The
Committee consisted of the following
Members:
†
Betts,
Mr. Clive
(Sheffield, Attercliffe)
(Lab)
†
Cox,
Mr. Geoffrey
(Torridge and West Devon)
(Con)
†
David,
Mr. Wayne
(Caerphilly)
(Lab)
Davies,
David T.C.
(Monmouth)
(Con)
†
Duddridge,
James
(Rochford and Southend, East)
(Con)
†
Fabricant,
Michael
(Lichfield)
(Con)
†
Follett,
Barbara
(Stevenage)
(Lab)
†
Hoyle,
Mr. Lindsay
(Chorley)
(Lab)
†
Lepper,
David
(Brighton, Pavilion)
(Lab/Co-op)
†
McCafferty,
Chris
(Calder Valley)
(Lab)
†
Marshall-Andrews,
Mr. Robert
(Medway)
(Lab)
†
Munn,
Meg
(Parliamentary Under-Secretary of State for Communities and
Local
Government)
†
Rogerson,
Mr. Dan
(North Cornwall)
(LD)
†
Shaw,
Jonathan
(Chatham and Aylesford)
(Lab)
†
Spellar,
Mr. John
(Warley)
(Lab)
Stunell,
Andrew
(Hazel Grove)
(LD)
†
Syms,
Mr. Robert
(Poole)
(Con)
James
Davies, Committee
Clerk
†
attended the Committee
Fifth
Delegated Legislation
Committee
Wednesday 7
March
2007
[Mr.
Greg Pope
in the
Chair]
Draft Housing (Tenancy Deposit Schemes) Order 2007
2.30
pm
The
Parliamentary Under-Secretary of State for Communities and Local
Government (Meg Munn):
I beg to
move,
That the
Committee has considered the draft Housing (Tenancy Deposit Schemes)
Order 2007.
For some
years, the Government have been aware of bad practice by a minority of
landlords and agents regarding tenants’ deposits. Last year,
there were about 1.7 million assured shorthold tenancies—the
standard tenancy in England and Wales—to which tenancy deposit
protection applies. In 85 per cent. of those tenancies, 1.4 million
tenants had paid a deposit. In England, that averaged £700 per
tenancy, which is a big investment that tenants are entitled to receive
back if they keep the rented property in good condition.
In recent Government surveys,
17 per cent. of tenants questioned felt that some or all of their
deposit had been unfairly withheld. That equates to 246,000 deposits,
and if just one half of those deposits, averaging £700, had been
unfairly withheld, that would amount to £86 million. We would
all miss £700 if it was not returned to us, but in some cases
severe hardship
results.
We decided,
with cross-party agreement, that itwas time to provide
statutory protection for tenants’ deposits through amendments in
Committee and on Report in the other place to the Housing Bill, which
became the Housing Act 2004. Landlords and agents will be able to
choose between the custodial scheme and one of the two insurance-based
schemes to protect their deposits, or they could use a mixture of all
three if they have many
deposits.
Mr.
Lindsay Hoyle (Chorley) (Lab): Can the Minister help me?
In most cases, charities provide the deposit. What benefit will the
order bring to charities, which put so much of the money in? Perhaps
she can give us the figure for the amount provided by individuals, and
the amount provided by
charities.
Meg
Munn:
Clearly, the protection of deposits will benefit
charities because, provided the tenant leaves the property in good
order, the money can be returned at the end of the tenancy. I do not
have the figures to hand, but I may be able to respond to my hon.
Friend later.
I shall
describe how the schemes will work. Under the insurance scheme, the
landlord or agent will hold the deposit, as now, and pay a fee to the
scheme administrator who will ensure against any failure
on
the part of the landlord to repay such part of the deposit that should
be repaid to the tenant. There are two insurance-based
schemes.
Tenancy
Deposit Solutions Ltd. is a partnership between the National Landlords
Association, which sponsors the scheme, and Hamilton Fraser Insurance,
which will administer it. It caters primarily for landlords, although
letting agents can also join the scheme. Its fees for landlords and
agents were announced last
week.
James
Duddridge (Rochford and Southend, East) (Con): For the
sake of clarity, will the Minister outline those costs, because I am
concerned about
them?
Meg
Munn:
I will happily come to
that.
The second of
the two insurance-based schemesis the tenancy deposit scheme,
which builds on a voluntary scheme that was established in 2003 to
provide dispute resolution and complaints handlingfor the
letting industry. It caters primarily for agents, although landlords
can also join. Its fees for agents were announced on 1 February. Fees
for landlords are expected to be announced
soon.
The custodial
scheme is run by the Deposit Protection Service. Its parent company is
run by Computershare Investor Services plc, which has successfully
delivered the Australian state of Victoria’s custodial tenancy
deposit scheme for the past eight years. In this scheme, the landlord
or agent pays the deposit into the scheme and the interest generated by
the deposit pool pays for the running of the scheme. A percentage of
the interest is returned to person—the landlord or
tenant—who is entitled to the deposit at the end of the tenancy.
