Commercial Rent (Coronavirus) Bill
Public Bill Committee, 7 December 2021.
(Morning)
Stewart Hosie (Scottish National Party, Dundee East)
We are now sitting in public and the proceedings are being broadcast. Before we begin, I have a few announcements. Please switch electronic devices to silent. No food or drink is permitted during sittings of the Committee except for the water provided. Members are expected to wear masks when they are not speaking, in line with current Government guidance and that of the House of Commons Commission. I remind Members that they are asked by the House to have a covid lateral flow test twice a week if coming on to the parliamentary estate. That can be done either at the testing centre in the House or at home. Please also give one another and members of staff space when seated and when entering and leaving the room. Hansard colleagues will be grateful if Members could email their speaking notes to hansardnotes@parliament.uk.
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.
Stewart Hosie (Scottish National Party, Dundee East)
The Committee will therefore proceed to line-by-line consideration of the Bill on Thursday at 11.30 am.
Stewart Hosie (Scottish National Party, Dundee East)
Copies of written evidence that the Committee receives will be made available in the Committee Room and circulated to Members by email.
Stewart Hosie (Scottish National Party, Dundee East)
We will now go into a short private session to discuss lines of questioning.
Examination of Witnesses
Stewart Hosie (Scottish National Party, Dundee East)
Q We are now sitting in public again and the proceedings are being broadcast. Do any Members wish to make a declaration of interests in connection with the Bill? No, so in that case, we will hear evidence from Kate Nicholls OBE, chief executive of UK Hospitality, who will appear in person, and Dominic Curran, property policy adviser at the British Retail Consortium, who will appear by Zoom. I remind 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 agreed. For this session we only have until 10.10 am. Would the witnesses introduce themselves for the record? If they have any brief introductory remarks, I would be delighted to hear them. Kate, I will begin with you because you are in the room.
Stewart Hosie (Scottish National Party, Dundee East)
Do you have any introductory remarks to make about the Bill?
Stewart Hosie (Scottish National Party, Dundee East)
Thank you. Dominic, will you introduce yourself and make any introductory remarks that you may have?
Stewart Hosie (Scottish National Party, Dundee East)
Thank you very much. In that case, I will open up the floor to questions. Seema Malhotra.
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Thank you very much. We really appreciate you both coming to give evidence today. I will ask Ms Nicholls a question first, if I may. Do you feel that the Government have engaged sufficiently with stakeholders on introducing the Bill, and are there specific changes that you feel may be important in order for it to better achieve its intended outcomesQ ?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Have you had any concerns at all about any definitions in the Bill—for example, the definition of “tenant”, which is slightly narrower than definitions in other parts of coronavirus-related legislation? Given your experience in the hospitality sector, what can you share about areas where there may have been difficulties with landlords and tenants achieving an agreement between them?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q I have one final, small question. Do you have any views about the fee structure that may be brought in? Clearly, we want the scheme to be affordable and accessible. Have you been involved in any discussions about whether there should be a cap on the fees or what kind of fee structure there should be for the arbitration process?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Mr Curran, do you have any additional comments to make on those areas, and do you feel confident that the scheme as outlined will work in practice?
Paul Scully (Conservative, Sutton and Cheam)
Q Can you give us an idea from the retail perspective of how significant the problem of rent arrears still is?
Paul Scully (Conservative, Sutton and Cheam)
Q The code of practice will remain an important part of the solution. How has it helped over the past few months
Paul Scully (Conservative, Sutton and Cheam)
Q Do you think signifying that we are legislating has helped move things on significantly? Have people priced this in to their discussions now?
Paul Scully (Conservative, Sutton and Cheam)
Fantastic. Thank you very much.
Ruth Cadbury (Labour, Brentford and Isleworth)
We have had evidence of concerns about the arbitration scheme—for example, whether there should be a single approved arbitration body and about the difference compared with other arbitration schemes in how the agreement is reached as to which arbitrator should be used. There is a concern that they should be legally qualified rather than just businesspeople, because of the nature of complex arbitration processes. There is also a question about confidentiality, which is the norm in such processes but is not specified in the Bill. Mr Curran, do you have any comments on those issues?Q
Ruth Cadbury (Labour, Brentford and Isleworth)
Q Is there anything else to add about the arbitration processes in the Bill?
