Tenant Fees Bill - Second Reading

Part of the debate – in the House of Lords at 4:07 pm on 10th October 2018.

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Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Opposition Whip (Lords), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Housing) 4:07 pm, 10th October 2018

My Lords, first, I draw the attention of the House to my relevant interest as a vice-president of the Local Government Association. Secondly, I welcome the Bill, which seeks to ban landlords’ and letting agents’ fees. It is something that the Labour Party has called for repeatedly and it delivers on a pledge that the Government made some time ago. It has taken a while to get this far. The private rented sector is a significant part of our housing tenure and an important part of the housing supply available to people. It has grown significantly and it is right that we should put legislation in place to protect people from unfair fees or practices in the private rented sector.

I rented in the private sector when I was in my 20s, having grown up in a council property with my parents, and I have been an owner-occupier for many years since. My involvement with the private rented sector was relatively short, but for millions of people and millions of families it could be the only type of accommodation they ever know. There are many excellent private landlords and letting agents who do a good job. Like lots of legislation, however, the Bill seeks to deal with unfairness, where the balance is unfairly loaded against the private renter, with fees being charged with little or no evidence of what they are for, of whether they are value for money or of any reasonable basis for how those fees were decided, and fees charged by landlords as well as letting agents.

The Bill seeks to ban landlords’ and letting agents’ fees, and most other up-front fees, by prohibiting what landlords and their agents can require a tenant to pay. As the noble Lord, Lord Bourne, has told us, the ban covers shorthold tenancies, tenancies of student accommodation and licences. Looking at the list of what can be charged for, I have an immediate concern that the Government have left the back door open and that, despite good intentions, the Bill runs the risk of not achieving all the Government want to achieve. I propose to go through the Bill and highlight those areas where I have concerns, and which I will be raising in Committee and on Report. The noble Lord, Lord Bourne, is someone I have huge respect for, as I do for the noble Lord, Lord Young of Cookham. In all our dealings, both noble Lords are courteous. I am sure they will listen carefully to the points raised around the House during our deliberations. I hope we will be able to persuade the Government that some areas of the Bill will require amendment. If not, and I am still not convinced by the arguments put forward by the Government, I will divide the House on Report stage a number of times.

Turning to the Bill and the issues that I have concerns about, what can be charged for? As the noble Lord told us, there is obviously rent. The Bill also includes a refundable tenancy deposit, capped at no more than six weeks’ rent. It is disappointing that it has been set at six weeks. This runs the risk of becoming the norm. I would prefer it to be set at four weeks, which is the level at which I believe the Prime Minister first indicated it would be set when announcing the policy some years ago. It also includes a refundable holding deposit, capped at no more than one week’s rent. I fully accept that a holding deposit should be paid, but this is set far too high. It should be capped at, say, three days’ rent or even £50—whichever is higher. At the same time, I would also like the tenant to be provided with a copy of the draft tenancy agreement, so that they can see in writing what they will be asked to sign. They can then raise issues with the landlord and/or the letting agent, while other processes are taking place. It is important for there to be full transparency on the part of the landlord or the letting agent over how they intend to treat a holding deposit, setting out clearly in writing, when the deposit is not returned to the prospective renter, the full reasons for the deposit not being returned. This will enable the renter to be more easily able to challenge the decision if they believe it is unfair.

We then have the ability for certain payments on assignment, novation or variation of a tenancy when requested by the tenant to be capped at £50, or reasonable costs incurred if that is higher. This provision appears open to abuse. How will reasonable costs be determined? What is the protection from the risk that the £50 becomes the minimum figure charged, and that tenants will pay much higher charges? I would appreciate it if the noble Lord could address that in his reply to the debate.

Payments associated with early termination of the tenancy when requested by the tenants, payments in respect of utilities, such as communication services and council tax, and payments in the event of a default of the tenant, such as replacing a lost key or late payment of a fine, are to be limited to the landlord or agent’s reasonably incurred costs, which must be evidenced in writing. This is another provision that I fear will be open to abuse. The Bill fails to protect tenants form unscrupulous practices where, in effect, the fees lost by landlords and agents will find their way back, being recouped through this provision. If the noble Lord, Lord Bourne, disagrees with me on this point, can he explain to me how the Bill in its present form guards against that? To guard against it, you have to go further than we have at present and clearly define matters, maybe in secondary legislation, saying what the Government mean and how it will apply. Secondary legislation will give the Government flexibility to amend regulations as necessary and give greater protection to tenants.

I am pleased to see the Bill dealing with enforcement and that for the first year at least some funding has been provided by the Government—although I am not convinced that it is at the right level. Trading standards, like other parts of local government, are under extreme financial pressure. The risk with inadequately funded extra requirements is that it will not be possible for the authority to deliver what is expected of it. I am not convinced that funding this work through fines levied in the future is the right model to develop a system that serves tenants, landlords and letting agents well. Perhaps the Minister can say a little about the thinking behind this when he replies to the debate.

I welcome the proposal to designate a lead enforcement agency. The Local Government Association’s suggestion that National Trading Standards should provide this function is well made and should be considered carefully by the Government when they make their final decision. Enforcement functions will be delivered by local weights and measures authorities. The local district council may also enforce provisions in the Bill if it so wishes. Can the Minister explain why the Government decided to construct the enforcement regime in this way? Is there a risk of confusion or duplication, particularly in the context of my earlier remarks about local government resources?

Where a ban is breached, tenants are entitled to a refund of illegal fees. The local authority can impose a financial penalty on the landlord or letting agent of up to £5,000 for a first offence with a further breach resulting in a fine of up to £30,000 or prosecution. In Committee, I will probe whether these fees are set at the right level. The tenant can apply to the first-tier tribunal for the recovery of illegal payments but is not entitled to any compensation. Why can the local authority not be empowered to recover the illegal payments on behalf of the tenant, in addition to imposing a fine, before passing the illegal payment back to the tenant? That would avoid the need to go to a tribunal in the first place and leave the landlord with the option of challenging the decision in the tribunal. It would be a real help to tenants.

Perhaps we should go even further with a compensation payment to the tenant who has been subjected to this abuse. It is not unusual in this country to award compensation to victims, in addition to levying a fine on an offender. If you have been ripped off and made to pay an illegal payment, you are a victim and it is not unreasonable to receive some element of compensation. That is certainly better than leaving the tenant who has been charged an illegal fee to go to the First-tier tribunal to recover the money taken from them illegally.

It is great that there is a provision in the Bill requiring fees to be published on third-party websites. My only question is: how prominently will they have to be displayed? I ask this because I am aware that companies over a certain size are required to have links to their modern slavery statements on their websites, but it is fair to say that they are not always the easiest thing to find. I want an assurance from the Government that there will be some sort of provision to ensure that they are put in a prominent place on the site. I support the provisions on client money protection schemes.

In conclusion, I look forward to Committee, where I will probe further, with a series of amendments that seek to engage the Government on the issues I have raised. I welcome the Bill. From my remarks, however, noble Lords will see that it can and should be significantly improved for private sector tenants. They are an increasing group of people who deserve regulations and legislation that afford them reasonable protection.