The scheme is free to use by landlords and
agents.
Each scheme
will be supported by a free-to-use alternative dispute resolution
service, funded by scheme providers. That is a statutory requirement
under schedule 10 to the Housing Act 2004. The Act provides stiff
penalties for those landlords or agents who fail to protect their
tenants’ deposits in a scheme or who fail to provide their
tenants with details of how their deposit is
protected.
First, the
landlord or agent will be unable to regain possession of the property
using the usual “notice only grounds” available in
respect of assured shorthold tenancies if they have either failed to
protect the deposit within 14 days of receiving, or failed to provide
the prescribed information to the tenant within 14 days of receiving
the deposit. Secondly, if the court directs a landlord or agent to pay
the deposit into a scheme and he or she refuses, the court must order
the landlord to pay the tenant three times the deposit
amount.
Getting the
message across to tenants, landlords and agents is crucial to the
success of tenancy deposit protection. We are employing a range of
media to publicise it. Simple, easy-to-understand leaflets are
available in eight languages and an advertising campaign will run
across national, regional, ethnic minority and trade press and online
until May 2007.
The
consultation exercise in November 2005 onthe prescribed
information to be given to a tenant, combined with numerous subsequent
communications with tenant, landlord and industry representatives over
the past 18 months, brought to light three key concerns regarding the
operational aspects of this part of the Housing Act 2004. First, the
requirement for joint agreement to release the deposit in the custodial
scheme makes it impossible for a scheme to release the deposit without
a court order in circumstances where joint agreement is not possible
and the other party is genuinely entitled to the deposit.
Secondly, a landlord or agent
in the insurance-based scheme would be able to frustrate a
tenant’s efforts to resolve a dispute by not bothering to
indicate how they wish a dispute to be resolved at the end of the
tenancy, thereby forcing the tenant to take the dispute to court.
Thirdly, a requirement for the insurance-based schemes to protect
deposits, even if the landlord has transferred protection elsewhere and
the scheme is not receiving any membership fees, is commercially not
feasible for an insurance-style scheme. We have acted on those concerns
and brought forward three corresponding amendments to schedule 10 to
the Act throughthis order, together with some minor
consequential amendments. I will explain each of the three main changes
in detail.
The first
change is the single claim. The Act currently requires joint agreement
for release of the deposit from protection at the end of the tenancy in
the custodial scheme. If one party cannot contact the other to obtain
joint agreement on the apportionment ofthe deposit—for
example if the tenancy has been abandoned—the only recourse is
for that party to go to court to release the deposit. The proposed
amendment to schedule 10 will allow a landlord, agent or tenant to make
a single claim application to the scheme administrator for all or part
of the deposit to be paid to him when joint agreement is not
possible.
At the end
of the tenancy, the claiming party should try to obtain agreement from
the other party regarding the release of the deposit. However, if after
a periodof 14 days they cannot contact the other party, the
claiming party can submit a single claim to the scheme administrator
together with a statutory declaration which must include the
information that is set out in the order about the tenancy and the
communication attempts that have been made by the claiming party to
reach agreement. It must also make clear why a single claim is being
made.
The scheme
administrator will immediately send the application and statutory
declaration to the last postal address they have for the other party.
If the scheme administrator receives no response, they will pay the
amount of the deposit applied for to the applicant.If the
other party does respond, and objects to the applicant’s claim,
the dispute will have to be resolved before the administrator pays out
the disputed part.
The
second change is to make the use of alternative deposit resolution
automatic for disputes in either scheme when both parties are still
able to contact each other but one or other is refusing to communicate
how the deposit should be paid out, or how they wish any dispute to be
resolved. This change is applicable for both schemes. As the Act
stands, when the landlord and tenant cannot agree who is entitled to
the deposit at the end of the tenancy, but one of the parties does not
indicate whether they wish to use alternative dispute resolution or the
courts, the default position is that the dispute must be resolved
through the court.
That places the parties in no better situation than
before the Housing Act was passed, so the changesnow require
the parties to indicate to the scheme administrator how they wish any
dispute over the deposit to be resolved. If the whereabouts of both
parties is known, and if one party has agreed to resolve the dispute
through the scheme’s free alternative deposit resolution
service, but the other party has failed to indicate how it wishes to
resolve the dispute, the scheme will treat the non-communicating party
as having agreed to use the alternative deposit resolution. That will
encourage the parties to stay in contact with each other and enable the
majority of disputes to be resolved more cheaply and quickly than
through the courts.
