Pre-legislative scrutiny of the draft Tenant Fees Bill Contents

Annex

Suggested amendments

Table 1 assimilates the various ways in which we recommend, in the body of the Report, that the Government should amend the drafting before introducing any Bill based on the draft Bill.

Place in draft Bill	Original text	Recommended amendment	Para in Report
Clause 7
Cl 7(2)	The financial penalty— (a) may be such as the authority determines …	Provide that the only costs to be taken into account in fixing the level of a financial penalty are those costs directly associated with the breach for which the penalty is being imposed.	>122
Clause 11
Cl 11		Provide that where this section applies (i.e., while prohibited fees have not been repaid) a landlord be prohibited from recovering possession.	98
Cl 11		Clarify that prohibited loans are repayable on demand.	104>
Cl 11(3)	The relevant person may make an application to the county court for the recovery from the landlord or letting agent of …	Allow tenants to recover prohibited fees in the First-tier Tribunal, with a simple process of registration and enforcement as if payable under an order of the county court.	98
Clause 17
Cl 17(5)	The Secretary of State may direct the lead enforcement authority to issue guidance about the operation of the relevant letting agency legislation to relevant authorities in England and may give directions as to the content of that guidance.	The lead enforcement agency to be under a duty to issue guidance. Guidance issued to be subject to the draft negative procedure.	146

Schedule 1
Para 1(6)	There is to be left out of account … as a result of a variation of the rent payable in respect of the later period— (a) by agreement between the landlord and the tenant, or (b) pursuant to a term in the tenancy agreement which provides for variation of the rent under the tenancy.	Clarify that (a) applies only to variations in the rent which are agreed after the tenancy agreement has been entered into, and that (b) relates only to a review clause capable of increasing or decreasing rent.	30
Para 2(3) and (4)	(3) But if the amount of the tenancy deposit exceeds the amount of six weeks’ rent, the amount of the excess is a prohibited payment.	Reduce the cap on security deposits to the equivalent of five weeks’ rent	41
Para 3(2)	In this Act “holding deposit” means money which is paid by or on behalf of a tenant to a landlord before the grant of a tenancy with the intention that it should be dealt with by the landlord in accordance with Schedule 2 (treatment of holding deposit).	Clarify that holding deposits can be paid to letting agents as well as landlords.	54

Schedule 2

Para 7

Paragraph 3(b) or (c) does not apply if—

(a) the landlord is prohibited by section 22 of the Immigration Act 2014 (persons disqualified by immigration status) from granting a tenancy of the housing to the tenant, and

(b) the landlord did not know, and could not reasonably have been expected to know, that was the case before the landlord accepted the deposit.

Add, as an alternative to (a), that the landlord has attempted to comply with the requirements prescribed under section 24(2)(a) of the Immigration Act 2014 for checking whether a person has the right to rent, and the tenant has not provided the necessary information or documents to allow the landlord to comply with those requirements before the deadline for agreement.

Provide a landlord with a defence to any financial penalty or offence (but ensure the deposit remains repayable) where they have complied with the prescribed requirements but erroneously been told by the Home Office that the tenant does not have the right to rent.

(So long as in neither case the landlord knew the tenant had no right to rent when taking the deposit (as currently provided in paragraph 7(b) of Schedule 2))

Para 8

Paragraph 3(b) or (c) does not apply if the tenant provides false or misleading information to the landlord and—

(a) the landlord is reasonably entitled …

Provide that a landlord may retain the holding deposit if a tenant provides false or misleading information (without the need to show this is reasonable)

Provide that, unless the tenant knew the information was false or misleading, the landlord may retain only the cost of any reference check undertaken, limited to an amount to be prescribed by the Secretary of State.

Schedule 3

Para 6(2)

The grounds for an appeal under this paragraph are that—

(a) the decision to impose a financial penalty was based on an error of fact,

(b) the decision was wrong in law,

(d) the decision was unreasonable for any other reason.

Specify a broader right of appeal against financial penalties, allowing the First-tier Tribunal to decide appeals as complete re-hearings, and to take into account all matters, whether or not known to the local authority at the time of its decision.

129

Para 7

In proceedings before the county court for the recovery of a financial penalty or part of a financial penalty, a certificate … is conclusive evidence of that fact.

Reconsider carefully whether the need for local authorities to be able to recover financial penalties might not be adequately met by providing that a certificate of non-payment is prima facie, rather than conclusive, evidence of that fact.

131

Minor drafting issues

Table 2 summarises points that we raised with the Government which are not dealt with in the body of our Report. They are, for the most part, of a minor nature or concerned with legal or drafting technicalities. We were pleased to have the opportunity to engage with the Ministry’s Bill team, and are grateful to them for the provision of detailed responses to our questions. We believe this has been a productive way to challenge the Ministry appropriately on points of detail. We acknowledge that the Government responses may not represent their final position and were provided to us in the spirit of sharing their ongoing consideration of our concerns.264

