Examination of Witnesses

Tenant Fees Bill – in a Public Bill Committee at 11:30 am on 7th June 2018.

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Rhea Newman, Katie Martin, Dan Wilson Craw and Izzy Lenga gave evidence.

Photo of Peter Bone Peter Bone Conservative, Wellingborough 12:16 pm, 7th June 2018

Q We will now hear evidence from Shelter, Citizens Advice, Generation Rent and the National Union of Students. We have until 1 pm for this session. May I ask the witnesses to introduce themselves and make a short introductory statement?

Dan Wilson Craw:

My name is Dan Wilson Craw, the director of Generation Rent. We broadly support this Bill and campaigned for it originally. We think it will save tenants money and, by reducing barriers to moving, give them more bargaining power in their relationship with landlords and letting agents. There will also be a more efficient market if landlords are made responsible for all the costs of agents and there is clear pricing in the market. We are worried about how default fees are defined and about how a tenant might help to enforce the law and ensure that default fees and, indeed, banned fees are not charged or abused. We also think the Bill is only a first step in the wider reform of the rental market. Security of tenure is an important aspect of giving tenants the confidence to complain.

Rhea Newman:

I am Rhea Newman; I work in the policy team at Shelter. We also strongly welcome the Bill and generally the Government’s commitment to making the rental market fairer and more affordable. We think the Bill will go a long way towards doing that and, in particular, the ban on up-front fees will make a significant difference for private renters, reducing the barriers to securing a new tenancy, which will particularly benefit those on low incomes who struggle most with up-front costs.

There are a couple of areas of the Bill that we think need to be further tightened to provide clarity and ensure they cannot be exploited. Our main priority is on payments in the event of a default, and we have a secondary concern about the terms when a holding deposit is refunded. Broadly, we strongly welcome the Bill.

Katie Martin:

I am Katie Martin from Citizens Advice. You guys are probably familiar with Citizens Advice. We give advice to about 7.5 million people each year, over the phone, via webchat and email, and face to face. Some 400,000 of those people came to us last year with housing problems, 100,000 of whom were in the private rented sector, so we are pretty close to some of the problems people face. We use that evidence to support Government, to help to prevent problems arising, and that is why we have been calling for a ban on letting agent fees for almost a decade.

Again, we welcome the Bill and think it will go a long way towards solving some of the problems, but there are some problems with the wording, particularly about default fees, which could fundamentally undermine the Bill’s intent to create fairer conditions, and create a loophole that landlords could exploit. We think that should be tightened up in the legislation, following consultation. We also have concerns about the cap on the deposit, which should be reduced to four weeks rather than six, because six will only help 8% of renters. If we are really going to bring down the barriers to entry for the private rented sector, that should come down.

We think this will be a strong Bill with those changes. We really welcome it, but we want to see those things tightened up.

Izzy Lenga:

Hi, I am Izzy Lenga, the vice-president of welfare at the National Union of Students. The NUS represents students across further and higher education, around a third of whom live in the private rented sector. Students in higher education represent 5% of the total number of households in the private rented sector, according to the English housing survey.

The NUS runs tenant training programmes for student unions, so that they can train their members on their rights and responsibilities as tenants, knowing that, when those tenants graduate and move on to other private rented properties, they will take that knowledge with them. Our aim is to equip future generations of renters with a good understanding of their rights and how best to protect them.

We really welcome the spirit of the Bill. Alongside the other witnesses, we absolutely support measures that will improve renting, although we have some concerns around specific areas in the Bill—namely, the resources for enforcement within trading standards, the level of security deposit and especially the terms suggested around the holding deposit, which we believe could unfairly affect some renters.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

Thank you. We will shortly move to questions from Members. This is a very important part of the Committee system, because it allows Members to be better informed before going into the line-by-line examination of the Bill, which they will start this afternoon. It also gives the Minister the opportunity to put some concerns to you as well. We will start with the shadow Minister.

Photo of Melanie Onn Melanie Onn Shadow Minister (Housing, Communities and Local Government) (Housing)

Q Thank you, Mr Bone. Could you go into a little bit more detail about your concerns over the description of default fees? What specifically concerns you about what is in the Bill?