The third key change deals with
a situation in which either a landlord or a scheme administrator wishes
to cease protecting a deposit through an insurance-based scheme even if
a tenancy is not at an end. Schedule 10 of the Act requires an
insurance scheme to continue to protect its deposits until the end of
the tenancy and when the deposit has been repaid even though a landlord
might want to use an alternative scheme, or the scheme might wish to
expel a landlord—for example, if they have breached scheme rules
ornot paid their membership fees. That is a highly undesirable
and unintended situation for a commercial insurance organisation. The
order amends schedule 10 to allow a landlord to secure the deposit in
one of the other schemes, and for the scheme administrator to end
protection of the deposit before the end of the
tenancy.
James
Duddridge:
The Minister is going through the detail, but I
want to take her back to the broader picture. Are only shorthold
tenancies covered or are other types of tenancy, too? Are the
Treasury’s rent-a-room schemes covered? They would include a
key group of people who are staying in accommodation
only for the short
term.
Meg
Munn:
I understand the hon. Gentleman’s desire for
his questions to be answered, but the proposal is a bit technical and I
can see that hon. Members are struggling to follow some of the
technicalities. If he will allow me, I will continue with my
explanation and answer his questions later if I do not do so in my
response.
In addition
to the three key changes, the order includes a small number of
amendments; it clarifies what notices need to be served and how service
of the notices is effected; and it expressly allows the schemes to
provide for the adjudicator under the alternative dispute resolution
service to decide whether it should consider, or continue to consider,
a case. Although the alternative dispute resolution may be the default
position, the adjudicator will have the discretion to decide whether to
proceed or continue with a case referred to
it.
Long-standing
problems exist in the private rented sector with respect to the
protection of tenancy deposits, so we have introduced measures to
address the problem. Concerns were expressed about how schedule 10
worked and we have addressed them to improve the running of the deposit
schemes.
My hon.
Friend the Member for Chorley raised the issue of charities. We do not
have specific numbers;the deposits they pay now on behalf of
vulnerable
tenancies are not protected but, under the new arrangements for tenant
and deposit protection, they will be.
Mr.
Hoyle:
The Minister suggested that people would get
interest on the money that they put in at the end of the bond? Will
interest be given to charities in the same way if they have provided
the
bond?
Meg
Munn:
That is certainly my understanding of it. One of the
benefits of the proposal is that the interest is protected. Clearly, if
part of that deposit has to be paid to a landlord because of damage to
a property or for any other reason relating to the tenancy—for
example, unpaid rent and so on—the interest relating to that
proportion of the deposit will go to the landlord. The tenant, or the
charity that has paid on behalf of the tenant, will get the benefit of
interest when the deposit is returned.
The hon. Member for Rochford
and Southend, East asked about the cost of the scheme. As I set out,
the custodial scheme is free to join. If a landlord or an agent wishes
to retain the deposit—that is, not give it over into a custodial
scheme— they can join one of two insurance schemes, so
essentially there are three options. There is a custodial scheme, which
is free and the deposit is handed over, or an insurance scheme, where
the landlord or agent holds on to the deposit.
The tenancy deposit scheme
costs are as follows. There is a standard joining fee for landlords, of
which there are two types. One is for landlords who belong to the
National Landlords Association and another for those who do not. A
landlord who does not belong to that association will pay a joining fee
of £58.75 and a deposit protection fee per deposit, including
VAT, of £30. They will also pay an annual renewal fee, including
VAT, of £14.70. The joining fee for landlords who belong to the
association is £47; their deposit protection fee per deposit is
£26 and their annual renewal fee is the £14.70 that it
would be if they were not in the association. The hon. Gentleman raised
some other points. If he will bear with me, I will come to them
later.
Mr.
Geoffrey Cox (Torridge and West Devon) (Con): Let us
suppose there is a landlord who—and I should declare an interest
in that I occasionally let out a cottage that I own—makes
available a house once every year for a couple of months. How would the
fees apply to that person? Many in my constituency occasionally let out
properties but they do not do so all the year
round.
Meg
Munn:
That goes to the point raised by thehon.
Member for Rochford and Southend, East that only assured shorthold
tenancies are covered bythe legislation. If the hon. and
learned Member for Torridge and West Devon subsequently wants to
clarify his point by contributing to the debate, I will be happy to
respond in more detail in my closing remarks. In summary, this order
will improve the working ofthe Housing Act. I therefore
commend it to the
Committee.
2.48
pm
Mr.
Robert Syms (Poole) (Con): The Minister started by talking
about the Housing Act 2004, which I spent many happy hours in various
Committee rooms going through. This is the unfinished business of that
Act and has taken some while to come about. Although I came here today
with an open mind, having heard the explanation, I am not very happy
with what is being suggested.
Most landlords, small letting
organisations and small businesses providing property to people who
cannot now get it through social housing, are trying to make a profit.
Inevitably there is going to be some tension in the relationship
between landlord and tenant. However, I think that the majority of
landlords are good. There are of course a few rotten applies, but this
is a perfect example of a few rotten apples being used to put a
paraphernalia of bureaucracy and cost on small businesses. Therefore we
are not happy with what is being suggested. I would much prefer
voluntary arrangements. This order is a sledgehammer to crack a nut. I
have to say that my colleagues and I are going to vote against
it.