Issue	Committee’s observations	Government’s reply264
Clause 7 Divergence from drafting of other legislation on financial penalties	In allowing authorities to impose financial penalties, clause 7 and Schedule 3 appear to be based on the similar provisions in the Regulatory Enforcement and Sanctions Act 2008 and the Housing and Planning Act 2016. Can you confirm the genesis of the provisions in the draft Bill, and any reasons for substantive differences between the draft Bill and the earlier ‘precedent’?	Regarding Clause 7 and Schedule 3, the differences between the drafting and the Housing Planning Act were an oversight. We will instruct Parliamentary Counsel to rectify.
Cl 7(4)(c) Drafting	Clause 7(4) (on financial penalties) aims to ensure that local authorities can’t impose a civil financial penalty on someone prosecuted with an offence in respect of the same breach. Subsection (4)(c) is intended to cover an acquittal in respect of the conduct (see paragraph 64 of the Explanatory Notes). It might have been better to say “criminal proceedings for such an offence in respect of the conduct have been concluded and the person has not been convicted of an that offence in respect of the conduct”. This would make it clearer that the offence of which the person has been acquitted must be the one for which trading standards want to impose the penalty. Read in context, the draft might well be sufficiently clear, but might not greater precision have been achieved in this way?	Regarding Clause 7(4) (on financial penalties) we have noted the suggestions and will discuss the exact drafting with Parliamentary Counsel.
Cll 7(8), 18(3) and 18(5) Reference to enforcing a breach	Clause 7(8) and clauses 18(3) to 18(5) refer to the “enforcement” “of a breach”. Professor Loveland has criticised this as “infelicitous drafting”: enforcement action is taken against a breach. Alternatively, one might say the obligation not to breach is enforced. Do you agree that the Bill should not provide for breaches to be “enforced”?	We agree with your point on Clause 7(8) and clauses 18(3) to 18(5) and will rectify in the drafting.
Cl 7(8) Potential for absence of duty to enforce	Under clause 7(8), a local authority (LA2) is relieved of its duty to “enforce the breach” if notified that another authority (LA1) proposes to impose a financial penalty. At that point—unless “proposes to impose a financial penalty” is read as “has served a ‘notice of intent’ under Schedule 3 para 1(2)”—it is unclear that any authority is obliged to enforce. Might it not be better for the legislation to make it clear that the duty transfers to LA1? (In a similar vein, see also clause 18(4)).	[No reply]
Clause 13	The duty, in clause 13, for letting agents to publicise fees on third party websites does not extend to advertising of licences (cf tenancies). The other provisions about agents’ fees in this draft Bill relate also to licences: why doesn’t the duty to publicise fees?	The Consumer Rights Act was targeted at letting agents, who are for organising tenancies and who use third party websites. We do not consider it necessary to amend the Consumer Rights Act 2015 to make provision with regards to displaying fees when advertising licences since the Tenant Fees Bill bans the charging of any such fees to tenants.
Clause 19	Clause 19(2) defines “letting agency work” as things done “by a person” in the course of business in response to instructions received from a landlord looking for a tenant for housing, or a tenant looking for housing. Would it not be clearer if the Bill explained that this encompasses only things done in relation to fulfilling the landlord’s quest for a tenant, or the tenant’s quest for housing? While it might be unnecessary, given the context, it would shut out argument. Is “by a person” (page 11 line 7) necessary?	In reference to your questions on Clause 19(2) regarding the definition “letting agency work”. The drafting is intentionally aligned with the definition of letting agent work in other legislation such as s.54(3) Housing and Planning Act 2016, s.86(2) Consumer Rights Act 2015, and s.83(7) Enterprise and Regulatory Reform Act 2013. The reference to “by a person” hinges on the reference to “in the course of a business”, which thereby excludes steps that a friend or colleague may take in assisting a person in finding a tenant or housing. This definition goes to the persons that the ban applies to–a letting agent is a person who engages in letting agency work. Clause 2 goes to the conduct which is banned. We do not think any amendment is needed to the definition in order to narrow the scope of the ban. We do not believe that the ban would apply to fees for letting agent services that are commissioned by tenants, such as relocation services. We do not consider such fees to be required as a condition of arranging the grant etc of a tenancy.
Explanatory Notes	In the last line of paragraph 60 of the Explanatory Notes, “how” is missing between “about” and “it”. Paragraph 98 of the Explanatory Notes does not accurately enumerate the duties of the “lead enforcement authority”. They are to keep under review and advise the Secretary of State about developments and the operation of the “relevant letting agency legislation” (i.e., not just “the ban” referred to in the second bullet point) (clause 17(7)). The duty to disseminate information to the public (third bullet point) also extends beyond just “the ban”, and is not qualified by reference to only that which is “necessary” (clause 17(2)). It also extends to advising relevant authorities.	We agree with your points about the drafting of the explanatory notes and will make the necessary changes.
Schedule 1 Use of numerals	Schedule 1, paragraphs 2(4)(b) and 3(4) transcribe the number “fifty-two”, rather using numerals, presumably to be consistent with “one” and “six” used elsewhere in paras 2(4) and 3(4). The clarity might nevertheless be improved by substituting “52”—it would make it more immediately apparent, just glancing at the paragraphs, that a week’s rent is 1/52 of a year’s rent.	We have noted the point made about the number 52 in Schedule 1, paragraphs 2(4)(b) and 3(4) and will discuss the merits of the alternative approach with Parliamentary Counsel.
Schedule 3 Confusing application of a defined term	Paragraph 1 of Schedule 3 defines a “financial penalty” as including a local authority requirement to repay a prohibited payment or holding deposit. Paragraph 1(3) dis-applies that extended definition from paragraphs 8 and 9, where the term “financial penalty” isn’t used. On first reading, it might suggest those paragraphs don’t deal at all with prohibited payments or holding deposits. The opposite is true. Though that is made clear in the italic headings, there seems no particular reason for mentioning paragraphs 8 and 9 at all in para 1(3). What was the reason for that approach?	We have noted your point on paragraph 1 of Schedule 3 and agree that the references to paragraphs 8 and 9 should be removed.

264 MHCLG (DTF0059), unless otherwise stated

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Published: 29 March 2018