Tenant Fees Bill

Written evidence submitted by the Chartered Trading Standards Institute (TFB43)


The following document is intended to be the Chartered Trading Standards Institute (CTSI) views to be submitted to the House of Commons Public Bill Committee in respect of the Tenant Fees Bill currently passing through Parliament. CTSI are a professional membership association founded in 1881 that represents trading standards officers and associated personnel. We responded in June 2017 to the consultation on banning letting fees.


Key messages

· The central concept that enforcement of the ban will be self-funded from the proceeds of civil penalties recovered by trading standards is completely erroneous. For it to be effective it requires upfront resources to train officers and fund enforcement projects. With a cut of more than 50% of skilled officers in just over 7 years the burden on local trading standards services is unsustainable and this additional duty will simply will not be prioritised universally across the country. [1]

· The letting fees ban’s main infringements require proof to the criminal standard of ‘beyond a reasonable doubt’ but this is incompatible with a civil infringement framework. The evidential burden should be to the civil standard of ‘on the balance of probabilities’. This is in line with other similar bans and has a backstop provision to have penalties reviewed by a civil court (First Tier Tribunal). Without change this too would be an impediment to effective enforcement.

· To be effective the ban needs to have clear and unambiguous definitions, especially those around the scope of the ban and default fees. Without prescriptive definitions there may be an opportunity for landlords to circumvent the ban through their tenancy agreements or by adopting alternative business models.

Introduction

The Government has stated that its objective is to deliver 'a fairer, more competitive, and more affordable lettings market where tenants have greater clarity and control over what they will pay and where the landlord is the primary customer of the letting agent.'

CTSI is broadly supportive of the proposed aims of the draft Tenant Fees Bill and the Government’s intention to create a fairer, more affordable private renting sector for consumers. Clarity for consumers is also one of the chief concerns of the Institute, and whilst CTSI recognises that an outright ban on certain prescribed tenancy fees and a cap on pre-rental deposits may go some way to achieving this; we are also keenly aware that there must be provisions for effective enforcement of any new regulations in order for such aims to truly succeed. With this in mind, CTSI supplements the previous responses it has made as this Bill has progressed with the following points below.

Clauses 6 & 7: Enforcement by local weights and measures authorities

Resource is, without question, the pervasive issue which will determine the efficacy of the Tenant Fees Bill.

Trading standards services across the U.K. are underfunded and overstretched, already covering over 250 statutory duties whilst suffering an average per head spending of £1.99 and a 50% fall in officer numbers overall. This has been recognised by the National Audit Office to be a direct threat to the consumer protection system’s viability as a whole.

The Government expects the enforcement of the Bill to be fiscally neutral from year 2 onwards. It has theorised that should the levels of non-compliance rise; then so, too, will the money generated from the enforcement of the financial penalties. Notwithstanding the real need for actual funding for local authorities to train their officers and consult with their lettings markets, CTSI expects this view does not account for other issues the Bill may present. It should also be noted that self-financing enforcement model potentially creates a disincentive to provide regulatory compliance. Providing advice on the ban will require significant local resources that will not be recovered from the subsequently compliant businesses.

The Bill imposes financial penalties on agents and landlords charging prohibited fees, requiring enforcers to prove the offences ‘beyond all reasonable doubt’ in order to succeed in issuing a penalty. CTSI recognises the Government’s aim to provide a robust approach to the enforcement of rogue agents, however, the burden of proof is higher than that of the Consumer Rights Act 2015 and the Estate Agents Act 1979, which allow for civil penalties to be obtainable on the ‘balance of probability’. With a higher evidential requirement comes more work and more risk for the local authority, which may act as a deterrent for trading standards services. Greater clarity is needed in the Bill to account for the two evidential levels contained within it.

For repeat offenders, the Bill gives local authorities the choice of imposing penalties of up to £30,000 instead of taking court action. CTSI is concerned this potential cost-recovery revenue may be a misnomer, with more unscrupulous companies likely to close down in the face of such amounts and set up shop under a different name to avoid liability. For this provision in the Bill to be effective, there would need to be further protections for authorities to legitimately recover larger penalties.

Clause 12 in the Bill state enforcement authorities may provide help to relevant persons wishing to recover prohibited amounts paid to landlords/agents, suggesting they give advice, help navigate First Tier Tribunal applications or conduct proceedings. CTSI suggests this is a very significant expectation for trading standards services already facing increasing resource issues and which now largely outsource the provision of first line consumer advice to other agencies, due to those limitations.

The definition of default fees

Effective enforcement relies heavily on clear, unambiguous legislation. Where there is potential for the skewing of regulatory provisions, this has an impact on the ability of enforcers to carry out activities successfully. It has been recognised at Committee that the lack of definition of default fees has the potential to undermine the overall objectives of the Bill, opening the door for otherwise prohibited fees being included in the tenancy agreement, so long as the agent or landlord somehow evidences this as an actual loss. The Consumer Rights Act requires fees to be stipulated ahead of any potential tenancy agreement, whereas default fees (in whatever form they may be) will not be discoverable by tenants until an agreement is at signing stage.

The rise of ‘alternative business models’

There is evidence of an increasing trend of alternative business models establishing which fall outside the scope of the definitions of a letting agent. ‘Membership Clubs’ have been mentioned in the media, which offer seemingly affordable rooms in multi-occupancy properties. Instead of deposits, companies require a non-refundable joining fee and a membership fee. Tenants, known as ‘members’, pay a monthly rates in return for an attractive living package which includes cleaning, utilities, broadband and council tax. Those adopting the business model liken themselves to the growing ‘gig-economy’ firms. The hidden terms and conditions are concerning, and include examples of ‘members’ having to replace white goods and furniture at their own expense, but giving up their ownership of the items to the club. Staff arrive unannounced and withhold the otherwise refundable membership fee for extremely punitive reasons, such as dirty dishes on display.

As with the ‘gig-economy’ firms which have grown in popularity, there is a potential for similar companies to develop in the lettings sector in light of changes to the regulatory framework.

Alexandra McKeown and Andrew Coulter

CTSI Joint Lead Officers for Property and Lettings

May 2018

 

Prepared 7th June 2018