieval term "landlord", we must accept now that there are about 14 to 15 million landlords in the United Kingdom, the majority of whom own one house which from time to time they wish to let in whole or in part, entering into a freely negotiated contract with a tenant who finds it convenient to rent that accommodation, generally for a short period of a few years. I am advised that the majority of such tenants are under 24 years of age. In 1985, one in five households in that category was in rented furnished accommodation.

My constituent, Miss Hayward, purchased a small semi-detached house in 1988, and within months she and her fiancé were posted to Dubai in the Gulf. Meanwhile, she had arranged a mortgage, which cost her about £320 a month. It seemed sensible for her to rent the property for a fixed period to two nurses for £360 a month. It was essentially fully furnished.

Shortly after that arrangement had been made, one of the two tenants decided to leave. The other became pregnant, left her job and went on social security, leaving the rest of my constituents to pay her rent. On hearing this, Miss Hayward flew back from Dubai, took legal advice and negotiated a new contract with her tenant for six months. At the end of this period Miss X refused to leave, ceased to pay the agreed rent and put what is described as a fair rent assessment on the property. The effect of this was that my constituent was paying her tenant effectively £120 a month to live in her property. My constituent also had to find the arrears of her mortgage, which was a substantial sum, thus reducing her standard of living in Dubai. She had also to pay the rates and the insurance because no one else would pay them.

At this point my constituent took further and different legal advice. She negotiated a new six-months contract with her tenant, which included two-months' notice to quit as she was about to return from Dubai and naturally wished to reoccupy the house. But the tenant had no intention of moving. She, too, was taking legal advice, but at the taxpayer's expense. She was told to stay put. My constituent was advised that the second legal contract was worthless. She took yet further legal advice and started court proceedings. On 11 July of this year the court granted my constituent a possession order and costs. Neither Miss X nor her solicitor put in an appearance.

Worse was to follow. Miss X's solicitors had the effrontery to advise my constituent's solicitors that they were not aware of the court hearing and appealed to the court, which set another date for the tenant's case to be presented. When that date arrived, no case was presented and my constituent was informed that the tenant would voluntarily leave—voluntarily is the word that I emphasise —when a £500 deposit had been surrendered by my constituent.

After negotiations between the two firms of solicitors, that bribe—for that is the right term to describe it—was reduced to £120, and thus at that stage my constituent, to regain possession of her home, had paid out several thousand pounds in mortgage payments, rates, insurance and, of course, legal fees. So, too, had the rest of my constituents who were subsidising the other party through legal aid.

The payment to regain possession was conditional on the surrender of the keys of the property, but as the solicitor concerned handed over that sum to the tenant without obtaining the keys, the saga ended with my constituent and her fiancé having to break into their home to regain possession. I have since been shown photographs of the scene of utter devastation that awaited them. I would place an estimate of at least a couple of thousand pounds on the cost of restoring their property to some sense of normality.

Even then, the saga was not finished. Apparently the tenant had taken most of the furniture, most of the carpets and much personal property. She had left large, unpaid bills from the gas and electricity boards, British Telecom and others. When that was reported to the local police, I regret that they apparently did nothing, although the tenant's whereabouts must have been known. The whole house will have to be redecorated and refurnished.

This appalling saga raises a number of serious questions. First, is it in the least surprising that the private rented sector, which my hon. Friend the Minister recently said comprised some 600,000 empty properties, has declined, and is continuing to decline, when the law, despite all that my right hon. and hon. Friends have done, not merely permits but appears to subsidise such a state of affairs?

Secondly, I have ascertained from the latest Government statistics what the chances are of a private householder recovering his or her property from a tenant via the courts. In the year 1986–87, the most recent for which I have figures, resident private landlords took to court 7,986 cases for repossession. Their fate is both interesting and relevant. Some 2·2 per cent. were refused; 5·3 per cent. were told to wait two weeks; 66 per cent. were told to wait up to a month; 5 per cent. were told to wait up to eight weeks; and 8 per cent. were told to wait more than eight weeks. The statistics do not reveal how many were awarded costs, but I suspect that they could be numbered on the fingers of one hand. The figures for what are described as absentee landlords—my constituent was probably described as such, although I prefer the term absentee householder—are broadly the same. While that position persists, defended by the current law, there is not a snowball's change in hell of the privated rented sector recovering as the Government would wish it to recover and make its much-needed contribution to the housing market.

The third conclusion is that as there were some 165,000 such cases in 1987—up on the previous year—the country is suffering the grotesque waste of about £165 million per annum in futile and unnecessary court proceedings simply because the system—aided and abetted by local authorities' definition of homelessness—encourages tenants to break their contracts and stay put. That £165 million would buy a great deal of property and a great deal of accommodation.

My fourth conclusion is that the application of a so-called fair rent in such circumstances is wholly inappropriate and devastatingly unfair. There were some 474,000 registrations in 1987, and the trend is rising. That, too, will not encourage the revival of the private rented sector.

