Recovery by enforcement authority of amount paid

Tenant Fees Bill – in a Public Bill Committee at 10:15 am on 12th June 2018.

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Question proposed, That the clause stand part of the Bill.

Photo of Virendra Sharma Virendra Sharma Labour, Ealing, Southall

With this it will be convenient to discuss clause 11 stand part.

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

We want to ensure that when a tenant has paid an unlawful fee, they are repaid as soon as possible. Clause 10 enables an enforcement authority to require a landlord or letting agent to repay the tenant or other relevant person any outstanding prohibited payment or holding deposit. Similarly, if the landlord or agent required a relevant person to enter into a contract with a third party, they may be required to pay compensation. That may be ordered if the local authority imposes a financial penalty for a breach of the Bill. It does not apply if the tenant has made an application to the first-tier tribunal to recover the payment or if the amount has already been repaid.

Clause 11 enables the enforcement authority to require the landlord or agent to pay interest on any payment referred to in clause 10. That ensures that the agent or landlord does not receive any financial benefit from a prohibited payment.

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

For the Bill to have an impact, it has to be possible for prohibited payments to be recovered, and for those enforcing the legislation to fulfil their roles. We have already touched on our concerns about whether there are sufficient resources for local authorities and trading standards to function as the Government would like. These clauses highlight a particular potential issue in the legislation as it stands. The need for a criminal level and burden of proof for the civil financial penalties discussed in this Bill is a flaw that could well hamper its effectiveness. We all want to see legislation that is effective, that leaves tenants and landlords clear on what is permissible and what is not, that ensures that rogue traders are dealt with effectively, and that leaves tenants able to bring claims when things do go wrong.

As things stand there is work to be done on all those points, particularly the last point, as the focus in these clauses seems to be uncertain. The Government’s plan for penalties for breaches by landlords and letting agents is for any claim against them to be proven to a criminal level of beyond all reasonable doubt, as opposed to the usual civil standard of preponderance of evidence—something that is more likely than not to have happened, given the balance of probabilities.

What will that mean in practice? It will mean fewer successful claims, so there will be less money in the pot to make this policy self-funding. It will mean less confidence in the system from tenants, who will not see examples of successful claims and evidence that it can be done. It will mean that tenants are far less likely to complain about breaches, as they know that they will have to undergo a process that is far more rigorous.

For those tenants who are in a particularly vulnerable situation, anything that puts them under undue strain or pressure, that is seen to be rigorous, and that pits them in an adversarial manner against their landlords will operate as a disincentive, in our view. Practically speaking, they may be more likely to do a trade-off, whereby they know that they would have to go through a hard and unpleasant process, which is less likely to be found in their favour, all the while souring the relationship they may have with the landlord or the letting agent. We have to bear in mind with this legislation that there are very sensitive relationships between tenants and landlords, which are finely balanced. To take action as a tenant against a landlord is no mean feat. It is not something that any tenant would willingly put themselves through, unless they felt that there was a genuine opportunity for redress.

I draw the Committee’s attention to some of the facts around revenge evictions, which I think are relevant, particularly in this context, in order to look at what letting really means in this country. Laws, unfortunately, do not always mean an end to bad practice, particularly if people think they can escape justice and avoid those laws for any reason. Of private renters in this country—a growing sector—nearly a fifth, or 17%, did not ask for repairs to be carried out or for conditions to be improved for fear of eviction. Those are Shelter’s statistics. All of us will feel that that has some relevance to the postbag we get from our constituents. Often, by the time constituents reach us with their concerns about privately rented accommodation, they have lived for an extremely long time in conditions that none of us would wish anybody to be living in—certainly not conditions we would accept ourselves. A small issue of damp could become a significant issue of damp—I can recall such cases—resulting in whole families living in one room and not using the rest of the property, because of the cost of trying to heat the rest of the property and keep damp to a minimum.

Given Shelter’s evidence, it is not unreasonable to think that many renters will work out whether to report a fee they have been charged on a comparative basis. If the rent is otherwise a reasonable value and the property in a good state of repair, would a relatively small prohibited payment lead them to complain and risk ruining a relationship or a potential eviction? The likelihood is that it will not, if they know that they will get a good deal on their rent. That does not mean that the actions of the landlord would be right; it certainly does not mean it would be acting within the proposed laws as they stand. However, if the property is in an area where properties are few and far between, and it would be risky to jeopardise the tenant-landlord relationship when there is no guarantee that a new property would be easy to come by, again a prohibited payment may not lead to a complaint from a tenant.

That is probably broadly reflected in what trading standards have said so far about complaints they have received relating to tenancies. The letting market in many parts of the country is very unbalanced; far more power is concentrated in the hands of landlords. Even when landlords and letting agents are entirely scrupulous, that imbalance can persist simply in the most straightforward sense of supply and demand, such as where demand is much greater than the supply of appropriate properties, such as in London, although not exclusively in the capital. In those locations, tenants may well be far less able, and thus less likely, to report unjust fees.

Take the evidence from last week’s sessions given by expert witnesses—the people who know better than anyone what implementing these policies looks like on the ground. Alex McKeown of the CTSI clearly highlighted the problem:

“Something that I have picked up on is that, at the moment under the Consumer Rights Act 2015 and the redress scheme legislation, the burden of proof is on the balance of probabilities, in terms of issuing these financial penalties. What you are trying to say is that this is going to be self-funding, and at the moment with the Consumer Rights Act 2015 that has the ability to be self-funding, because all we have to do is look at a website and we can see whether it is displaying the correct information or not. It is easy—we have to prove it on the balance of probabilities, we download the website and we have the proof. In this Bill, you are asking for a criminal burden of proof for a civil financial penalty, and that is going to scare people off; that is going to scare trading standards off. They are not going to want to prove beyond all reasonable doubt that a tenant has been charged a fee. Then, you are also relying on the complaints to trading standards. We do not get that level of complaints to trading standards in relation to tenancies.”––[Official Report, Tenant Fees Public Bill Committee, 7 June 2018; c. 34, Q57.]

She went on to say that a requirement to tell the tenant what they are expected to provide in evidence to a trading standards officer, in order to provide evidence to enable the officers to take the necessary enforcement action, prompts severe doubts that this will come to pass in the way that the Minister intends. If the experts fear that this measure will put people off—and they know far better than us whether that is probable—we ought to listen to the likes of the CTSI.

If we look at clause 11 in that context, the idea behind it is sound—that interest could be charged and it could be made clear how that could be done. However, if the enforcement is made less achievable as a result of the burden of proof required and tenants not having confidence in the system, it is not likely to come into play very often.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11 ordered to stand part of the Bill.

Clause 12