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I beg to move, That the clause be read a Second time.
I shall not detain the Committee for long. New clause 12 would simply improve existing tenancy deposit schemes so that legislation works better for tenants and landlords. It would clarify the circumstances in which landlords must protect deposits, and give judges greater discretion over the size of the penalty for landlords’ non-compliance to ensure that it is proportionate.
As the Committee probably knows, Government-backed tenancy deposit protection schemes were introduced in April 2007. The legislation was designed to set out clear responsibilities and time scales for landlords to protect tenants’ deposits, and to provide a quick, efficient way of resolving deposit disputes. Such schemes benefit more than 2 million households in the private rented sector. Those 2 million households’ deposits have been protected, and that includes my own, so I probably need to declare an interest.
Ambiguities in the existing legislation have meant that it is failing some private tenants because they do not have their hard-earned deposits protected. It is also failing landlords, who struggle to find accurate information, and the process is wasting the time of the courts and the advice services. In the past year, for example, citizens advice bureaux dealt with almost 15,000 inquiries relating to tenancy deposit protection. Almost 4,000 people went to the housing charity Shelter for advice relating to their rent deposit, three in four of whom did not have their deposits protected. Despite the best efforts of the previous Government to introduce much-needed protection in this area, the system is not quite working as the House intended. Each of the individual schemes that provide tenancy deposit protection, as well as national landlord and property organisations, has given strong support to improving the schemes and, indeed, to new clause 12. The broad support for such change is a clear sign of the need for reform to ensure that legislation works better.
The first provisions of new clause 12 are designed to clarify the circumstances in which landlords must protect deposits. It removes the “initial requirements” wording in the original legislation and instead requires landlords to protect their tenants’ deposits by complying with the requirements of one of the authorised schemes. The original wording implied compliance with the initial requirements of the individual schemes, but the courts have found that particularly difficult to enforce and landlords have been unclear about which requirements they were supposed to follow. The amended wording would make the requirements much clearer, so landlords would have a much stronger idea of their responsibilities and the courts would find it easier to make judgments.
The new clause clarifies specific grey areas in existing legislation. First, ex-tenants, as well as current tenants, would have access to recourse if their landlord failed to protect their deposit. Secondly, if a tenancy that began before the introduction of tenancy deposit protection schemes was subsequently renewed, the landlord would be required to protect the deposit. Finally, if a property changed hands, the new landlord would also be under an obligation to protect the deposit.
The second aspect of new clause 12 would give judges greater discretion over the penalty for a landlord’s non-compliance. The new wording would remove the all-or-nothing sanction of three times the deposit, and it would enable judges to make a discretionary judgment as to whether the landlord should pay a penalty of between one and three times the amount. As hon. Members are aware, judges have been reluctant to impose the full penalty of three times the deposit, particularly when the landlord had protected the deposit but outside the strict 14-day limit. A Court of Appeal judgment of 11 November 2010 concluded that the sanction of three times the deposit does not apply if the landlord belatedly protects the deposit at any time up to and including
“the eve of the trial of a claim for the penalty damages”.
The existing provision is not only not proportionate in law, but not working in practice.
By giving judges discretion on the level of sanction that they can apply, new clause 12 would ensure that they would be better able to take into account the range of factors that contributed to a landlord’s non-compliance on protecting a tenant’s deposit. That would enable them to impose lower penalties on landlords who were evidently ignorant of their responsibilities, and higher penalties on landlords who wilfully failed to protect their tenants’ deposits. I believe that the change would lead to more proportionate sanctions for landlords, while offering a clear incentive for them to comply with the will of the House. I have no intention of pressing the new clause to a Division, but I shall be grateful if the Minister will respond to some of these issues.