Sara Britcliffe (Conservative, Hyndburn)
Ms Nicholls, you touched on templates earlier. What more can we do to make sure that commercial tenants are aware of the arbitration process available to themQ ?
Sara Britcliffe (Conservative, Hyndburn)
Q If further restrictions were to come in, what effect would that have on businesses?
Sara Britcliffe (Conservative, Hyndburn)
Dominic, do you want to add something?
Peter Dowd (Labour, Bootle)
An early-day motion tabled on 27 April 2020 expressed concern—I will not go into the details—about some large pub companies charging rents. You can have a look at it after the meeting. Partly in relation to that, I just want to get a feel of the differences you may have seen between small and large tenant and landlord businesses and how they have handled rent arrears. Have you seen any differences at allQ ?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Could I ask your views—perhaps I will start with Mr Curran—about the 10 November cut-off? We have had some evidence suggesting that there are landlords who are choosing not to engage and are ignoring the code, and who have applied for court order judgments for full arrears to be paid. Do you have a view about whether the Bill should treat all claims equally, whether they were issued pre or post 10 November, and have you seen in practice behaviour that could end up getting around the protections that the legislation is intended to bring in?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Ms Nicholls, have you had similar concerns? I would also be very interested to know whether this has been a subject of discussion in the consultations that you may have had with Government, and what the outcome of that was.
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Thank you for the clarity on that. It certainly seems extraordinary that litigious landlords should in the end be doing better than those who may have acted fairly. That seems to go against all the principles and intentions of the Bill as well. I am sure the Minister has also heard the comments today. Could I ask, then, a specific question? I think you have alluded to this. Would you be supportive of arbitrators being able to also award adverse costs where one side or the other has made the process of reaching agreement more difficult?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Mr Curran, you made very helpful comments in relation to the skills and experience that you would expect to see from arbitrators. Have you had the opportunity to share that with officials previously, and has there been any discussion about, perhaps, a small discussion or consultation with you about what the skills and experience should be? It is clear that the arbitrators will be making some critical decisions about the viability of businesses. Do you think this is something that should have some more specific definition and expectations from the Secretary of State prior to the panel and the appointment of arbitrators?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Finally, you alluded to the question of viability and how it should be determined. As you mentioned, from April next year the new national insurance hike, or jobs tax, and other increased costs to businesses will come in. How should those extra costs for businesses be considered when determining viability? Some sectors may well recover but will have a slower tail of recovery, particularly with the ongoing uncertainty around covid and covid variants. What is your view of how viability should be assessed, and within that context, the impact of the extra costs to businesses that are coming?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
I ask Ms Nicholls the same question.
Stewart Hosie (Scottish National Party, Dundee East)
Order. I am sorry to cut across you in full flow, but I am afraid we are at the end of the time allocated for these questions. I thank the witnesses very much indeed. We will now prepare for the next panel.
Examination of witnesses
Stewart Hosie (Scottish National Party, Dundee East)
Before we start with the next panel, I remind Members that they are expected to wear masks in Committee when not speaking. We will now hear oral evidence from Melanie Leech CBE, chief executive at the British Property Federation, appearing by Zoom, and Astrid Cruickshank, director of Lightstone Properties, also appearing by Zoom. For this session we have until 10.55 am. Can the witnesses please introduce themselves for the record? If there are any very brief introductory remarks, you are more than welcome to make them.
Stewart Hosie (Scottish National Party, Dundee East)
Thank you. Astrid?
