Transitional provision

Tenant Fees Bill – in a Public Bill Committee at 2:15 pm on 12th June 2018.

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Photo of Sarah Jones Sarah Jones Labour, Croydon Central 2:15 pm, 12th June 2018

I beg to move amendment 16, in clause 28, page 19, line 33, leave out “one year” and insert “six months”.

This amendment would reduce the period of transitional provision from a year to six months.

Photo of Virendra Sharma Virendra Sharma Labour, Ealing, Southall

With this it will be convenient to discuss the following:

Amendment 17, in clause 28, page 19, line 37, leave out “one year” and insert “six months”.

This amendment would reduce the period of transitional provision from a year to six months.

Amendment 18, in clause 28, page 20, line 10, leave out “one year” and insert “six months”.

This amendment would reduce the period of transitional provision from a year to six months.

Amendment 19, in clause 28, page 20, line 14, leave out “one year” and insert “six months”.

This amendment would reduce the period of transitional provision from a year to six months.

Photo of Sarah Jones Sarah Jones Labour, Croydon Central

Amendment 16 would deliver an important and achievable result for more than 4 million households currently in a private rental contract. Along with its consequential amendments 17 to 19, the amendment seeks simply to speed up the pace of the changes that the Bill will deliver. As we draw towards the end of this Committee sitting and prepare to discuss the European Union (Withdrawal) Bill, it is fitting perhaps that that we set about talking about the transitional period.

We believe that the transitional period set out in clause 28 is correct. Landlords and agents will need time to come up to speed with new rules and to review the elements in their agreements with tenants that will subsequently cease to have effect. Labour Members, however, argue that a year is an unnecessarily lengthy period. Among other issues, a lengthy transition period may see unscrupulous landlords and agents charging excessive fees through loopholes, such as default fees, in a rush to extract money as quickly as possible before the law changes.

In opposing the amendment, the Government might cite concerns about the capacity of enforcement authorities to develop the requisite skills and learning properly to enforce the Bill. If they truly do have those concerns, they should look again at our proposals on enforcement. When the underlying issues with an overstretched trading standards system are so serious that the National Audit Office is warning of a direct threat to the consumer protection system’s viability, a six-month difference will not change much. I fully expect the Government to highlight the need for proper consultation with landlords and tenants to ensure that they are properly briefed, which is absolutely right, but there is no reason that work cannot start before clauses 1 and 2 come into force. The Government have been clear that a strong deterrent effect will be provided by the penalties and convictions described in the Bill. We have already set out in detail our concerns about enforcement, but we agree in principle that, if enforced effectively, the penalties will be a clear deterrent. If the Government are confident about their deterrent, surely the Minister will agree that landlords and agents will be motivated quickly to come to terms with the changes they will need to make. If not, will he tell us which specific measures he expects to take up to a year to put in place?

As we have previously pointed out, a Labour Government would have introduced the Bill years ago. The cumulative total of the money lost to tenants through the Government’s reluctance to do likewise has likely been millions. We owe it to all private renters to bring the Bill into force quickly.

We will shortly discuss the issues posed by the wording of clause 32 and the merits of our amendments 20 and 21. I will not go into too much detail here, beyond pointing out that clauses 1 and 2 are not currently included in the provisions that will come into force on the day on which the Act is passed. As we will hear, clause 32 is problematic, as it allows the Secretary of State to choose the day when the full Act, including clauses 1 and 2, will come into force, and it currently sets no limit on how long he or she might delay that decision. We believe that the combined uncertainty over the effective start date and the year’s delay proposed in clause 28 would be unacceptable to tenants. If the Minister does not support the amendments, will he set out a clear timetable, either now or in writing, for how that year will be used?

The amendment is not onerous. It would not cause disproportionate hardship to tenants, agents, enforcement authorities or the Government. What it would do is ensure that tenants get more quickly the fair deal they were promised which, I think we all agree, is something they deserve.

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

Clause 28 deals with how the prohibitions described in clauses 1 and 2 will apply in relation to agreements that were entered into before the commencement of the relevant parts of the Bill. Upon commencement, the fees ban will apply to all new tenancies and agreements between agent and tenant. The transitional provisions in clause 28 mean that for a period of a year the ban will not apply to tenancies the terms of which were agreed prior to commencement. Similar transitional provision is made for agents’ agreements with tenants.

The amendments that we are considering seek to reduce that transitional period from a year to six months, and we do not believe that that would be fair on landlords and agents. Although most fees are charged at the outset of a tenancy, some landlords and agents will have agreed that tenants should pay other fees at a later stage. Tenants will have signed a contract accordingly, and we need to allow time for landlords and agents to renegotiate those contracts to ensure that they are not unfairly penalised.

Data from the English Housing Survey 2015-16 shows that 48% of tenants had an initial tenancy agreement of 12 months and 39% had an initial agreement of six months. Reducing the transitional provision would mean that more landlords and agents with pre-commencement tenancies—tenancies that were entered into before the legislation came into force—would be at risk of not being able to renegotiate their contracts, and would be responsible for fees that their tenant had previously contractually agreed to pay. That strikes me as retrospective and does not seem fair, and we do not seek in the Bill to unfairly penalise landlords and agents.

We recognise the importance of having a clear date when the ban on fees applies to all tenancies, and we know that tenants are eager for the ban to come into force. That is why the Government have revised their position from that reflected in the draft Bill, which had no end date for when fees could be charged in pre-commencement tenancies. The transitional provisions as drafted here mean that all tenants will see the benefit of the fees ban a year after it comes into force. Unlike the proposed amendments, they ensure that agents and landlords will not be significantly financially affected retrospectively, and will have an opportunity to review their contracts during that transitional period. I therefore ask the hon. Lady to withdraw the amendment.

Photo of Sarah Jones Sarah Jones Labour, Croydon Central

I listened to the Minister, and I agree with him that tenants are eager for the clause to come into force, but I will not withdraw the amendment.

Question put, That the amendment be made.

The Committee divided:

Ayes 8, Noes 9.

Question accordingly negatived.

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

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

Clause 28 deals with how the prohibitions described in clauses 1 and 2 will apply in relation to tenancy agreements that were entered into before the commencement of the relevant parts of the Bill. As we have just discussed, the fees ban will apply to all tenancies, but the clause provides for a transitional period of one year during which the ban will not apply to what we call “pre-commencement tenancies”—tenancies the terms of which were agreed to prior to the commencement of the ban. After one year, any term of a tenancy agreement that breaches the fees ban will not be binding on the tenant, regardless of the date on which the tenancy agreement was entered into. Any payment accepted by the landlord and not returned within 28 days will then be a prohibited payment.

Equivalent provisions also apply in relation to any agreement between tenants and letting agents. We have provided for this 12-month transitional period in order to mitigate the risk of retrospective effect on landlords of pre-commencement tenancies—although we consider that risk to be relatively low and also offset by the benefit of having a clear date when no letting fees can be charged to tenants. These transitional provisions will mean that all tenants will see the benefit of the fees ban a year after the ban comes into force. That will create a clear marker after which no tenant fees may be charged. That is likely to reduce confusion in the marketplace and facilitate tenant-led policing of the ban. I beg to move that the clause stand part of the Bill.

Question put and agreed to.

Clause 28 accordingly ordered to stand part of the Bill.

Clause 29