What is to be done? There is not the time to deploy a detailed analysis of the possibilities. My hon. Friend, who has seen the papers, may well have some excellent ideas. I am absolutely certain that the present state of the law and the manner of its enforcement are seriously inhibiting the contribution that can and should be made by one of the most flexible and effective segments of the housing market. In effect, the law is arbitrarily forcing the private householder to undertake the responsibilities of the social welfare apparatus of the state, often in circumstances where the income of the householder is less than the income of the tenant. It is also unfair to the many thousands of responsible and fair-minded tenants who would observe their contracts but who at present cannot find rented accommodation because the house owner, for the best of reasons, is not prepared to risk the virtual loss of his property or the vast expense of recovering it.

It is high time that the balance was redressed and a proper sense of equity restored to the housing market. One thing can be done straight away. I hope that my hon. Friend's Department will issue a directive to all local authorities as soon as possible saying that the Government will not tolerate the present policy of advising tenants in private accommodation to break their contracts in order to have themselves legally evicted and declared homeless. That would be a good start. We should then move on to the vexed question of rent registration, and devise a policy that will ensure that a case such as that which I have described this evening cannot happen again.

Photo of Robert Key Robert Key , Salisbury 10:45 pm, 19th November 1990

I noted that in the debate on the Loyal Address my hon. Friend the Member for Havant (Sir I. Lloyd) said that it would be the last, or perhaps the second last, such debate in which he would participate. This is my second Adjournment debate at the Dispatch Box, and the first in which I have to reply to my hon. Friend the Member for Havant. I hope that it will not be his last debate, because he raised an important topic, and expressed his concerns very clearly on behalf of his constituents.

I was sorry to hear of the problems that my hon. Friend's constituents have experienced with repossessing their property. He will appreciate that it would be inappropriate for me to say how the law should have applied to their particular case. Nevertheless, I can offer general comments on the law and about our policy on private landlords and tenants.

Resident landlords who share with their tenants accommodation that is not self-contained no longer need a court to obtain possession, which is some progress.

From the details of Miss X's tenancy, it appears that she was a regulated tenant under the Rent Act 1977. Regulated tenants cannot be made to leave their home unless the landlord first obtains an order for possession on one of the grounds laid down in schedule 15 of that Act.

The grounds for possession, known as cases, include where the tenant is in arrears with rent or has damaged property or furniture. Provision was made in the Act for an absent landlord who lets his home with the intention of returning to live there again to claim possession under case 11 of schedule 15. Before the tenancy began, the landlord had to give a written notice saying that he might in future apply for possession under case 11. With the Housing Act 1980, we relaxed the repossession rules for absent landlords, by allowing them to let under protected shorthold tenancies. That guaranteed repossession of the property so long as the tenant was given three months' notice in writing.

Regulated tenants have the right to a fair rent registered by the rent officer. In assessing a fair rent, rent officers must follow the rules laid down in the 1977 Act. If either party disagrees with the rent officer's assessment, it can apply to the rent assessment committee, which, like the rent officer, is, by law, independent of Government. The committee will consider each case afresh and, applying the same rules, will reach its own assessment of a fair rent. That could be higher, lower or the same as the rent officer's assessment.

We are aware that levels of fair rent have been generally inadequate to provide many landlords with a reasonable return on their investment, or in some cases even to cover the cost of maintenance. There is no doubt that that has been a key factor in the decline in both the quality and supply of rented accommodation in recent decades.

The measures that we brought forward in the Housing Act 1988 were designed to stem the process of decline that we have seen throughout the century, and to bring private renting back into the mainstream of British housing. The 1988 Act created a statutory regime that could be seen as a sensible investment proposition rather than, as it appeared for so long under earlier legislation, an act of commercial lunacy.

The new regime rests on three fundamental propositions. First and foremost, the landlord must be free to charge a genuine market rent. Secondly, the landlord who cannot commit himself to letting long-term must be sure of an exit route at the point that he needs it. Thirdly, to the extent that the lettings market must operate within a statutory framework, it must be kept as simple as possible and must maintain an equitable balance between the interests of landlord and tenant.

Lettings by non-resident private landlords, granted on or after 15 January 1989, take the form of either assured or assured shorthold tenancies. Both types of letting take place on the basis of open market rents.

Assured tenants have indefinite security of tenure with the landlord being able to regain possession only under the grounds laid down in schedule 2 of the 1988 Act. Again, there is provision under ground 1 in schedule 2 for the absent landlord to claim repossession by serving notice in writing that it is his home, and that he intends to live there again.

The assured shorthold tenancy is designed to give the landlord far greater flexibility in letting his property. As a basic rule it must be granted for a fixed term of at least six months, and before the tenancy starts the landlord must have served a prescribed notice on the tenant, stating that it will be an assured shorthold. When the shorthold fixed term comes to an end, the landlord will be able either to offer the tenant a further fixed term, or let him remain in occupation on a longer-term basis under a statutory periodic tenancy. In the latter case, the landlord will have a continuing right to repossession at any time, subject to giving the tenant two months' notice.