Stewart Hosie (Scottish National Party, Dundee East)
Thank you very much. Seema Malhotra?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q I want to start by asking Ms Leech some questions in relation to the very helpful briefing note that was sent through to the Committee. I would be keen to understand your view about the scale of the challenge, if you like, in terms of the difficulties in achieving agreement between tenants and landlords. What does your recent survey and research show about the scale of the challenge? Do you feel that all parties are generally acting in good faith?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Thank you. To understand more about where they are not covered by agreements and what some of the concerns and behaviours of those involved might be, have you come across examples where the code has been ignored or people have not acted in good faith? What are some of the behaviours that you are seeing?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Can I ask a slightly different question about the discussion we had with the previous witnesses? I will put the question to you first, Ms Cruickshank. There needs to be confidence in the arbitration process. What is your view about the skills and experience that the arbitrators should have, and do you have a view about how they should be appointed?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Could I follow up with you, Ms Leech, on the issue of confidence in the system? In your evidence to the Committee you alluded to the Government’s impact assessment of arbitration, which suggests that there are some key uncertainties that could threaten how the system will work in practice. You referenced the costs associated with arbitration, the number of cases that might enter, and suitably qualified arbitrators. Could you elaborate on that, and on why there could be scepticism that the system will work effectively in practice?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q It might be helpful to hear from you both on whether there could be modifications to the scheme, or whether there might need to be a sliding fee structure, or some other clearer ways in which the system could work for smaller as well as for larger and more complex businesses. It would be helpful to understand what modifications to the scheme could allow it to be more flexible, in terms of being accessible and affordable for businesses that might need it.
Stewart Hosie (Scottish National Party, Dundee East)
We have a sound issue, Ms Leech. Hold on one second.
Paul Scully (Conservative, Sutton and Cheam)
Q I have a similar question to that I asked the last panel. From what you were saying, I think you agree that the legislation will be able to bring certainty to landlords. I know it is not a comfortable position to be in, with intervention in, effectively, a private contract, but it will give you some degree of certainty in the sense that you are pricing it into your thinking moving forward.
Paul Scully (Conservative, Sutton and Cheam)
Thank you. Astrid, same question to you.
Paul Scully (Conservative, Sutton and Cheam)
That point is very well made as well. Thank you.
Mark Eastwood (Conservative, Dewsbury)
I have a question for Melanie. Some landlords have argued that a binding arbitration system would favour the tenant over the landlord. What is the view of the BPF on thatQ ?
Mark Eastwood (Conservative, Dewsbury)
Do you want to add anything, Astrid?
Peter Dowd (Labour, Bootle)
Q We all know of circumstances in which tenants and landlords may have played the game; frankly, it would be naive to believe otherwise. In that regard, we are in exceptional circumstances. Members here today are supposed to be wearing masks, for example; we have rules in the House, but people ignore them. We are all trying to play the game in this sort of situation. We are all trying to be responsible.
There is an issue about landlords. I think you accepted that landlords agree with the principle that both landlords and tenants might have to share the burden of rent arrears that built up during the period of coronavirus restrictions, in the light of the examination of evidence. Do you accept the principle that there may have to be a sharing of the loss for both the tenant and the landlord? Unlike Government Members, I do not think that this is a laughing matter.
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q I want to ask you specifically about the definition of “business tenancy” in the Bill. There has been some feedback that the definition is different from and narrower than that of the relevant business tenancy in coronavirus legislation. Do you have any views about the definition and, therefore, what could come within the scope of the Bill?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Thank you. May I ask for your view on whether the hearings should be in public or potentially in private and what the guidance around the arbitration process should be on that?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Both of you say that there might need to be some private hearings. Would that be something you would want to see the arbitrators have some discretion over? How do you see that?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Could I ask one final question? Do you have any views about how the fee system structure should be put in place in order to make the arbitration affordable and accessible? Do you have any views about how that should implemented and whether there should be a cap on arbitration costs? Secondly, where one side might be making the process more difficult, do you think there should be the power to award adverse costs to either party?
Mark Eastwood (Conservative, Dewsbury)
Q Melanie, you mentioned in your introduction that you represent commercial agents, who as you know offer property management services and rent collections. Have you had any feedback from commercial agents or property management sector, or any consultation with them? Are they fairly agreeable to the Bill?
Stewart Hosie (Scottish National Party, Dundee East)
Thank you. Are there any final questions? No. In that case, I thank the witnesses very much for their evidence.
