Lord Carrington:

Moved by Lord Carrington

122: Clause 145, page 169, line 5, at end insert—“(9) Different days may be appointed for different purposes in relation to Chapter 1 of Part 1 so that—(a) one day (not sooner than three months after this Act is passed) is appointed for the purposes of new tenancies, and(b) one day (not sooner than six months after this Act is passed) is appointed for the purposes of existing tenancies.”Member's explanatory statementThis Amendment seeks to ensure that at least three months’ notice is given prior to new tenancies becoming section 4A assured tenancies and that at least a further three months’ notice is given before existing tenancies become section 4A assured tenancies.

My Lords, I speak in support of Amendment 122 and welcome the support of the noble Lord, Lord Hacking. The amendment aims to introduce a transition period of three months for new assured tenancies and six months for existing tenancies before the Bill’s provisions take effect.

Much of the debate surrounding this legislation focuses quite rightly on the need to tackle rogue or criminal landlords, while ensuring that the new responsibilities applied to PRS landlords are fair, equitable and sustainable. However, there is another important consideration which has received considerably less attention but which is equally critical if we are to maintain a vibrant PRS.

The implementation of the Bill’s measures must avoid any disruption in the flow of mortgage finance that underpins most of our country’s privately rented homes. Careful consideration must be given to the implementation of the legislation to ensure a smooth transition to the new tenancy system. A great many landlords have no knowledge of the Bill and what it entails. Landlords, lenders and others in the PRS will need time and support to adjust to the significant changes that the new tenancy system requires.

I would like to explain why this, or a very similar amendment, was not tabled in Committee. Lenders rightly wanted further engagement with government to discuss how the legislation can be implemented successfully, to share insights on the impact on the lenders and to consider how the sector can be supported to ensure the best outcome for tenants. In order to achieve a smooth transition to the tenancy system, following Second Reading in February the mortgage lenders, led by UK Finance, wrote to the Minister at MHCLG in early March requesting a meeting. The Minister’s officials at MHCLG responded in mid-April, offering that meeting. Ongoing discussions then started regarding the concerns of the lenders. I thought it best to wait till the outcome of those discussions was known before muddying the waters with an amendment. Unfortunately, these discussions, which also involved HM Treasury, have not so far satisfied the mortgage lenders. In fact, no follow-up has been received from the Treasury. Current meetings continue to take place with the Bank of England.

As noble Lords have been made aware, the PRS currently houses one in five households, including workers, students and those unable to buy homes or access social housing. Some 60% of landlords rely on buy-to-let mortgages. To maintain the supply of PRS homes needed to meet sustained demand, a continuing flow of buy-to-let mortgage finance is therefore essential. As such, the Government should welcome this amendment to introduce a transition period for the introduction of reforms before the Bill’s provisions take effect, so that the buy-to-let mortgage lenders have sufficient time to implement the necessary system changes.

I believe the Government have committed to implementing the new tenancy system in one stage, avoiding unnecessary cliff edges and working with all parts of the sector to ensure a smooth transition. To achieve this, sufficient time will be needed for the sector to prepare. The changes will include drafting new tenancy agreements, developing training materials to support property professionals, helping agents understand the new procedures, and enabling insurance and mortgage providers to adjust their policies, among other issues.

It would make enormous sense to provide a transition period to support the industry to implement the required changes. These lenders will need at least three to six months, depending on whether the tenancies underpinned by their mortgages are new or existing, to implement the changes required by the legislation. To give some examples, lenders will need to review new mortgage application terms and conditions, mortgage offers and lending policies. Additionally, lenders with forward flow or warehouse agreements for funding may need approval from their funders and forward flow partners.

However, and most importantly, buy-to-let mortgage lenders cannot begin implementing many of these changes until they have seen the finalised details of the Act. Addressing these issues is vital to ensure the continued supply of PRS homes for people across the country and to avoid the disruption of mortgage finance that could lead to a contraction in that supply.

We have had no information on the timescale for the implementation of the Bill, except the text of Clause 145, which I, as a lay man, find incomprehensible. I urge the Minister to tell us the timescale for implementation or to consider and accept the amendment as a means of a smooth transition. I beg to move.

My Lords, I am very pleased to support the noble Lord, Lord Carrington. There is nothing political about the stand that he is, and I am now, taking; it is a purely practical Amendment. Indeed, in Committee, I tabled a great number of amendments to do with the start date of the provisions in the Bill. They were also not in any way political; they were purely administrative or practical.

As your Lordships know, in the Bill there are absolutely fundamental changes to the law of landlord and tenant. The short-term tenancy has gone, and it is being replaced by a periodic tenancy. There are a number of other features which we have gone through in detail, both in Committee and on Report, which are new and represent some massive change. The consequence of that is that everybody involved in the lettings of property —estate agents and the landlords—needs time to draw up entirely new tenancy agreements.

As it happens, I personally write all my tenancy agreements with each of my tenants, and I have to get down to this task of completely rewriting these tenancy agreements. Of course, I have the advantage of having participated in the Bill at Second Reading, in Committee and now on Report. I do not need the full three months for either new or existing tenancies, but I am sympathetic to others who are going to need more time. I ask my noble friend the Minister—not for any political reasons, but for purely practical reasons—would she consider giving more time, because there is a lot of work to be done? I think I can do it within the requisite time, but others may find it very difficult.

