Tenant Fees Bill
Public Bill Committee, 5 June 2018.
Peter Bone (Conservative, Wellingborough)
Before we begin, I have a few preliminary announcements. Please switch electronic devices to silent. Teas and coffees are not allowed during sittings as they are deemed to be hot drinks, although you can persuade me otherwise. We will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication, and a motion to allow us to deliberate in private about our questions before the oral evidence session. In view of the time available, I hope that we can take those matters formally, without debate.
I call the Minister to move the programme motion standing in his name, which was discussed yesterday by the Programming Sub-Committee.
Peter Bone (Conservative, Wellingborough)
The deadline for amendments to be considered at the first line-by-line sitting of the Committee was the rise of the House yesterday. The next deadline will be the rise of the House on Thursday for the Committee’s sitting a week today.
Peter Bone (Conservative, Wellingborough)
Copies of written evidence that the Committee receives will be made available in the Committee Room.
Examination of Witnesses
Peter Bone (Conservative, Wellingborough)
We resume our public sitting and will hear evidence from the Association of Residential Letting Agents, the National Approved Letting Scheme, and OpenRent.
Before I call the first Member to ask a question, I remind all hon. Members that questions should be limited to matters within the scope of the Bill and that we must stick to the timings in the programme motion that the Committee has just agreed. For this session we shall have until 10.25 am. Also, I ask whether any members of the Committee wish to declare any relevant interest in connection with the Bill.
Robert Goodwill (Conservative, Scarborough and Whitby)
May I draw attention to my entry in the Register of Members’ Financial Interests. I have eight residential properties and three commercial properties, for none of which, however, we charge deposits or use letting agents.
James Frith (Labour, Bury North)
I draw attention to my entry in the Register of Members’ Financial Interests. I have one property of which I am a landlord.
Richard Graham (Conservative, Gloucester)
I draw attention to my declaration in the Register of Members’ Financial Interests. My wife and I have recently become landlords of a property.
Paul Williams (Labour, Stockton South)
May I draw attention to my entry in the Register of Members’ Financial Interests? My partner and I rent out two properties, and we are also tenants.
Peter Bone (Conservative, Wellingborough)
Thank you. I call the first panel. Will the witnesses please introduce themselves for the record?
Peter Bone (Conservative, Wellingborough)
Q Good morning. This is a fairly informal process to help the Committee get views as background for when they go through the Bill line by line. It might be an idea, starting with Mr Cox, to make an opening statement.
Peter Bone (Conservative, Wellingborough)
Thank you. We will now move to questions from members of the Committee. This is a rather unusual situation because this is a time when the Minister is allowed to have some fun and to ask you questions. Let us start with the shadow Minister.
Melanie Onn (Labour, Great Grimsby)
Thank you, Mr Bone. I wonder if I could get your views on the ban on tenant fees in Scotland. Obviously, there was a revision to the 1984 ban on tenant fees in 2012, and I would like your views on what that did to the sectorQ .
Melanie Onn (Labour, Great Grimsby)
Q What did that mean in cash terms, and what do you make of Shelter’s 2014 report that said that the market had improved, and that that was one of the reasons why?
Melanie Onn (Labour, Great Grimsby)
Q Do the other panel members agree with that assessment? Is there anything different that you want to add to that?
Melanie Onn (Labour, Great Grimsby)
Q Mr Cox and Ms Thomson, you both mentioned enforcement. Why do you think financial penalties have not been issued on the scale that you referenced in your opening statements?
Melanie Onn (Labour, Great Grimsby)
Q The intention of the Bill is that it will be cost-neutral and that fines will cover the cost of any enforcement activity. Do you think that fines set at the level indicated in the Bill will manage to do that, given that fines for non-display are £5,000 at the moment?
Melanie Onn (Labour, Great Grimsby)
Q One final point and then I will be quiet. You said that between 1984 and 2012 tenant fees were lower in Scotland. Why do you think the industry in England did not follow the lead of Scotland and reduce tenant fees during that period?
Peter Bone (Conservative, Wellingborough)
Q Mr Hyslop, do you want to add anything to that?
Richard Graham (Conservative, Gloucester)
Q May I explore some of the comments that you all made? David Cox, you said effectively two things. First, you said that you do not support the Bill, and then you criticised it for the lack of an adequate enforcement mechanism. The two are totally different things, aren’t they? If you do not support the Bill, the fact that it has not got an adequate enforcement mechanism is neither here nor there. If you are not supporting the Bill because it has not got an enforcement mechanism, the focus is on your offering some suggestions as to how that could be helped. The shadow Minister’s comment about whether the price of the fines is going to be adequate to help finance good trading standards teams is pretty relevant to that. Why do you think that the Bill is not going to achieve its aims, when Adam Hyslop of OpenRent has clearly said that it will?