Rhea Newman:

We accept the principle that there may be certain circumstances in which a tenant should cover the cost of a default, but we want to ensure that there are sufficient protections in the Bill to ensure that, first, this is part of a fair term in a tenancy agreement, and secondly, tenants cover only the actual cost of the default. We welcome that the Government, as a result of the pre-legislative scrutiny, have already tightened the definition to limit payment in the event of a default to the landlord’s loss.

However, we think that that needs to be tightened further, so that the payment covers only the landlord’s reasonable and proportionate loss, because what could be included in loss is currently too broad. We do not think that landlords’ and agents’ business costs, which could include their time, should be factored into that, and we also think that charges for things like sending letters or making phone calls to chase late rent are unfair. Tenants chasing a landlord to fulfil their obligations cannot charge for every communication they send, so we think that there should be parity in those principles.

We think that that definition needs to be tightened further. We also think that, through regulations, the Government could set out clearly the types of things that are allowed to be charged for as a default fee, and impose a requirement on landlords and agents to produce evidence of their costs when trying to charge a default fee. That should be shown to a tenant up front, which would make it easier for them to challenge if anything looks unfair.

The Government are currently proposing to produce non-statutory guidance. We do not think that that will be strong enough, because it will not be binding on landlords and letting agents. Putting it in regulations will make it easier for tenants to challenge and strengthen the hand of trading standards when trying to enforce the Bill.

Katie Martin:

I support everything that the witness from Shelter has said. The only thing I would add is that we have seen attempts to use guidance for enforcement in other sectors. For example, in the energy sector, Ofgem introduced guidance around back-billing. That was found to be ineffective, so it had to introduce rules around that. That is also true of council tax debt collection practices. There are other examples of guidance not being followed, which has then required stronger measures. We think that that should be pre-empted and that it should be written into the proposed legislation at this point.

Dan Wilson Craw:

I agree with what has been said. I am particularly worried that challenging default fees that are unfair or that relate to unfair terms in a contract will be very difficult for the tenant. Because it is not clear cut, trading standards might not devote resources to investigating it, so we think something stronger than guidance is necessary.

Izzy Lenga:

We need a bit more clarity on the reasonableness of charges. There is an issue for students in particular around garden maintenance. There is quite a big disparity as to whether the cost would be just for a gardener or for a whole landscape change. That difference can be a massive cost and that needs a lot more clarity. Anecdotally, I remember that when I was a student we spent two days just plucking weeds out of my garden, because we did not know what we were meant to do and what the cost could be. That clarity would help students a fair bit.

Photo of Melanie Onn Melanie Onn Shadow Minister (Housing, Communities and Local Government) (Housing)

Q I think it was Shelter that said it welcomed the ban on up-front fees, but it is not quite the case that the Bill bans all up-front fees. There is still a requirement for a holding deposit and the cost of the deposit. On Tuesday, we heard some evidence that highlighted the issue of the dual deposit situation where, if you are in one tenancy and you have paid your deposit, and then you are seeking to move and you have to find a deposit for your next place, you are out of pocket by two deposits and you need to find a holding deposit. The Bill does not entirely deal with that, and I wonder what your view is on how much of a barrier that is for people.

Dan Wilson Craw:

We think it is quite a big barrier. We have done some work and we published a report in March on tenancy deposits. The average deposit is about £1,000, and you have to find that as well as the current £400 average letting fee. The majority of tenants will get their deposit back in a number of weeks, but only after they have moved out of their current place and into their new place so, as you say, they are out of pocket. One of our proposals was to passport deposits or to enable a portion of the deposit to be passported from the first tenancy to the next one. The Residential Landlords Association is looking at that as well. This Bill is a great opportunity to explore that in further detail.

Rhea Newman:

We support what Dan said about up-front costs: they are a significant barrier for tenants. In our most recent private rented survey, moving costs were about £1,400 on average, and for those who paid letting fees, the average fee was about £250. We regularly hear from our advisers across the country about what a challenge those up-front costs pose for people who are trying to secure a new tenancy, particularly lots of tenants we support who might be on lower incomes.

