Tenant Fees Bill - Second Reading

Part of the debate – in the House of Lords at 4:18 pm on 10th October 2018.

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Photo of Baroness Grender Baroness Grender Liberal Democrat 4:18 pm, 10th October 2018

My Lords, as the Minister said, today is World Homeless Day. It therefore seems fitting that we are discussing the Bill. The loss of a private tenancy remains the biggest cause of homelessness. One in six households now rents privately; that includes more than 1 million families with children. It is in that context, looking out for people on low incomes who have no choice but to rent, that we should view this Tenant Fees Bill. I thank the Minister for his kind words, the regular meetings and updates, his ability to listen and the great care he shows for this subject.

I was delighted when the Chancellor announced in the Autumn Budget in 2016, while my Private Member’s Bill on this issue was still in progress here, that he would crack down on lettings fees, but I profoundly regret that the delays to this Bill caused by those higher up the Government food chain have resulted in yet more families being put into temporary homes or debt because they could not afford the prohibitive up-front fees. Shelter’s most recent survey of private renters showed that the average costs of moving were £1,400.

Our party is fully in support, but in this place it is our duty to ensure that the legislation is right. We will do that. We must ensure that there are no loopholes to be exploited by unscrupulous lettings agencies that have tenants with no choice but to use them. So if there is any fuss from the business managers on the other side of the House because of delays to get this Bill right, they would do well to remember that they hold responsibility for the delay of three years or more from announcement to implementation—that is, three more years of tenants, as the Government found in their own research, being exploited and charged arbitrary amounts, such as a reference check of anything from £30 to £220, or a tenancy renewal costing anything from £35 to £150. Shelter states that over the past five years alone tenants have paid more than £678 million in unfair fees, so when the landlords suggest that the legislation will cost them £82 million, I would look at it in that context.

When landlords also suggest that this will lead to a rise in rent I ask them to consider the following three points. First, there was no evidence of rent rises when the system was changed in Scotland. Secondly, if someone is on such a prohibitively low income that they are driven into debt by arbitrary up-front costs from lettings agents, they would rather spread that payment over a 12-month period than have to pay it up front. Thirdly, there is evidence that lettings agencies have been one of the drivers of pushing up rentals by prompting landlords to do just that.

My hope, as we scrutinise this Bill, is that we keep uppermost in our minds those very families on low incomes. The school cook, the teaching assistant—real examples that I have described when we have previously discussed this issue—are doing the right thing by looking for lower more affordable rent, but cannot afford to move to a cheaper rent and become homeless because of up-front costs.

One of the other guiding principles should be who the customer of the lettings agents is—who can call the shots and shop around for a better deal. It is of course the landlord, as this Bill sets out, and they are the ones who should pay. There are suggestions that this will jeopardise an industry, but I urge anyone making that argument to take a look at a newcomer into the sector that, in a short period, has become the largest lettings agency in England and WalesOpenRent.co.uk, which supports this Bill. Incidentally, it also charges a flat fee to landlords, so it is entirely possible to grow and thrive in the market without the use of fees from tenants. I spoke to OpenRent today; it has only just conducted a YouGov survey in September, as yet to be published. The general public and tenants are overwhelmingly in support of the Bill and this change at 70% and 81% respectively, but the most compelling part of the survey is that 64% of landlords also support this policy. That begs the question: why are those who represent landlords lobbying against this Bill when most landlords want to do the right thing?

If we accept that the customer of the lettings agency is the landlord, I suggest that we need to examine whether the suggested default fees in the Bill are in danger of being overkill. The changes that the Government made in the other place to tighten the definitions, on the limit on the amount, the planned guidance regarding the type and reasonableness of fees—although we might want to look at whether that needs to be in the legislation rather than in guidance—and the change to introduce a paper trail are welcome, but this part of the Bill remains open to exploitation as a loophole. I question whether these default fees are necessary at all and will want to examine this in Committee.

One of the failures of previous attempts at transparency has been how limited tenants’ knowledge can be of their rights in this part of the law, and the law dealing with unscrupulous lettings agencies. If there is clarity in the law that literally no additional fee goes to a lettings agency, it would be much easier to enforce and explain. We already have two current pieces of legislation that I believe cover the default issue. I thank the Minister for our discussions yesterday and for the possibility, at least, of taking a look at this.

First, to deal with keys, security devices and late rent payment fines, I think that everyone involved in this debate would ask the Minister if there are other examples: so far they seem to have been absent from any of the debates that have taken place. What is the list of issues, and what is the estimate for these defaults? In other words, how often will this part of the Bill actually need to be used? If the answer is that the level of likely use of this default is minimal and can be covered by current legislation, then I suggest that this particular section is a sledgehammer to crack a nut.

In the Housing Act 2004 there is a system for deposit protection, and Schedule 10 sets out the role of the deposit protection scheme. This includes arbitration between landlord and tenant: under this law, if a key needs to be replaced, the lettings agency can charge the landlord. The landlord has access to the deposit and can use that money, unless it is disputed by the tenant, in which case arbitration and ultimately the county court can make a judgment. In the most severe cases of rent arrears or damages, the landlord can recover their property under Section 8 of the Housing Act 1988. Does this legislation cover the areas where the Bill has introduced a default fee?

As for the cap on tenancy deposits, I appreciate that the rental sector is a very wide market, covering everyone from people on very low incomes to those with money to burn. I hope that the policy leans towards those who we all know should not be in the private rental sector but in social rents, a problem that cannot be solved immediately. For that reason I will want to look in Committee at getting the security deposit number of weeks down. We should note that the HCLG Select Committee, which did the pre-legislative scrutiny, recommended that it should be five weeks. The suggested six weeks would mean that renters in England will still have to find an average of more than £1,100—or £1,800 in London. Citizens Advice currently estimates that six weeks will help only 8% of renters. Does the Minister agree with that figure?

On the cap on holding deposits, as I discussed with the Minister yesterday I would welcome the extension of the transparency and use of paper trails introduced on Report to the clauses on defaults to be applied to holding deposits too. I would also like to explore the issue raised by Generation Rent that while tenants are prohibited from putting down holding deposits on multiple properties, landlords and agents are not prohibited from taking holding deposits from multiple tenants for the same property. I will also want to look at a reduction in the number of days. Citizens Advice published a survey yesterday showing that more than half of renters surveyed were shown a tenancy agreement only after they had paid a holding deposit or the equivalent. How can they negotiate terms when they are not allowed to look at the paperwork until they have put some money down, whereupon they are too invested to pull out?

The funding of £500,000 for the first year of the legislation is welcome, but I will ask for further detail in Committee of what plans there are to ensure that tenants know that lettings fees have been banned. Of course, I suggest to the Minister that it would be easier to put that message across if they were banned outright and the default loophole not introduced. Tonight, as I bed down on a cardboard box next to my noble friend Lady Suttie to recognise World Homeless Day at a sleep-out organised by Depaul, a charity that supports young homeless people, I will be greatly encouraged that the Bill has finally arrived. It goes some way to preventing people on low incomes from tipping into homelessness and I really look forward to seeing it on the statute book as soon as we have given it the necessary scrutiny and removed some of the loopholes that impact on people who are in the private sector and on low incomes.