Examination of witness
Stewart Hosie (Scottish National Party, Dundee East)
Q We will now hear oral evidence from Lewis Johnston, assistant director of policy and external affairs at the Chartered Institute of Arbitrators, who is appearing in person. We have till 11.25 am on this session. Mr Johnston, could you please introduce yourself for the record? As with the previous witnesses, if you have any brief introductory remarks, please make them now.
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Thank you, Mr Johnston, for coming to give evidence today. In relation to the scheme being set up and the assessments that will be made, what key skills and experience will those who participate in the scheme as arbitrators need to have?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q There has been some discussion about fee structures and the fact that the Secretary of State may be able to make regulations in this area. What would be an appropriate way to have a fee structure that is affordable and accessible?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Thank you for that. I want to pick up on a point you made about the number of those who may be qualified and have the relevant skills and experience, which may come forward in further discussions on the detail of the scheme. In your experience, is there sufficient interest for arbitrators to be involved in the scheme? One of the critical success factors will be that enough are involved so that there is not a backlog in dealing with some of the rent arrears cases. What is your view about the level of interest and the sufficiency of supply of arbitrators?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q What is your view on how arbitrators should be guided in going through the process? What needs to be in place, in terms of guidance or otherwise, to make their role clear, so that there is some consistency? I imagine that confidence will come with clarity and consistency. Do you have any concerns or any message for us about what you want to see in place—what kind of guidance needs to be brought forward? Could I extend that to how assessments might need to be made of viability and ability to pay, with other costs—business rates and other costs, like the jobs tax—that might be coming on stream for businesses as well?
Peter Dowd (Labour, Bootle)
Q Partly linked to this one is clause 7(2) and (3). Subsection (2) sets out the requirement for the Secretary of State to approve those bodies suitable to become approved arbitration bodies to carry out the functions under section 8. The disapproval of arbitration bodies is in subsection (3). Have you had any conversations with the Department about the parameters of approved arbitration bodies—who they should be associated with, registration and all the rest—given that there may well be substantial amounts of arbitration going through the process?
Peter Dowd (Labour, Bootle)
Q Would you welcome further, more detailed discussions with the Department on these matters? It is important that we try to get this right, because we do not want to create more problems down the line. I think we have been here before in relation to those people who are regulated—whether that be social workers, doctors or nurses—so it is important that we get that right. Would you welcome more significant or more substantive discussions with the Department about how this should pan out?
Paul Scully (Conservative, Sutton and Cheam)
Q In the last sitting, Melanie Leech expressed concern about having a system like this set up for small landlord and tenant issues, compared with some of the bigger and more complex ones. How do you think arbitration services could cater for both sides?
Sara Britcliffe (Conservative, Hyndburn)
Q In the simple case that you talked about, from your perspective what is the likely cost of that, including the legal fees of the tenants and landlords?
Sara Britcliffe (Conservative, Hyndburn)
Q Can I clarify that, in answer to a previous question, you stated that you would want documents only?
Stewart Hosie (Scottish National Party, Dundee East)
Q Given that there are no further questions and we are not pressed for time, Lewis, do you have any other observations that have not been drawn out in the questions that you have received so far?
Stewart Hosie (Scottish National Party, Dundee East)
Thank you very much for your evidence.
(Afternoon)
Examination of witnesses
Stewart Hosie (Scottish National Party, Dundee East)
Good afternoon, gentlemen. We will now hear oral evidence from Jack Shakespeare, director of research, policy and communications at UK Active, Andrew Goodacre, chief executive officer of the British Independent Retailers Association, and Martin McTague, national vice chair of the Federation of Small Businesses. We have until 3 pm for this session. Could I ask you to introduce yourselves? If you have any brief remarks to make, please do so now.
Stewart Hosie (Scottish National Party, Dundee East)
Thank you. Mick Whitley.
Mick Whitley (Labour, Birkenhead)
Good afternoon, panel. I think we met last week, didn’t we?
Mick Whitley (Labour, Birkenhead)
Q 44 Many businesses continue to experience significant covid-related disruption to their businesses, even following the end of the lockdown restrictions. Do you think that the protected period for rent debts should be extended, and if so, for how long?