2.49
pm
Mr.
Dan Rogerson (North Cornwall) (LD): My party’s view
is opposite to that of the hon. Gentleman. However, I have to say that
he is showing remarkable consistency as there has been a lot of change
in recent Conservative policy. I note that he served on the Committee
that considered the Housing Act 2004 and that he expressed similar
concerns about this scheme.
There has been a huge amount of
debate in the housing sector. It is clear that there have been
problems, which is why the order has been brought forward. It is not
just about protecting the tenants; it is about protecting the landlord,
too. Often, tenants on low incomes who have been able to put together a
deposit will later rely on it to move to a further tenancy. Losing some
of that money as a result of a dispute with their landlord in their
first tenancy will endanger their ability to move on speedily and
effectively. The deposit is also there to protect the landlord’s
interest, so anything that makes that more efficient and ensures that
the landlord’s interests are protected—as well as those
of the tenant, of course—will, I hope, ensure that both parties
to the tenancy are
protected.
It has
taken a great deal of time for the order to come forward. The National
Association of Citizens Advice Bureaux published a report in 1998, in
whichit identified this issue as a growing problem. The
Government’s response at that time was not encouraging in that
they felt that it would be difficult to introduce a scheme and found
all sorts of reasons why it could not happen.
The Minister has already
referred to the Housing Act 2004 and, in its Committee stage, my hon.
Friend the Member for Kingston and Surbiton (Mr. Davey) and
the former Member for Ludlow, Mr. Matthew Green, proposed
the introduction of such a scheme by moving a new clause.
Unfortunately, the Government did not accept that new clause, so we
lost an opportunity at an early stage to send a message to Shelter and
Citizens Advice, for example, that the Government were prepared to take
on their concerns
and act. Subsequently, the Government reviewed their position and
relented and the 2004 Act was amended to provide for the scheme to come
forward. We have had to wait a long time for the order, but there is a
great deal of support out there for it. Many organisations have been
campaigning on this issue for many years.
Given that there are two types
of scheme, will the Minister tell us what proposals are there to
monitor the two, compare their effectiveness and ensure that there is
best practice in terms of efficiency and saving money and that there
will be the swiftest processing of any claims to ensure that both
tenant and landlord get the best from the
system?
My party
supports this scheme, which is long overdue. We regret that it has
taken so long to reach this stage given the Citizens Advice report in
1998. We will support the
order.
2.52
pm
James
Duddridge:
I apologise if I did not declare an interest
earlier. I rent a small property in central
London.
I am concerned
about this debate. Providing affordable housing is essential. I have
never understood why there is a tradition of pushing people,
culturally, into home ownership in the United Kingdom. It is essential
that we retain a healthy rented sector. I do not want to move back to
the bad old days, when absentee landlords would abuse their position.
It is important that people moving away from the pensions industry feel
able to invest in property to rent out and feel secure when doing
so.
The order follows
a long line of changes in legislation, including increases in stamp
duty—making buy-to-let flats more expensive—increased
costs when selling, and changes to freehold and health and safety in
respect of houses in multiple occupancy. Forgive me, Mr.
Pope, I appreciate your indulgence as I am straying off-piste. None the
less, although the order will not make a significant difference to the
background I have described, I wonder whether, when added to all the
other elements, it will make a difference in reducing the supply of
affordable housing for
rent.
I am glad that
the Minister said that the excellent rent-a-room scheme, which allows
people to rent a room, is not included. However, I am concerned about
other types of tenancy beyond the assured shorthold tenancy. I am not
an expert in this area. My hon. and learned Friend the Member for
Torridge and West Devon raised some issues about short-term lets, but
those were on the basis of an assured shorthold tenancy, so I suspect
that they would be
included.
Michael
Fabricant (Lichfield) (Con): For the sake of clarity, will
my hon. Friend confirm whether he is renting or renting out a property
in
London?
James
Duddridge:
I am renting out a property in central London.
I apologise if I was not clear.
The Minister went through the
annual costs, but there is also the cost of the extra bureaucracy of
landlords filling in forms. She rightly said that bad landlords are a
minority but all landlords will face the cost of the bureaucracy and
the lost opportunity cost
of the interest that they would have received on the deposit in the
past. Assuming that they were making a reasonable profit, that profit
would have to be made elsewhere by including it in the rent. Therefore,
there will be a cost to existing
tenants.
Mr.
Rogerson:
I am interested to hear support forthe
private rented sector, which I am sure that many Committee members will
agree is an important and perhaps undeveloped part of the housing
market in this country. Does the hon. Gentleman feel it is right for
landlords to profit from deposits—in other words, to take the
interest from tenants? Would he rather see that than have scheme by
which tenants are able to get the interest on their deposit
back?