There is a distinction to be made between what we are referring to as up-front fees that are non-refundable and the refundable bits in the Bill, which are the holding deposit and the security deposit. We support proposals around deposit passporting and that is an area that certainly merits further attention, but it is perhaps beyond the scope of the Bill. Our priority for the Bill is to ensure that the existing provisions are clear and enforceable so it can have the maximum impact for tenants. There is further work to do on other up-front costs, as Dan highlighted.

Katie Martin:

Clearly, up-front costs, whether they are refundable or not, are a big barrier for people who are moving within the private rented sector or entering it. We would like that to be tackled. If the cap on the deposit was brought down to four weeks, as we recommend, that would help in respect of dual deposits as well.

Izzy Lenga:

I echo my fellow panellists. Our priority campaign this year at the NUS is “Poverty Commission”. We know that students are really struggling with money and are having to work two or three jobs to find where their next month’s rent will come from, on top of their studies and any extracurricular activities. Such things place an added burden and stress on people that in turn can have an impact on their mental health, their ability to study and so on. It affects students financially, but also academically and in their whole welfare.

Photo of Melanie Onn Melanie Onn Shadow Minister (Housing, Communities and Local Government) (Housing)

Q I have two more questions. Can you tell me about specific challenges for students when it comes to renting and what their general experience is?

Izzy Lenga:

A specific challenge is definitely affordability. That is a massive challenge that students face. As I mentioned earlier, the fact that students are too often living in poverty and do not know where their next month’s rent will come from really affects them.

Students often do not know their rights as tenants. That is something that we really try to train them up on. The NUS runs a “Ready to Rent” scheme and encourages student unions to do the same. Landlords often take advantage of the fact that a lot of students are first-time renters, so it might be their first time looking over a contract, for example. There is also the question of the effect on students who are estranged or do not have the necessary documents, such as a passport, and on working- class students who have lived in social housing their whole life and whose families have not filled in contracts and stuff like that for housing.

Those are big things. Another is that the quality of housing for students just is not up to par. People joke, “It’s student accommodation—it’s meant to be damp and in squalor.” We did a report this year about fuel poverty. Students are living in increasing fuel poverty and just cannot afford to heat their own homes, because of the price and because they do not know they can change energy supplier. Things like that are the key issues for students with renting at the moment.

Photo of Melanie Onn Melanie Onn Shadow Minister (Housing, Communities and Local Government) (Housing)

Q My final question is, how will enforcement work in practice? I would like to get a flavour of how it currently works and what people need to be able effectively to enforce their rights, if that is possible.

Dan Wilson Craw:

Do you mean in terms of the general quality of housing?

Photo of Melanie Onn Melanie Onn Shadow Minister (Housing, Communities and Local Government) (Housing)

Under the Bill, how will people be able to enforce the rights they are being offered in the context of housing legislation as it exists at the moment?

Dan Wilson Craw:

A tenant has two options apart from simply saying to the agent, “This fee is unfair.” The tenant can say, “If you don’t retract it, we’ll report you to the council,” or, “We’ll take you to the first-tier tribunal.” Those are the two options they have, in essence. The tenant can go to the council’s trading standards or to another authority and rely on officers to carry out an investigation, or take it upon themselves to make an application to the first-tier tribunal. We need that back-up process, but all a tenant can get through that process is the fee back, so we think there is merit in awarding a higher form of compensation to a tenant who goes through that process. That would create more of a deterrent for an operator who charges an illegal fee, it would potentially save the council work, and it would give the tenant something back for the effort they put in.

Rhea Newman:

Enforcement starts with having a really clear ban in the first place. The clearer the ban is up front in terms of all the different provisions—for default fees and refunding holding deposits, and the ban on up-front fees—the easier it will be for landlords and agents to know what they can charge and for tenants to know what they should pay. When the Bill comes into force, there will need to be clear communication to all parties, so that it is very clear what should be charged and what should be paid.