To the noble Lords, Lord Carrington and Lord Hacking, I have to say that we do not want to do anything that would delay the Bill. We want its key statutes to be on the books as soon as possible. Being blunt, the key players who are talking about to buy-to-let mortgages have known that this is coming for a long time. They really should have been on it for months. If they have not, I am not quite sure what planet they have been on.

Would the noble Baroness kindly help me when I have to write all these tenancy agreements? It takes time.

I am hoping that some of the larger players will have ones that are off the shelf for the noble Lord to use. I am sure the Minister will be able to help out with that. Basically, we do not want to delay things any more. We genuinely believe that the trailing of the key planks of the Bill has been so public and so out there. But I say to the Minister that some definite timescales would be helpful.

My Lords, we think that the Amendment from the noble Lord, Lord Carrington, is sensible and measured. The amendment provides for a minimum of three months’ notice before new tenancies are treated as Section 4A assured tenancies and a further three months before existing tenancies are reclassified in the same way. This introduces a clear and reasonable transitional period, giving landlords and tenants time to prepare for the significant legal and practical implications of these changes.

Crucially, it gives banks time too. As the noble Lord, Lord Carrington, noted, Amendment 122 is supported by UK Finance, including lenders such as Nationwide and Paragon. Banks need time to adjust. Any change to how a landlord can evict a tenant makes lenders more cautious about the security of their investments. These lenders will want to have seen it in writing before they start to make too many changes.

Additionally, lenders will need to reassess their understanding of rental income flows. Lenders will have to adjust their risk models, and potentially their loan terms, to accommodate the risks under the new regime, not only in relation to individual properties but with regard to the broader market stability. It is vital to understand how the regime affects overall demand in the rental market.

I take this opportunity to raise the specifics of buy-to-let mortgages. Flexibility in increasing rents in these cases is especially important and an area where sufficient time for adjustment will be needed. Lenders must evaluate the continued attractiveness of buy-to-let properties as collateral for loans.

Operational readiness matters too. Quite simply, new systems and processes will need to be adapted to the framework. Earlier today, we discussed systems such as the database and the pensions dashboard. Of course, many private companies are often more agile when responding to challenge and change, but even they need time.

This is a complex Bill, and I have said several times that its implementation will require careful communication and a phased approach. I see this amendment as a practical way of helping the Government ensure that no stakeholder is caught off guard by the shift to the assured tenancy regime.

I would welcome clarity from the Minister on the Government’s plans for commencement—so, I am sure, would landlords and tenants—and all stakeholders will need time.

My Lords, I thank the noble Lord, Lord Carrington, for his Amendment and for his engagement generally on the Bill. Subsequent to our meeting earlier this week, I had a detailed response prepared for the noble Lord on Clause 145. Unfortunately, it arrived in my inbox just as I was coming into the Chamber this afternoon. It probably has not reached him yet, but that is on its way to him.

On Amendment 122, the Government are committed to introducing the new tenancy system for the private rented sector in one stage to bring to an end Section 21 no-fault evictions as soon as possible. These evictions cause utter misery for the tenants on the other end of them and a huge amount of cost to local government in picking up the pieces when people get evicted at very short notice. A single implementation date for both new and existing tenancies will enable all tenants to benefit from the reforms as soon as possible and prevent a confusing two-tier system during transition.

We are continuing to work very closely with stakeholders. The noble Lord, Lord Carrington, referred to meetings between my Honourable Friend the Minister for Housing and financial institutions. He has also met with many landlords’ associations and other stakeholders to ensure that the sector is prepared for the reforms in the Bill. I want to be very clear that we are committed to providing sufficient notice to ensure that all parts of the private rented sector have time to prepare. Implementation will not be immediate, as we have secondary legislation to pass. We are making good progress on drafting that and the necessary guidance that goes alongside it. All this will help us to implement in a timely manner.

In addition, the Bill makes specific provision to ensure a smooth transition to the new system and avoid unnecessary cliff edges. For example, the Bill will ensure that notices served by landlords before the commencement date remain valid after that date. Based on our ongoing work to ensure a smooth transition to the new system, we consider that there will be no benefit to requiring arbitrary minimum time periods after Royal Assent before the tenancy reform measures in the Bill can come into force.

With these reassurances that we are committed to a smooth and responsible approach to implementing the Bill, I respectfully ask the noble Lord, Lord Carrington, to withdraw his amendment.

My Lords, I thank the Minister very much for her engagement with me, although the letter has not arrived yet. I am in a position of enormous power now, in the sense that this is the very last Amendment and I am keeping noble Lords from their drinks and everything else. I am very pleased that the Minister has now reassured me that the cliff edge will not happen just like that as far as financial institutions are concerned, and that there will be time for preparation.

I also thank the noble Lord, Lord Hacking, for his support and his emphasis on the fact that this was not a political amendment but a practical one. I wish him great success in the work he does with his tenants. Happily, I have someone to help me.

Having thanked everybody for their kind engagement and sometime support, I have pleasure in withdrawing the amendment.

My Lords, before the noble Lord sits down—

Noble Lords:

Oh!

I am entitled to intervene here. I thank the noble Lord, Lord Carrington, for his words and the Minister for reassuring me that more time will be given, and more time for me to rewrite these tenancy agreements.

Amendment 122 withdrawn.

Schedule 6: Transition Provision