When we introduced the 1988 Act, we decided that existing regulated tenants should retain their rights in respect of rents and security. I realise that that will be of little comfort to my hon. Friend's constituents. Many people, particularly the elderly, have lived in their accommodation a long time, and we considered that it would be wrong to remove the protection established for them under previous Acts. As I said, landlords of regulated tenants are not without legal means of repossessing their property. I recognise that my hon. Friend's constituents have attempted to pursue these avenues since their return from the Gulf. There is, of course, a procedure for dealing with complaints about the quality of legal advice through the Solicitors Complaints Bureau.

Although the 1988 Act made it easier and quicker, in a number of ways, for a landlord to obtain possession, it did not remove the general requirement on a landlord to seek possession through the courts. A requirement that the rights, duties and actions of both parties are examined in law is, we believe, a necessary precaution—given that people's homes are at stake—against the possibility of harassment and illegal eviction by unscrupulous landlords. Nevertheless, it is clear that court procedures should, wherever possible, offer a speedy and sure recompense for landlords taking action against unsatisfactory tenants. The Lord Chancellor's Department is introducing from next April a simpler and quicker procedure for claiming rent arrears, which will no longer require full legal representation for either landlord or tenant. That should help landlords faced with non-payment of rent, who at present often have to resort to full possession proceedings.

I recognise that going to court for other matters, such as repossession, can be a lengthy and expensive business. I can assure my hon. Friend that, in consultation with the Lord Chancellor's Department, we shall continue to give the fullest consideration to any other improvements in legal procedures which could be made for the benefit of a healthy private rented sector. I shall draw the attention of my noble Friend the Lord Chancellor to the difficulties experienced by my hon. Friend's constituents in taking the necessary legal action against their tenant.

It must be said that, as with all commercial debtors, it is not always possible to legislate against the very worst tenants. For new Housing Act tenancies it is now right that market rents can reflect the costs of wear and tear, and indeed the costs of insurance against the possibility of damage to the property.

As I said, the 1988 Act has also greatly improved landlords' rights to repossess their property, although balancing the interests of landlord and tenant has never been simple.

Last month my hon. Friend the Minister for Housing and Planning launched a new booklet designed to draw the attention of property owners to the 1988 Act. It outlines the advantages of the new measures on rents and security of tenure, and advises on some legal precautions that landlords might need to take, such as serving the correct notices for assured shorthold tenancies. In this, as in any business, it is best to adopt a professional approach, and the landlord with only one property may find it advisable to use a reputable managing agent with experience of housing legislation, who will also be able to check on the suitability of prospective tenants, and may well advise obtaining a security deposit to be held against the possibility of loss or damage.

I realise that this problem affects a large number of people. As my hon. Friend pointed out, there were 165,000 cases in 1987 alone. It is clearly a growing problem if we wish to see the revival of the private rented sector, which we most certainly do. One area that we in the Department of the Environment are pursuing is precisely why we think that this country has all the answers to the problems of a subsidised housing sector. That attitude is not shared by people in other countries of the European Community, or beyond. I have had to ask myself why, right at the beginning of this century, this country decided that the answer lay in municipalisation. Since then, there has been a steady decline in the private rented sector.

If we can find the right answers to those problems, we can begin to find the answers to bring about the revival of the private rented sector, which is so very important. We tend to forget that only in the past 25 years or so has it become uncommon for many young people to start their adult lives in private rented accommodation. I cannot speak for my hon. Friend the Member for Havant, but I began my married life in private rented accommodation, when that was regarded as perfectly normal. I expect that many people of my generation would agree with that.

What has gone wrong? The facts that my hon. Friend outlined give us some of the answers. One problem lies in the approach taken by people wishing to rent out their own property. I have noticed that there is a dearth of information, expertise and professional advice for people in the situation of my hon. Friend's constituents. People often take it upon themselves to find tenants for their properties. They cast their eyes around and light on the sort of person whom my hon. Friend described. That may, of course, lead to tears, as in this case.

So, what is to be done? Not everybody will immediately consult a professional for advice. People often fear the financial consequences of doing so. Perhaps they will not seek the advice of a professional managing agent. We have been involved in discussions with the National Federation of Housing Associations and I am glad to be able to tell my hon. Friend that some housing associations are now likely to be prepared to provide a managing service. That is a great step forward. Although it will be of little comfort to my hon. Friend's constituents, I hope that it will be widely welcomed when we are able to announce that such a scheme is up and running across the country. I am grateful to the housing associations for the positive stance that they have taken.

As I said earlier, I have every sympathy with the case that my hon. Friend raised, but, on the face of it, it does not seem to have arisen as a result of the new legislation, which has been a great improvement. It is hard to see how, under the new legislation, the situation that he described would have arisen. The case appears to raise more general questions about the process of the law and we shall want to consider that further. As I said, I shall make representations to my right hon. Friend the Lord Chancellor.

I am sure that the measures for deregulating the private rented sector in the 1988 Act have gone a long way to redressing the unnatural balance that favoured difficult tenants in the Rent Acts, and thereby to encouraging people in the future to let out more property, to the mutual advantage of both landlord and tenant.

Question put and agreed to.

Adjourned accordingly at one minute to Eleven o'clock.