Richard Graham (Conservative, Gloucester)
Q Why?
Richard Graham (Conservative, Gloucester)
Q Okay, but let us focus on the first bit first. Adam Hyslop has said clearly that the Bill will achieve its aims. He had a couple of queries that we can come back to. You have said that it will not, but you have heard his experience. How can you defend your position against that?
Richard Graham (Conservative, Gloucester)
Q Those are all important aspects of what letting agents can do. I argued, when we last debated this, that there is a critical role for letting agents in compliance—keeping landlords and letting agents within the law—ensuring tenants know where the fire escape is, and all the rest of it. Given the importance of those issues, why do both you and Isobel Thomson believe that, suddenly, letting agents are going to close down and there are going to be lots of job losses? Is that not so important that it is the key thing to market to both landlords and tenants?
Richard Graham (Conservative, Gloucester)
Q It sounds a little like what the betting association predicted when we changed the rules on the maximum amounts you could bet. Do you not think this is possibly exaggerated?
Richard Graham (Conservative, Gloucester)
Q If I may ask one more question, Adam Hyslop, you were hinting that there could be a problem in terms of tenants having full protection on default fees. Do you mind expanding that a bit?
Richard Graham (Conservative, Gloucester)
Q Perhaps the Minister will address that. The other side was the false declaration by tenants, and that did sound quite serious. What is your concern there?
Peter Bone (Conservative, Wellingborough)
A number of Members are trying to catch my eye, so with the Minister’s permission, I shall hold him to the end.
James Frith (Labour, Bury North)
Q This is very interesting. In the contributions we have the new and future economic model in this industry, and the old economic model. One is protecting the status quo and one is saying, “This direction will be fine.” Adam, will you just talk us through—whatever you feel comfortable with—your growth as a business in recent years, including any employment opportunity growth that you have provided by virtue of these 70,000 properties last year, please?
James Frith (Labour, Bury North)
Q And to answer the question?
James Frith (Labour, Bury North)
Q How many people does your business employ itself?
James Frith (Labour, Bury North)
Q Has that grown significantly in recent times, or is that a core rump of people you have kept?
James Frith (Labour, Bury North)
Q Mr Cox and Ms Thomson, I take it on board that Adam is saying his business is not actually hugely disruptive. It sounds pretty disruptive in terms of some of its transformative impact and the market share he is taking from the high street, but I am assured that he uses existing networks, contractors and professionals in the sector. How are you catching up with that way of working to improve accessibility? It feels like there is an equalising quality to Adam—he is saving money for the landlord and for the tenants. Are you just behind the curve on this?
James Frith (Labour, Bury North)
Q In your opening contribution you talked about serving two masters. I would say that the premise of that is inaccurate. The tenant has no choice as to who the agent of their property is. The landlord instructs as the client. That relationship does not change ever, at all. The decision maker remains the landlord. A relationship might be involved; you may well have more involvement with the tenants than the landlord, but the landlord is the decision maker here, and therefore I would challenge the very premise by which you are protecting this status quo. I do not believe that the tenants hold an equal relationship.
Peter Bone (Conservative, Wellingborough)
The trouble with these sittings is that we could go on forever, because it is so interesting and it helps the Committee enormously, but a number of Members want to ask questions, so I will move us on.
Chris Philp (Conservative, Croydon South)
I would like to pick up on the question of conflict, which David Cox brought up at the beginning. Is it not the case, Mr Cox, that in most regulated industries, such as financial Q services, it is already unlawful for a professional service provider to charge both sides of the transaction, which in this case means both the tenant and the landlord? The reason that in regulated activity such as financial services it is unlawful to charge both sides of the transaction is that it creates a conflict of interest. Is it not therefore appropriate, Mr Cox, that under the Bill agents should charge only one side of the transaction—the landlord—because that will eliminate the conflict of interest?
Chris Philp (Conservative, Croydon South)
Q Would not that be allowed as a default fee under the Bill?
Chris Philp (Conservative, Croydon South)
Q I will come on to default fees in just a moment. In your earlier evidence you mentioned that one of the services paid for by the tenant was to provide the best tenant for the landlord, but there is clearly a conflict there. From a landlord’s perspective, they want the most creditworthy tenant, but any individual tenant just wants to get the house. There is an inherent conflict there, and to represent both sides of that is misleading. I put it to you that this legislation clears up that conflict by making it clear that the agent is acting for the landlord.
Chris Philp (Conservative, Croydon South)
Q That is fine because it will not waste the tenant’s time either.
Chris Philp (Conservative, Croydon South)
Q But you are saying that they cannot afford those properties, so it will avoid tenants wasting their time. Let me move on to your other point. You suggested that in 2012 rents in Scotland went up, whereas in the rest of the UK they were flat or very slightly down, and you sought to ascribe that to the changes in fee arrangements. Are you potentially confusing coincidence with causality? The first thing you get taught when you study science is that correlation is not the same as causality.