James
Duddridge:
I was not passing judgment, but rather stating,
as a matter of fact, that if the landlords take the interest on the
deposit—although it is the tenants’ money—it
represents part of the overall profit that the contractual relationship
deems necessary. It might be more efficient for them to retain that
interest rather than pass it on the cost of losing it and increasing
the price of the underlying rent. It is much more simple to express the
costs in the underlying rent.
Turning to
implementation, will the Minister explain what will happen in place of
shorthold tenancies, particularly in places such as central London,
where they are rolled over year after year? If a shorthold tenancy and
a deposit were put in place yesterday, or indeed last year, on renewal,
will the arrangement be subject to the order or will only brand-new
shorthold tenancies be covered? I thank you very much for your
indulgence, Mr. Pope.
2.57
pm
Mr.
Clive Betts (Sheffield, Attercliffe) (Lab): Along with the
hon. Member for Poole, I too served on the Committee of the Housing
Bill, which became the Housing Act 2004. It is interesting, as the hon.
Member for North Cornwall said, that much has changed in Tory
policy—or at least the veneer of Tory policy—in the past
few months. However, one element appears to remain
consistent.
The hon.
Member for Poole was against a tenancy deposit scheme on a statutory
basis then and he remains so today. He is in favour of a voluntary
scheme, despite the fact that we had a good argument in Committee. I
have been looking back through the Hansard records, which showed
that there had been a pilot of a voluntary scheme before the Committee
discussed whether a statutory scheme should be brought in. That pilot
concluded that the scheme worked, as a pilot when landlords chose to
join it. However, because it was voluntary for landlords to choose
whether to join the scheme at the pilot stage, the reality
was—surprise, surprise—that most landlords chose not to
join it. Only those landlords who were well behaved and responsible
chose to join and therefore the scheme worked as a voluntary scheme on
that basis alone.
It
was clear from evidence heard at the time, and remains true, that there
was a real problem out there. Surveys of tenant attitudes were done
before the Committee investigated the matter and they found that
20 per cent. of tenants felt that at the end of their tenancy, the
deposit they had put down had been unreasonably withheld. Tenants may
be wrong in those accusations, but that is what they felt. They also
felt that they had nowhere to go.
The reality is that for many
years, tenancy deposits have been a rip-off. Landlords have treated
them as part of their rent and as something that they can keep as a
right. Tenants have shrugged their shoulders and accepted that as well.
There has been the route to the small claims court, but that is time
consuming and relatively expensive and much more difficult for many
tenants to go through than it is for a
landlord.
This order,
and the Act on which it is based, are about restoring a balance of
power between landlord and tenant. It will provide real protection for
some of the poorest and most vulnerable people in our society. At the
same time, it will offer real protection for landlords who are badly
treated. If the tenants mistreat the property during the course of the
tenancy, landlords have nothing to fear.
The order is about dealing with
the bad landlords in this world. The good ones will find that they get
to keep the deposit if the tenant has indeed caused damage to the
property. There is nothing to fear in that regard. Therefore, there is
nothing in the measure that should lead to fear about reducing the
supply of private rented accommodation. People have only to look around
our major cities, including London and my own city of Sheffield, to see
that the supply of private rented accommodation is increasing at
present. Nothing in the order or in the 2004 Act will push us in the
opposite
direction.
The scheme
has led, and will lead in future, to a better balance between landlords
and tenants in resolving issues. Because the scheme exists and because
landlords know at the beginning that there is a method of resolving
disputes, that will lead to better behaviour on both sides, in the
knowledge that there is a fair system for
resolution.
The scheme
is right in principle and I support the order because it attempts to
get the right practical measures in place to ensure that that principle
works. Ultimately—the Tories are consistent on this matter and
others as well—when push comes to shove, they will side with the
wealthy rather than with the poor and with the powerful rather than
with the powerless. It is as true on this issue as it is in respect of
many others. The Opposition have demonstrated their true position on
these matters again this
afternoon.
3.1
pm
Mr.
Cox:
First, I apologise for not being here at the
beginning; I was detained while
travelling.
May I
begin by saying that I sympathise with the intent of the order? As with
so many regulations that have been introduced, I do not think that
anybody wishes to doubt the true and sincere intent to protect
vulnerable people. I have no doubt about that. One often sees
regulations being introduced for that purpose. However, I am concerned
about what the practical consequences will be.
The hon. Member for Sheffield,
Attercliffe is on a different planet from
me—
Mr.
Cox:
The hon. Gentleman may be glad about that. However, I
say that from our experience of housing and housing shortages. The hon.
Gentleman represents an urban constituency and I represent a very rural
one—the second largest in England. I ask him to accept that, in
my rural area, people’s experiences, of the kind that he is
describing—those who desperately need housing and cannot afford
to get on the property ladder—are increasingly that they cannot
find private rented accommodation within their reach. Housing benefit
provisions usually do not cover the full
rent.