Once the Bill comes into force, it may be quite difficult for a tenant to challenge an unfair fee charged by an agent during a tenancy. That is one of our concerns about default fees. There is concern among tenants, who do not want to raise issues with the landlord during a tenancy for fear that they might face a retaliatory rent increase or eviction. There are problems with challenging unfair fees once you are in a tenancy.

We have concerns that few tenants will use the option to go to the first-tier tribunal. Citizens Advice has done some research about how likely tenants are to take formal routes of redress, such as going to court, for disrepair issues. We know that few tenants will use that option, but it is important that it works as well as possible for those who can be supported to use it. I know you heard from local authorities this morning. I am sure they made the point about ensuring they are sufficiently resourced to enforce the ban. That will be a key part of it.

I come back to the point that the clearer the ban is in the first place, the easier it will be for all to enforce it. The evidence from Scotland really points to that. The reason the ban needed to be clarified in Scotland in 2012 was that the provisions were not clear in the first place. Even after 2012, Shelter Scotland has been running a campaign to help people to reclaim their fees. That just highlights how important it is to get it right in the first place.

Katie Martin:

We think that it is really important to get enforcement right. We are concerned about the reliance on trading standards in terms of resourcing and the willingness of authorities to take action. We think the market is very much skewed in favour of landlords and agents, and that tenants actually have very weak bargaining power. As we have pointed out, tenants feel like they are intimidated and do not want to take action against their landlord for fear of retaliation.

We very much support the Government’s moves to introduce mandatory redress membership and we want that to happen as soon as possible, but we do not think that that will fix all the problems. We think that trading standards needs to be adequately resourced. We need to make sure that the requirements in the legislation are really clearly set out so that we hopefully do not get to the point where we have to resort to this kind of redress, but if that happens, it has to be adequately resourced and tenants need to be supported.

Photo of Robert Goodwill Robert Goodwill Conservative, Scarborough and Whitby

In the opening comments from Citizens Advice, we heard that a four-week deposit was preferable to a six-week one on the grounds of affordability, but in a previous evidence session, we heard from the landlords that where there is a four-week deposit, often the departing tenant will just not pay the last month’s rent in the knowledge that the landlord will then take the deposit to cover that rent. There is then nothing left to cover any damage or any other problems, so they were very much of the view that a six-week deposit would prevent that from happening. In the experience of the panel, is that something that happens quite a lot and would a six-week deposit be preferable for that reason?Q

Katie Martin:

We have done some research on this. Our most recent research found that currently only 2% use their security deposit as their last month’s rent, and 34% have a deposit of four weeks, so it does not stack up as an argument for us. We think the benefits of bringing it down to four weeks would far outweigh the risks.

Photo of Robert Goodwill Robert Goodwill Conservative, Scarborough and Whitby

Indeed, the passporting arrangement that the Opposition mentioned would solve that problem as well. It is interesting to have some statistics behind that. Thank you very much.

Photo of Neil O'Brien Neil O'Brien Conservative, Harborough

I have a question for the whole panel. Two days ago, we heard from various landlords’ groups that they did not think that the Bill would lead to net savings for tenants. For complete clarity, could I get a quick answer from each of you on whether you think that the end of lettings fees will lead to benefits to tenants?Q

Dan Wilson Craw:

The Bill will benefit tenants. Yes, we think that.

Rhea Newman:

Yes, we do. Is this in relation to potential rent increases? Is that what the question is?

Photo of Neil O'Brien Neil O'Brien Conservative, Harborough

Yes, the argument was made that rents would just go up to compensate.

Rhea Newman:

We still think the Bill will benefit the majority of private renters, because it will save them money every time they move. In terms of rent increases, we do not expect that all the fees currently charged to tenants will start being charged to landlords, because landlords have the consumer power to shop around and choose the agent that they use, and therefore there will be a competitive pressure on agents to drive down their prices and to offer surpluses at the best value for money.

If we look at the example of Scotland, there is no conclusive evidence that the ban led to a spike in rent increases immediately after it came into force. We conducted some independent research that suggested that there might have been a small short-lived increase in rents, but only one out of 120 landlords had experienced their agents putting up the price and consequently put that on to renters. Similarly, the Office for National Statistics produces an index of rental prices that is now the most authoritative source on rent increases and in the years after the ban, for the first two years, rents increased at roughly the same rate in Scotland and England. Four years later, they had increased much more in England than in Scotland, at 9% to 5%.