Chris Philp (Conservative, Croydon South)
Q I am interested that you have conceded you have no direct evidence—that is a very important admission. I suggest one reason might be that whereas average incomes in England and Scotland are broadly similar, average rental prices in England are about 50% higher, so that relative move you described simply closes a very small part—about one tenth—of the relative differential between those two nations. You said you do not have any direct evidence, which is a very helpful admission.
Before I turn to your comments on referencing, Mr Hyslop, let me commend you on setting up such an effective and efficient business. It has clearly grown very quickly and I was impressed by what you said about the way your company operates and the low costs that you have managed to deliver to both tenants and landlords. Congratulations on innovating in that way. As a former entrepreneur, I strongly endorse what you have done.
Chris Philp (Conservative, Croydon South)
On your question about misleading information, you gave examples of information that is clearly misleading, such as a mis-stated salary. You went on to give examples of things that are less clear, such as a poor credit score or employer reference. Is the point that the prospective tenant will not have made a representation or statement about their credit score or their employer’s reference, so they will not be guilty of having given misleading information? They will not say, “My Experian credit score is at least 800,” so they will not get caught by the clause because they will not have provided misleading information?
Chris Philp (Conservative, Croydon South)
Q Are you suggesting £20?
Peter Bone (Conservative, Wellingborough)
I am going to have to cut you short on that. I am conscious that I promised the Minister to allow him in before the end.
Neil O'Brien (Conservative, Harborough)
I want to bring us on to the question of refundable tenancy deposits. The Bill caps them at six weeks of rent. Do you all think that is the right levelQ ?
Neil O'Brien (Conservative, Harborough)
Q Some have argued for taking it down to four weeks. What would be the effect of that?
Rishi Sunak (Conservative, Richmond (Yorks))
Q May I thank all the panellists for being with us this morning and thank you for engaging with the Department during the course of the formulation of the Bill. I appreciate all the time you have given.
For the record, the Government and I do not have the intention of trying to drive letting agents out of business, as was potentially characterised early on. We very much recognise the valuable role that high quality letting agents play. We have got a great example of one here this morning. This Bill is just about improving the industry to make it work for tenants where there have been abuses of the system and an asymmetry of power. I wish to put on record our thanks for the work many good letting agents do.
In the brief time we have—and in a quick answer to the question—the Bill allows for default fees for things such as a lost key or a late rental payment. Do you think that is a sensible provision to have in the Bill? Also, the Bill allows for payment for changes to the tenancy agreement at the request of the tenant—such as an extra sharer added to the tenancy agreement—capped at the landlord’s reasonable fees for that. Do you think those are sensible? Do you think they should be limited or broadened?
Peter Bone (Conservative, Wellingborough)
Order. I am very sorry to interrupt. You have been a very engaging and useful panel and we could have gone on much longer, but I am afraid that under the programming motion, I have to bring the session to an end. Thank you very much for attending this morning.
Peter Bone (Conservative, Wellingborough)
Q We will now hear oral evidence from the National Landlords Association and the Residential Landlords Association. We only have until 10.55 for this session. Gentlemen, would you introduce yourselves and, to speed things up, perhaps make an opening statement at the same time?
Melanie Onn (Labour, Great Grimsby)
Q Do you think that it is about enforcement, or is it about deterrence? Fines are set at around £5,000. Do you think that is enough of a deterrent? Do you think that if those fines were sufficiently high to worry the small number of rogue landlords, we would not have to worry so much about the enforcement side?
Melanie Onn (Labour, Great Grimsby)
Q Mr Lambert, would you agree with that?
Melanie Onn (Labour, Great Grimsby)
Q Do you think it is right that tenants in England should pay more than tenants in Scotland?
Melanie Onn (Labour, Great Grimsby)
Q In relation to tenant fees, given that is what we are here to discuss. I am not allowed to go outside the scope of that.
Maria Caulfield (Conservative, Lewes)
On the issue of enforcement, I have been working closely with my local citizens advice bureau in Lewes, which has done a huge Q amount of work on this. The current system does not work because it is up to local authorities to enforce it, and tenants often do not realise that there are fees that have to be paid, and that on the same high street those fees could vary from hundreds to, in some cases in my constituency, thousands of pounds, and that letting agents are supposed to publish those fees.
So, currently, the enforcement system is not working. Is it not right that if fees are banned, tenants will be able to self-enforce, because they will be aware that no fees should be charged? Do you not recognise that this would give more power to tenants in the process, given that currently they are not able to make those decisions?
Maria Caulfield (Conservative, Lewes)
Q There is, because it will be very clear that these fees will be banned.