Mick Whitley (Labour, Birkenhead)
Q Do other witnesses have anything to add?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Thank you for coming in to give evidence. Perhaps I could start with Mr McTague. On the 10 November cut-off date, we have had some evidence of concerns about landlords who have not engaged with their tenants, and who may have ignored the code and started to apply for court judgments to pay the full rental arrears. Those who started proceedings before 10 November could be in a more advantageous position than those who played it fairQ . Have you come across that at all through the FSB, and what is your view about whether there should be a retrospective change to the 10 November date?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q That is interesting, because some other witnesses have suggested that they would want to go further and see a greater incentive to use the scheme and to be treated more fairly within it. The more litigious landlords seem to do better for acting less fairly.
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q You may not have come across the same ones. Mr Shakespeare?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Do you have any concerns or suggestions about what the skills and experience of arbitrators should be? That is a slightly open question at the moment. What perspectives do you have? What experience do you think they would need to have in order to carry out the function effectively?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q That is helpful. Mr Shakespeare, I wonder whether you could come back on that point. I would also be interested in your view about how much arbitrators should be able to charge and what would be a fair, accessible and affordable system, perhaps for those whom you have experience of and their situations.
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Was that alluding to adverse costs as well in cases of making it difficult?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q I have a final, very quick question. Do you have any concerns that any part of the scheme would make it less likely to work, not in theory but in practice?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q Do you mean the six months after the start?
Seema Malhotra (Labour/Co-operative, Feltham and Heston)
Q I think it is important—in the context of increased business costs next April, whether from business rates or the jobs tax—that your view is that those six months may not be long enough to have the scheme in place.
Peter Dowd (Labour, Bootle)
I want to tease out a little bit more on the extent of the impact on the Landlord and Tenant Act 1954. How wide is it? How many businesses are we talking aboutQ ?
Peter Dowd (Labour, Bootle)
Yes.
Peter Dowd (Labour, Bootle)
Q Do you think that is a significant lacuna?
Peter Dowd (Labour, Bootle)
Q I am sure the Minister is listening to that. I think he has clearly got that tagged.
Peter Dowd (Labour, Bootle)
I am sure the Minister has got that tagged and will be paying due attention to it.
Stewart Hosie (Scottish National Party, Dundee East)
I think for today, Mr Dowd, we will just ask the witnesses questions.
Peter Dowd (Labour, Bootle)
Q Thank you, Chair. In terms of the sectors that you think are most indebted, how are they currently coping? What are those sectors? We have touched on that a bit today. Which are the sectors that are currently most in debt? How are they managing?
Peter Dowd (Labour, Bootle)
Q In terms of arbitration and the process available to commercial tenants, what can be done to ensure that they are aware of that process? We have lots of businesses under stress and strain, which we all understand—the Government understand that; we understand that. What do we need to do to get that message out and to give some reassurance?
Paul Scully (Conservative, Sutton and Cheam)
Q We talked a bit about the scale of the problem. Government signalled that we were going to legislate in this area. Can you give us an idea of what that did? Did it kick- start conversations? Did you see results that are now priced into the debate between landlords and tenants? Do you have any reflections on that?
Paul Scully (Conservative, Sutton and Cheam)
Q To follow up on your point, Martin, about businesses that are not within the scope, it is a really difficult balance to get right without swamping the system such that it is not satisfactory for anybody. Obviously the code of practice remains there for all businesses. What are your reflections on how the code has worked, whether the changes that have been made recently improved it, and which other areas would be useful within it?
Paul Scully (Conservative, Sutton and Cheam)
Q Jack and Andrew, do you have any other reflections on the code?
Mick Whitley (Labour, Birkenhead)
Q Are you concerned that the potential costs of arbitration might put business tenants, especially small and independent businesses, off engaging in the arbitration process, thereby leading to their closure?
Stewart Hosie (Scottish National Party, Dundee East)
Given that there are no further questions, I thank the witnesses for their evidence. That brings us to the end of today’s oral evidence session. The Committee will meet again on Thursday at 11.30 am in Committee Room 10 to begin line-by-line consideration of the Bill.