Countless times,
I have seen people from rural areas in my surgeries—as the hon.
Gentleman will have seen in his—saying, “We just
can’t afford private rented housing.” There is such a
shortage of such housing in the rural area that I represent that we are
in desperate straits in respect of getting any kind of acceptable
housing at all. The hon. Gentleman and the Minister may tell me that my
concern about this scheme is misplaced, in which case I shall be
relieved. However, my concern is genuine and is, I ask Labour Members
to understand, solely about whether the order will make private rented
housing even more difficult for families to find in the sparsely
populated rural area that I represent. If I could be persuaded that the
order would not make more scarce an already very scarce resource in my
constituency, I would be prepared to lend my tentative support to a
scheme such this, but I am deeply concerned that it will lead to
private rented housing becoming more scarce
still.
I ask the hon.
Member for Sheffield, Attercliffe to accept the truth that Torridge and
West Devon is one of the most deprived areas in the south-west. The
hon. Member for North Cornwall, whose constituency is adjacent to mine,
will have had similar experiences. I do not see too many disputes
arising over the deposits, but I do see desperate families afflicted by
a want of adequate housing, utterly distraught at the conditions in
which they find
themselves.
Mr.
Betts:
I was not implying that there are not housing
shortages in some areas. The issue is whether the measure will add to
that shortage. It provides a easier method of dispute revolution at the
end of a tenancy. There is a method now, but the small claims court is
relatively complicated and time-consuming. The hon. Gentleman ought to
reflect on that point. Even if there would be a slight impact on the
supply of housing, we must consider whether that is an excuse for
denying the important rights of
tenants.
Mr.
Cox:
I reflect on those two matters. I said at the
beginning that I acknowledge the case to be made for some kind of
scheme because it is despicable when deposits are retained by landlords
and not returned to the tenant in circumstances that are not justified.
That is clearly wrong. It places on tenants a difficult burden when
trying to recover their deposits. I am not sure whether the small
claims court could not be made more simple to use for tenants. A
special procedure could be
operated in the small claims court possibly with the assistance of
Citizens Advice, which is tremendously helpful in my constituency to
people who are so
affected.
I am
concerned that particularly in rural areas in the south-west it is by
far the preference of people who own properties to use them for holiday
lets. That is one reason we have such a shortage of private rented
accommodation. It is more profitable to let property for holidays, and
it is much easier to do so. People have more protection if they do so
because the occupiers are frankly unlikely to trash the place or abuse
it. The danger is that the measure will tip more landlordsin
small villages and sparsely populated rural communities into not making
rented accommodation available for vulnerable people. I see the matter
from that specific perspective. The problem might not exist so much in
urban areas such as that represented by the hon.
Gentleman.
Mr.
John Spellar (Warley) (Lab): Will the hon. Gentleman give
way?
Mr.
Cox:
Let me complete the point. I shall then give way. I
hope that the Minister will accept that my current opposition to the
scheme is based on a genuine concern that is related specifically to
what I experience in my constituency. I am concerned that landlords
will be deterred by the cumbersomeness of the scheme and the fees that
they will have to pay. Will the fees be reflected in the rent? Will the
fees for the insurance scheme mean that the landlords, by one means or
another, will put up their rent? If the scheme results in an increase
in rent, it will afflict the very people that the regulation is
intended to protect—those who cannot afford rented accommodation
and whose housing benefit does not cover
it.
Mr.
Spellar:
Yes, but the hon. Gentleman is putting the cart
slightly before the horse. He talks about those who cannot afford to
buy, but one reason they cannot afford to buy is that private renting
is forcing up the price as landlords are buying more property on a
buy-to-let basis. There would have to be a balancing exercise if, as he
anticipates, there will be a reduction in houses to let. They will then
be put out into the market and help to lower the price. However, in
many ways that is rather superfluous to what is an administrative
matter. The best way to deal with the imbalance between supply and
demand is to build more properties in the
area.
Mr.
Cox:
I agree that we should build more properties,
certainly in rural areas. Since I have entered this place, I have been
a consistent advocate for building houses, particularly in villages.
The problem is that the regional spatial strategy in most regions tends
to focus on larger towns and conurbations.
Mr.
Spellar:
Will the hon. Gentleman clarify whether that is
official Conservative
policy?
Mr.
Cox:
Yes. A right hon. Friend on the Front Bench recently
referred to the need to build in rural areas. The hon. Gentleman has
not taken on board my
point that, if someone owns a property in a holiday area such as
Devonshire or Cornwall, the temptationis to make it available
on the holiday let market. Therefore, there is a great scarcity of
longer term private rented accommodation.
Mr.
Rogerson:
Will the hon. Gentleman give
way?
That is the fear that I have.
The costs will deter landlords from making that type of accommodation
available, which could lead to rent increases. I am not convinced that
it will lead to the universal benefits of those whom I represent and
that is why I currently intend to vote
against.