Maria Caulfield (Conservative, Lewes)
Q But do you not recognise that that gives power back to the tenants? They can then question letting agents as to why fees are being charged. Currently they do not have the information to be able to do that.
Maria Caulfield (Conservative, Lewes)
Q Do you not welcome the Bill, then, in that it will make it very clear to tenants that there should not be fees being charged in the first place? They can then make that decision for themselves.
Maria Caulfield (Conservative, Lewes)
Q Do you not recognise that the Bill would improve that situation?
Maria Caulfield (Conservative, Lewes)
Q I just have a quick question on default fees. Will you set out your views on default fees, and why they are necessary? I recognise that there are tenants who often leave properties in a state in which they did not find them. How often, in your experience, are default fees payable? What percentage of tenants would this apply to?
Maria Caulfield (Conservative, Lewes)
So businessmen like you don’t know how often default fees are applied, as it stands.
Maria Caulfield (Conservative, Lewes)
Q So is there a need to have default fees within this Bill?
Sarah Jones (Labour, Croydon Central)
May I just ask for information? Obviously we accept that the majority of landlords are good landlords and do the right thing. You talk about exploitation, variation and some egregious levels of charging, and some exploitation of people. Would you describe what evidence there is as to the numbers of good agents versus bad agents, and good landlords versus bad landlords? We talk about the bogus ones who are charging people but is there evidence of the number, or of where they tend to be? Do they tend to be the bigger ones or smaller ones? Are they in cities or in rural areas? What do we know?Q
Sarah Jones (Labour, Croydon Central)
Q Yes. On the agent side, you said you could walk down a street and point the local authority to all the agents who are not displaying their fees at the right level. Do you have any sense of where and who those agents are? Are there any numbers to any of these assertions?
Sarah Jones (Labour, Croydon Central)
Q My question is whether there are any numbers on any of that, or whether it is all just speculation.
Sarah Jones (Labour, Croydon Central)
Might vary.
Sarah Jones (Labour, Croydon Central)
Q I have two other quick questions, if that is okay, Mr Bone. We have talked a lot about enforcement. Can you describe your ideal enforcement regime that would enable the Bill to be implemented?
Sarah Jones (Labour, Croydon Central)
Q In terms of local authorities, what kind of enforcement do we need there? We talked earlier about needing more resources. What else do we need?
Sarah Jones (Labour, Croydon Central)
Q I completely agree. On the six-week cap on deposits, people have suggested that the majority of landlords charge four weeks’ rent, and that if this piece of legislation goes through as it is, they would automatically put it up to six weeks. What is your view on that?
Sarah Jones (Labour, Croydon Central)
Q The question is whether people who are on four will put it up to six when this legislation is passed.
Peter Bone (Conservative, Wellingborough)
Thank you. I am going to move to Richard Graham very briefly, and then I want the Minister to have some fun.
Richard Graham (Conservative, Gloucester)
Q We all totally understand that there is a huge risk of unscrupulous agents or unscrupulous landlords continuing to exploit the most vulnerable, but a number of you, in this session and earlier, have said rather airily that you could just walk down the high street and find the—I think you used this figure—15% of agents with wrong information and so on. If you have that sort of information, why do you not share it with both local authorities and the MPs involved?
Richard Graham (Conservative, Gloucester)
Q I can absolutely assure you I have never had a letter, from your organisation or anyone else, telling me anything about any agent in the city of Gloucester who is doing it wrong. I would be delighted to have it and I would follow up on it, and I think you would find that a lot of MPs would share the same view.
Richard Graham (Conservative, Gloucester)
Q May I suggest that you change your habit if you think there is a real problem, and then we can help you to resolve it?
Peter Bone (Conservative, Wellingborough)
We are running short of time. Minister.
Rishi Sunak (Conservative, Richmond (Yorks))
Q Thank you both for coming today, and thank you for your engagement with the Department on formulating the Bill, which we very much appreciate. I have one quick question about holding deposits. The Bill permits a holding deposit to be taken by a landlord while references and things are being conducted, and allows part of that to be withheld if misleading or false information is provided. Do you agree with that provision? Do you think it provides an appropriate protection for landlords?
Rishi Sunak (Conservative, Richmond (Yorks))
Q Just to clear up something you said before, you talked about ambivalence regarding the deposit—that is, the number of weeks of deposit. To be crystal clear, are you ambivalent about the number of weeks at which the deposit should be capped, or do you agree that six weeks is the right level, or too low, or too high?
Peter Bone (Conservative, Wellingborough)
Thank you very much for coming today. It has been a most interesting session. We could have continued for longer, but I am afraid that the programme order requires me to stop the evidence session now. That brings us to the end of your evidence session today. The Committee will continue to take oral evidence in our next sitting on Thursday at 11.30 am, ahead of beginning the line-by-line consideration of the Bill at 2 pm.