Tenant Fees Bill - Second Reading

Part of the debate – in the House of Lords at 4:29 pm on 10th October 2018.

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Photo of Baroness Hayter of Kentish Town Baroness Hayter of Kentish Town Shadow Spokesperson (Cabinet Office), Shadow Spokesperson (Business, Energy and Industrial Strategy), Shadow Spokesperson (Exiting the European Union), Shadow Deputy Leader of the House of Lords 4:29 pm, 10th October 2018

My Lords, the Government have been on a very welcome journey with regard to the private rented sector. First, and following pressure in this House, they required all letting agents to belong to an alternative dispute or ombudsman scheme. Then, again following pressure in your Lordships’ House, they moved on client money protection. That was followed, as the Minister reported, by compulsory five-yearly electrical checks in rented accommodation, something that we started pushing for in the Consumer Rights Bill. Now, albeit after a delay—but, again, following pressure in this House—they have banned dual fee charging by letting agents; in other words, tenants cannot be charged by an agent which already represents the landlord. Furthermore, I have only just heard—maybe I missed it before—the very welcome announcement of what we are going to put on the broad shoulders of the noble Lord, Lord Best: the requirement on letting agents for training and codes. We now need only the right to a habitable property and we might actually have a really good private rented sector.

The Bill is good in itself. It will save tenants hundreds of pounds just when they are trying to put together the money for a deposit and to move, which alone can cost up to £1,000. Although the average letting agent charge to tenants—in addition to what they have charged the landlord—is £300, one in seven pays up to £500. It is good that the Bill puts an end to that but it is also important for the housing market because any such money extracted unfairly as fees is lost to both the tenant and the landlord, sucking some £240 million a year out of the housing sector. That money could be better used by landlords to improve homes rather than spent by letting agents, which generate no new properties.

I am sad to see ARLA, which represents letting agents, still arguing against the Bill, claiming that it will harm the private rented sector. In fact, it will do the opposite, partly, as I have said, by keeping funds within housing, rather than with agents, but also, vitally, by increasing tenant trust in the private rented sector. David Cox, the chief executive of ARLA, really ought to know that distrust in agents is not just apocryphal. It is based on hard evidence. He should also recognise, as I have long argued to him and his members, that the inherent conflict of interest within tenant fees is unethical and unprofessional. No service provider should have both parties to a transaction as clients. It cannot owe a duty of care to both. Charging both for the same service—letting a property—gives letting agents a dual responsibility which they simply cannot meet. Arguing on behalf of the landlord that rent should go up, or be paid on a certain day, can hardly be done by the same person arguing on behalf of the tenant that until a bathroom is fixed the rent is not due. Who is the client at that point? This is particularly important following the Consumer Rights Act. We have to be clear: who is the consumer in the transaction and therefore who gets the rights contained in that Act?

When we argued for a ban on the fees charged to tenants in your Lordships’ House, Ministers claimed that making agents’ fees transparent would be sufficient to drive down prices, as consumers could shop around. We sought at that point to explain that in fact tenants cannot shop around; only landlords can. If a tenant wants a particular property, they have to deal with the agent selected by the landlord and have no negotiating power at all over the fees charged, nor the quality of service provided. They cannot swap agents. So I greatly welcome the Bill and wish it a speedy path on to the statute book for the sake of millions of tenants, about whom we have just heard from the noble Baroness, Lady Grender.

Changes will obviously be needed as the Bill goes through in Committee. But following the very constructive way that Ministers have dealt with us over those earlier issues, we have every confidence that the Government will accept our amendments in Committee, particularly on default fees which, without protection, could be exploited, as the noble Baroness, Lady Grender, has again just noted. There is also the issue of the size of the cap on deposits, as mentioned by the noble Baroness and my noble friend Lord Kennedy.

We will also seek reassurance that proper enforcement will take place, with more meaningful penalties for those who flout the law. As my noble friend Lord Kennedy said, trading standards departments are highly stretched at the moment, with far too few assets, so we will look to the Government to ensure that the penalties due back into the enforcement system will be sufficient to enable action to be taken wherever tenants are being ripped off. Sufficient levels of fines are anyway essential to act as a deterrent to bad behaviour.

I will make one further point about how the Bill demonstrates the value of regulation. I am afraid that I had to watch the coalition Government abolish the National Consumer Council, which took away a source of thoughtful advice on when regulation is necessary to protect consumers. I have also had to witness, whether in relation to Brexit or more generally, the endless mantra from this Government and some of their supporters that red tape or regulation is bad for business. Not only is that not true; it ignores the interest and well-being of consumers who, without appropriate protection, are vulnerable to shoddy goods, rip-off merchants and poor service. I particularly welcome the Bill’s acknowledgement that this large group of consumers, who we have heard about, need legal protection to get a fair deal.

I wish the Minister well with the Bill and all strength to his arm in persuading others back at the ranch—or up the food chain, which I think was the term just used—that he be given the freedom to respond positively to the amendments we will table. We will be happy to give him all the credit for the movement that he makes.