Photo of Neil O'Brien Neil O'Brien Conservative, Harborough

That is quite the opposite of what we had been told the other day. Katie?

Katie Martin:

Overall, we absolutely think that this Bill will benefit tenants, with the changes that we have proposed. If there were to be any rent increases passed on to tenants, which it sounds like there will not be, that would at least be transparent and visible, and that would help to create a competitive market for tenants. So overall, yes.

Izzy Lenga:

I was going to echo the point about what happened in Scotland. When the Scottish Parliament banned those fees there was not that much of a spike in an equivalent rise in rent. I also echo the point that ensuring that the guidance is clearer, more transparent and provides a lot more clarity will be really beneficial for students, especially in learning how to manage to budget. As I have mentioned a few times, students can really struggle with money. Clear and more transparent guidance about where their money is going, and when and what they need to pay, will really help students in general.

Photo of Neil O'Brien Neil O'Brien Conservative, Harborough

Q If it is okay, Mr Bone, I have a question specifically for Rhea. You just made an interesting point about reasonable charges. I can see your argument that tenants are not able to claim the costs of getting in touch with their landlords, but on the other hand, as you were speaking I was struck by the thought that if it does take months of work, legal effort and endless emails to enforce something, I am not sure how a clause about “reasonableness” would be interpreted. On the face of it, charging for those kinds of costs might be considered reasonable. Could you perhaps say a little more about your idea? I feel sort of left hanging by what you said.

Rhea Newman:

Currently, the Bill limits payments in the event of a default to a landlord’s loss, but it is not clear what could be included in that. For example, replacement keys come up a lot. We think that it is absolutely right that if a tenant loses their key they should pay for it to be replaced, but we think that they should pay the cost of having a new key cut, not necessarily other costs that could be added to that such as time, going to get the new key cut and business lost. To draw a comparison, if you broke a glass in a shop you would be very happy to pay for a replacement glass, but I do not think you would necessarily offer to pay lots of additional things on top of that, which you would consider part of the shop’s business costs.

Photo of Neil O'Brien Neil O'Brien Conservative, Harborough

Q Just to push you a little on that, in quite a lot of other industries you do pay for the time. For example, if you get a parking charge you will get charged for all the associated legal stuff if you have bailiffs enforced against you. In lots of other industries you do get charged for the time. I wonder how you see your proposal being interpreted. Would it be for the courts to decide what is reasonable, eventually, or would you want a defined list?

Rhea Newman:

In regulations we would like a defined list of the types of fees that can be charged. In terms of what comes down to reasonableness, it might be difficult for that to be set out in regulations. I guess there are already some protections in the Consumer Rights Act around what is considered fair or unfair. I think reasonableness is about what a reasonable person would expect to pay in those circumstances, which is the cost the landlord actually incurs.

It is the combination of the reasonableness with the evidence. The landlord sets out the evidence and shows what the costs are. The tenant can then look at that, potentially get some advice, and challenge it. The problem is that by just saying that it is limited to a landlord’s loss, landlords could try to put lots of extra things in there. We have been asking some of our supporters and staff about things that they are potentially charged for at the end of a tenancy. For replacing items such as a dustpan and brush you could be charged £45 because an initial procurement fee was put on to it as well. That is the kind of thing that we are trying to guard against.

Photo of James Frith James Frith Labour, Bury North

This has slightly been touched on, but does Citizens Advice, or anyone else who wants to answer this, have an example of landlords taking the mick when it comes to default fees and incidental fees? We have discussed the loss of keys, but there is some concern about incidental fees, as well as the range of fees that are applied, being increased as an opportunity to recoup some of the earnings that agents or landlords might be losing. Are there any examples of thatQ ?

Katie Martin:

I am sure our advisers see examples of that every day. I am afraid I do not have any off the top of my head—I do not know whether other panellists do. We know that many tenants are being exploited by landlords. Not all of them—many landlords are totally fair and reasonable, but some are not, and we think that the legislation should prevent those unscrupulous landlords from being able to take advantage of tenants. I do not have examples off the top of my head.