3.10
pm
David
Lepper (Brighton, Pavilion) (Lab/Co-op): May I first
declare an interest, which differs from the one declared by the hon.
Member for Rochford and Southend, in that I rent a flat in
London?
James
Duddridge:
Not
mine.
David
Lepper:
I am happy to accept that clarification. I am one
of the three MPs who represent a city. My constituency of Brighton and
Hove has, I believe, the highest proportion of people living in
privately rented accommodated outside London. I am not sure whether it
is a case of being on a different planet, but all too frequently my
work involves tenants who feel, rightly or wrongly—usually
rightly—that they have been done out of the return of a deposit
to which they have a right. I know that many of my constituents, and
agencies in my constituency, such as Citizens Advice, will welcome the
proposals.
My
contribution will be brief because my hon. Friend the Member for
Sheffield, Attercliffe has said most of what I would have wished to
say. However, I believe that my local authority was part of the
voluntary scheme that we have been talking about this afternoon. The
scheme worked quite well, but as my hon. Friend has said, it was the
good landlords, for whom no scheme is needed, who chose to join up
rather than those who had deprived many of my constituents of the
deposit to which they felt they had a right at the end of their
tenancy.
Even in the
10 years that I have been in the House, we have heard again and again
from Opposition Members that this or that legislation on the rights of
tenants and leaseholders will lead to a shortage of properties becoming
available, and higher rents or service charges. Again and again, as far
as I can tell, that has not happened. We are seeing the same scare
tactics this afternoon.
I welcome the proposals on
behalf of many of my constituents and other residents of the city of
Brighton and Hove, who will now feel that they have extra
protection.
3.13
pm
Meg
Munn:
I shall try to deal in my summing up with all
the issues that hon. Members have raised. It has been a very
interesting and helpful discussion.
Clearly, rented accommodation is an enormously important part of our
housing provision and helpingto improve the situation in
relation to that accommodation is something that we should all care
about even if we come to different
conclusions.
I do not
currently rent accommodation. However, many years ago, when I was
renting, I had to pay a deposit on a gas bill because the gas company
was concerned that we might disappear without paying the bill. It was a
significant amount to pay when I was not on a very large wage. I
remember negotiating with the gas company to pay us interest on the
deposit, which was better than what I would have received from a bank.
In that case, we wanted to give them more money rather than
less.
This is an
important issue. I welcome the comments made by the hon. Member for
North Cornwall, and the support that he offered. He asked how the
schemes would be monitored. The Department has a contract governance
mechanism to ensure effective operationof both schemes, which
includes regular meetingswith scheme managers, a monthly
performance management regime, and an annual review of performance. The
performance regime has strict service levels by which the service
providers must abide. I hope that that reassures
him.
The hon. Member
for Poole maintained his position of preference for a voluntary scheme.
I can do no better on that point than support the comments of my hon.
Friend the Member for Sheffield, Attercliffe, not just because he is my
neighbour—in more senses than one—but because he has
followed the issue, and he argued powerfully for the position that we
are adopting. Support also came from my hon. Friend the Member for
Brighton, Pavilion, who likewise has a lot of experience of the private
rented
sector.
Michael
Fabricant:
For the sake of clarity on a matter that is of
some concern to Opposition Members, will the Minister tell us how she
is the neighbour of the hon. Member for Sheffield, Attercliffe in more
senses than
one?
The
Chairman:
I advise the Minister that she does not need to
answer that
question.
Meg
Munn:
Only in the sense that our offices in Sheffield are
near each other. I am sorry if that disappoints hon. Members who
thought that there might be a more interesting answer.
The hon. Member for Rochford
and Southend, East raised a number of issues. He asked about the
additional bureaucracy that the proposals will entail. There should be
a process whereby all good landlords and letting agents set out the
details of the tenancy, such as arrangements for rent payment and so
on, at the outset of a tenancy. The proposals require only a small
additional amount of work in that process. We are trying to protect
both parties. Hon. Members have rightly said that there should be a
balance whereby the vulnerable in society are protected, and I agree
with that. However, the proposals also provide a means for landlords to
protect their position. It is a minor matter
to include the additional steps in the pro forma documents that a tenant
completes at the outset of a tenancy. Should landlords not wish to pay
anything to enter an insurance scheme, they can consider the custodial
scheme, which is free.
Roll-over of tenancies and when
the proposals will come into force were also mentioned. Only deposits
relating to assured shorthold tenancies entered on or after the 6 April
2007 need to be protected; continuing tenancies will not be covered
unless there is a new agreement. If a new assured shorthold tenancy is
created, however, the deposit protection scheme will apply.
I take seriously the concerns
that have been raised by hon. Members about the number of tenancies in
the private rented sector, and whether there will be a reduction in
their supply. The hon. and learned Member for Torridge and West Devon
questioned whether more support would be given to people entering
holiday lets rather than shorthold tenancies in his part of the
country. The private rented sector was £2.3 million in 2003-4
and is now £2.6 million, so we believe that the measure is
unlikely to deter people from offering tenancies, as my hon. Friend the
Member for Sheffield, Attercliffe said.
Mr.
Hoyle:
The hon. and learned Member for Torridge and West
Devon made a point about people wanting to use holiday lets. The
reality is that people try to have holiday lets in the summer and
renting tenants in the winter. Such people want it to be easy to get
rid of tenants when they have the prospect of earning extra money in
the summer—they want the best of both
worlds.
Meg
Munn:
May I speak for a moment before giving way? I do not
know whether what my hon. Friend said is the case. However, we know
from our experience of speaking to local authorities in Cornwall, for
example, that many deposits are not repaid when properties are
expensive to buy. That sometimes happens to European seasonal workers
who have little or no English, so this is an important issue that
affects the whole of England.
Mr.
Cox:
Does the Minister agree that it does not require very
much more to induce landlords who make property available in the
private rented market to do something else with their property,
particularly when housing benefit, which can in itself be a deterrent
to private renting, is involved? In my constituency, it is easy to let
a property for 10 months of the year on the holiday market. Does she
accept that in rural areas, which perhaps does not include Sheffield or
other urban areas—
Mr.
Cox:
And Lancashire. In rural areas, where landlords have
a choice, the likelihood is that they will turn to the easy
availability of renting on the holiday
market.
Meg
Munn:
I do not accept the hon. Gentleman’s premise.
The private rented sector has increased. The scheme is supported by key
landlord and agent organisations because they see the benefit of a
regulated, easy-to-operate scheme that protects all
parties.
Mr.
Rogerson:
I am grateful to hear that the Minister
consulted local authorities in Cornwall, because housing has been a
problem in the area. Does she agree that, in rural areas such as
Cornwall, there is pressure to convert holiday lets and hotels into
flats for let? In fact, we are seeing the opposite process to that
outlined by the hon. and learned Member for Torridge and West
Devon—there is a reduction of holiday beds andmore
people in the buy-to-let market. The enabling legislation—the
Housing Act 2004—has been in position for three years and was a
strong signal to landlords. However, it has not deterred
them.
Meg
Munn:
I entirely agree with the hon. Gentleman, who
clearly knows what is happening in Cornwall better than I do. He is
absolutely right in that the order has been signalled for three years,
so people thinking about renting out properties will have taken it into
account.
I want to
clarify one or two points that I am concerned have not been made quite
as clearly as necessary. The order does not include the rent-a-room
scheme and refers only to assured shorthold tenancies. I gave the fees
for the insurance scheme for landlords and, for the sake of
completeness, it might be helpful for me to clarify the fees for
agents. Some landlords choose to place their rented accommodation with
agents who then conduct all the relevant processes on their behalf.
Agents who are members of accredited organisations pay £100 per
branch, excluding VAT, to join. The deposit protection fee is
£20 per deposit, excluding VAT, and there is an annual renewal
fee of £50. The corresponding fees for unaccredited agents are
£150, £30, and £75.
My hon. Friend the Member for
Chorley made a point about charities. The payment of interest is a
matter for the landlord when a tenant’s deposit is placed in a
custodial scheme; that is when the landlord holds on to the money but
insures against it. I hope that that clarifies the
situation.
James
Duddridge:
Again on the issue of costs, the Minister
mentioned an extensive media campaign involving television and press.
Will she give an indication of the additional costs involved in
that?
My second point may be a red
herring, but the Minister can correct me if it is not the case: what
would it cost the Treasury in deposits paid to local authorities that
rent out properties for social housing through the private sector?
Presumably, an inflated cost will result from the extra burdens being
carried by the private sector. The cost of renting accommodation from a
local authority that uses the private sector will go up. Presumably,
there will be a knock-on cost for the Treasury. The Minister is looking
slightly confused, so perhaps I have got that wrong. Perhaps she will
clarify the matter.
Meg
Munn:
I was looking slightly confused because I am not
sure to what situation the hon. Gentleman is referring. The issue is
about arrangements for assured shorthold tenancies, and I am not clear
that the circumstances he described are covered.
I do not have the figures for
advertising costs but, as for any scheme, it is important that people
are awareof it and that people comply. There will be other
mechanisms that will have minimal costs by which landlords who are part
of organisations can be made aware of the scheme. As the hon. Member
for North Cornwall said, the order has been signalled for some time, so
there should in any case be an awareness that the scheme is coming into
being.
Question
put:—
The
Committee divided: Ayes 10, Noes
4.
Division
No.
1
]
Question
accordingly agreed to.
Resolved,
That the Committee has
considered the draft Housing (Tenancy Deposit Schemes) Order
2007.
Committee rose
at twenty-eight minutes past Three
o’clock.