Rhea Newman:

I was going to pick up on a point that was made earlier. Garden maintenance could be quite a good example: what is expected of a tenant in terms of maintaining a garden? If you give landlords and agents the potential to do so, some—it is only some—might attempt to write in quite creative things that put unfair expectations on a tenant, and then charge them for not meeting them.

The existing examples we see that we are particularly worried about are the letters to chase late rent as well as emails, phone calls and so on. If they are charged at, say, £60 a time and there is no limit on how often a landlord or agent can send those letters or emails, that might be considered an unfair term in the Consumer Rights Act, but as we have said, it is actually quite difficult for a tenant to challenge that. That is why we think there need to be clear provisions up front about what is chargeable and what is reasonable.

Dan Wilson Craw:

We have a couple of examples. We asked our supporters for examples like this and someone was required by their landlord to have their chimney swept once a year even though their fireplace was completely out of action.

There was another whose landlord would not fix a broken extractor fan in the bathroom, so the bathroom got very damp. By the end of the tenancy, one of the cabinets had got water damage, so the landlord tried to claim for that. The tenant successfully argued that that was the landlord’s fault because of the extractor fan, and he was awarded his deposit back. But the point a lot of our supporters made was that in these cases they knew their rights and knew that they were in the right, but they felt that a lot of tenants in a similar situation would not have the confidence to take on the landlord, or perhaps could not have a deposit just held in escrow for months on end while that gets resolved.

Katie Martin:

In terms of transparency, it is required that any of these incidental fees default fields are written into the contract, but we know from our research that a quarter of tenants receive their contract on the day they are moving. So they have already paid the deposit and committed without having seen the contract. We think that is far too late for those things to be made clear to them.

Rhea Newman:

It is also potentially very difficult to identify charges in a contract, depending on how they are written in, and it is very difficult to negotiate. That is a really good point about when you receive the contract, but even if you received it earlier, if you want a particular property and you know that queues of tenants are trying to get it, you are in a very weak bargaining position.

Photo of James Frith James Frith Labour, Bury North

Q My other question is about whether holding deposits are needed. You raise an interesting point, Katie, that essentially the landlord and agents feel assured that the tenant is moving in because they have paid a holding deposit, but then they do not follow up with their own obligations and issue a contract on time. Is that what you are saying?

Katie Martin:

I am saying that they do not see the contract. I am not sure about the exact requirement for when they are supposed to see it, but we know that in reality they do not see it until the point when, as I say, it is too late to challenge.

We do think there is a role for holding deposits, but we think they should be limited. We also think that the terms on which they should be refunded should be really clear. It should only be in the case of misinformation—

Photo of James Frith James Frith Labour, Bury North

Q So the holding deposit coming off or being the first month’s rent is the scenario for getting it back.

Katie Martin:

The holding deposit is separate from the deposit that you keep for the course of the tenancy. I think the holding deposit would be capped at a certain amount. It is not something that we have looked at closely.

Photo of James Frith James Frith Labour, Bury North

Q So you think it should be more commonplace. It is not universal, is it?

Katie Martin:

No, indeed.

Photo of James Frith James Frith Labour, Bury North

You think it should be.

Katie Martin:

No. We can see the case for when they might be needed.

Photo of James Frith James Frith Labour, Bury North

Q But they should be refunded pronto.

Katie Martin:

Absolutely, yes.

Photo of Richard Graham Richard Graham Conservative, Gloucester

Katie Martin, I will ask you a question I wanted to ask our previous witnesses about who the best people are to try to work with tenants when there are issues effectively of breaking the law. We heard from previous witnesses that they had real doubts about vulnerable tenants turning to people such as trading standards and so on for help.Q

In my experience, quite a lot of tenants will turn to housing departments with questions, particularly on environmental health issues. For example, I have noticed a huge increase in the number of young mothers who go to the city council complaining about mould or damp properties. It is true that those tend to be more for housing associations than for private tenancies, where maybe the tenants feel more secure. However, do you think that if second-tier councils’ housing departments had responsibility for enforcing the measures in this Bill, tenants would be more likely to raise issues with them?

Katie Martin:

I think you have hit the nail on the head about people in social housing feeling much more secure. Tenants in the private rented sector hesitate to come forward with complaints because there is a huge fear of retaliation, which is one of the reasons why we think that all of these problems should be pre-empted in the legislation rather than having to be picked up later. People do not feel like they are empowered. They are very worried about what action the landlord might take, such as not renewing their tenancy and all kinds of different things. That is definitely problematic for renters.

Photo of Richard Graham Richard Graham Conservative, Gloucester

Q Do you happen to know whether it is mandatory at the moment for an agent, or a landlord if it is a direct tenancy, to provide tenants with a bit of paper that spells out what tenants’ rights are on things such as environmental health and up-front fees? If that is the case and it was clearly marked, “If you see evidence of any of these issues, contact your second-tier council housing team on this telephone number”, would that help make people more aware of their rights?

Katie Martin:

I will turn to Rhea on what is currently provided.

Rhea Newman:

Landlords and agents do now have to provide a document that the Government produced, the “How to rent” guide, which includes lots of information about the roles and responsibilities of landlords and tenants. The Department has worked closely on that and engaged with a lot of stakeholders to try to make things clearer, but there is a challenge. Providing it is one thing; ensuring that tenants can actually engage with it and understand their rights is another. Sometimes people do not look at things until a problem occurs.

Photo of Richard Graham Richard Graham Conservative, Gloucester

Q Do you think a part of that is about effective media communication from local councils when landlords are fined? For example, on illegal tobacco, I have noticed from the number of cases that since trading standards gave publicity to the fines of people who had been selling illegal tobacco, that has raised awareness of the issue hugely. Do you think the same thing would be effective on some of the up-front fees?

Rhea Newman:

Communications are really key to that. When the ban comes into force it will be really important in the lead-up to that to make sure that there are clear communications at a national and local level to try to reach all landlords, agents and tenants to make sure they are clear about what they should and should not pay. The clarity of the Bill helps to make sure those communications can then be clear.

Photo of Richard Graham Richard Graham Conservative, Gloucester

Q Rhea, you mentioned earlier that you were worried about the business of multiple deposits for people moving tenancies. Does the concept of passporting the deposit from one landlord to another deal with the issue?

Rhea Newman:

We think passporting could have a key role to play in dealing with such issues. There are real challenges for people when they cannot get one deposit back and they are trying to put a deposit on a new tenancy, so there is certainly merit in exploring deposit passporting. We would be keen to work with MHCLG and organisations such as Generation Rent on that.

Photo of Richard Graham Richard Graham Conservative, Gloucester

Q Dan Wilson Craw, is there anything you would like to add on either of those questions?

Dan Wilson Craw:

On the question of communication, council websites are really important. Tenants are supposed to get their heads around the guide, but it is a national document and they need to be able to find local information easily. Unfortunately, in our experience, a lot of councils do not really have much information on their websites for private renters. A lot of the time, if someone has a problem with their landlord, they phone up their council—this is an example that I came across—and get put through to the housing department. They are simply told, “This is how you apply for a council house”, and it is left at that, even though they have the right to have an environmental health officer come out and inspect the property.

Photo of Richard Graham Richard Graham Conservative, Gloucester

Q Do you agree that the environmental health officers are the right people in the council housing team? If you have a housing team that also has responsibility for following up on this, that is a more logical link.

Dan Wilson Craw:

I think each council will have to work out exactly how to communicate the letting fees ban under their existing responsibilities and the best way of communicating it. Obviously it depends on whether it is a two-tier council. as well.

Photo of Richard Graham Richard Graham Conservative, Gloucester

Q Do you agree that that tends to be where the expertise is? People in council housing teams often have a strong feel for who is a good landlord and who is likely not to be, and of course a better awareness of the tenants.

Dan Wilson Craw:

Sorry, I don’t quite understand.

Photo of Richard Graham Richard Graham Conservative, Gloucester

Within the Bill there are different options for who will have responsibility for enforcement. It could easily be at the first-tier level—the county council—but on the whole they do not have any direct experience of dealing with housing issues, whereas the housing teams in the second-tier councils do. They have environmental health officers and they deal with people who are looking for tenancies, so they know the customer very well.Q

Dan Wilson Craw:

Absolutely. What the Bill appears to do—we support this—is to allow second-tier councils to take on the responsibility for enforcement.

Photo of Richard Graham Richard Graham Conservative, Gloucester

It does. My question was whether you support that and think it is a good idea. Is that a yes?Q

Dan Wilson Craw:

Yes, it is.

Rhea Newman:

In their responsibilities for enforcing across the private rented sector, it is really important that trading standards and environmental health officers work together. That joint work is fundamental. They obviously have resource challenges at the moment, which need to be addressed. We have always supported having one responsible authority—trading standards—in the Bill, but if they can work with their district councils, that is really important.

Photo of Rishi Sunak Rishi Sunak Parliamentary Under-Secretary (Housing, Communities and Local Government)

Q Thank you to all of you for joining us today. You have all been working with the Department extensively in helping formulate the legislation, not least by providing input into the guidance that is currently being formulated. I really appreciate your help there, and I guess congratulations are in order. You have all campaigned for a long time on this issue, so I am sure you are delighted to see it come into practice. Thank you for your broad support for the aims of the Bill.

I have a very quick question about the principle of a holding deposit. Obviously, there is some debate about that. The argument that has been put forward—we heard it again the other day—is that having a holding deposit is sensible because it does two things: it ensures that tenants have a financial stake in the process and that they are not speculating on multiple properties, and it protects landlords, so they do not cherry-pick among tenants. If there were not a holding deposit, landlords might be inclined to pick safer tenants. I understand that you might have some different views about the detail of how it is implemented, but first I would love to hear whether you agree with the principle of a holding deposit. Katie, do you want to start?

Katie Martin:

Yes. As I said, we do not object in principle to holding deposits. We think they should be measured to ensure prospective tenants are not taken advantage of. We also think it is really important that the legislation ensures that the landlords or letting agents cannot retain the holding deposit following a failed credit check or reference check. They should do that only if tenants have provided misleading information. The circumstances under which holding deposits are withheld should be closely looked at, but we do not object to them in principle.

Rhea Newman:

We also do not object in principle. We think they can play a role. We are not sure, in practice, how much tenants speculate on multiple properties at the same time—in highly competitive markets, tenants often feel lucky to find one property that meets their needs—but we accept the principle of a holding deposit. We have always argued for a lower cap of about two days’ rent, because one week’s rent—I think the average is £192 across England—is a lot to lose if your circumstances change. Our main priority is to ensure the terms for refunding holding deposits are really clear. We think there needs to be a paper trail around what information is taken before holding deposits are given. Landlords and agents should tell tenants how it will be treated, and if they do not refund it they should provide evidence for why they are doing that. We think that, at the moment, the terms are not clear enough.

Dan Wilson Craw:

I agree. We think holding deposits serve a function in a market in which it takes a while to get a reference from the tenant. If technology and the market were to develop post the fees ban, and a tenant could be referenced instantly, you would potentially not need a holding deposit.

We have a couple of concerns. Having this Bill to formalise the process of taking a holding deposit is really important. Under the Bill, a landlord or a letting agent could still take holding deposits from several tenants and ultimately give the tenancy to only one tenant. What it would do for tenants who had put down a holding deposit and did not get the tenancy is to put their flat hunting on hold for 15 days. We would quite like to see the Bill tightened up in that respect. Also, as was mentioned before—

Photo of Peter Bone Peter Bone Conservative, Wellingborough

Order. I am afraid we will never know what the second point was, because time has beaten us. You have been excellent witnesses. Thank you so much for coming.

That brings us to the end of the oral evidence session for this Bill. The Committee will meet this afternoon to begin the line-by-line consideration of the Bill. To remind Members, that will happen not in this Room but in Committee Room 12 in the Palace of Westminster at 2 pm.

The Chair adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at Two o’clock.