Mortgage Repossessions (Protection of Tenants Etc.) Bill

The Department for Communities and Local Government and I have been in close contact with the Council of Mortgage Lenders, and we are aware of its feelings about the Bill. We listened to outside organisations, and amendments were made to the original Bill, so the Bill before us addresses some of those objections. I am not sure to which two amendments the hon. Gentleman has referred, but we believe that we have satisfied the Council of Mortgage Lenders. We hope that, if the Bill does not satisfy it, the accompanying regulations will. We want to carry all organisations with us. Following the representations that were made to the Government by the external sponsors of the Bill, in 2009 the DCLG published a consultation document, "Lender repossession of residential property: protection of tenants". The consultation on that document closed on 14 October, and we still await its findings, although I believe that they are almost ready for publication. A combination of rising house prices, the credit crunch and the difficulty of getting anything like a 100 per cent. mortgage means that home ownership is out of reach for most people—certainly more and more. Consequently, more people than for a long time have been attracted to the private rented sector. There are now 3 million households in that growing sector; in England alone, 14 per cent. of households live in it. We have seen the buy-to-let market grow, too, as a result of those changes. Most tenancies are assured shorthold tenancies, usually of six or 12 months' duration. Landlords can gain possession of such tenancies by giving only two months' notice outside the fixed term. Most buy-to-let landlords pay a commercial rate on their lending and a higher arrangement fee than domestic or residential borrowers in order to purchase suitable properties. I want to make it clear that the Bill does not apply to the normal buy-to-let market. Most owner-occupier mortgages prevent the borrower from renting their property without the lender's consent. However, a significant number of people have been borrowing money without telling the lender that they intend to buy a property to let to a tenant or tenants. As a consequence, those so-called residential-turned-let—RTL—tenancies are considered to be unauthorised in law, and the tenants are unprotected by the relevant housing legislation. If, therefore, their landlord defaults on the loan and the lender seeks to repossess the property, the tenants will lose their right to two months' notice and may face homelessness. That applies even if they are within the fixed term of the tenancy agreement. Unauthorised tenancies can arise in other ways. People become reluctant landlords. They might inherit a property that they cannot sell or move to another property—perhaps in another town to find a job—and find it difficult to sell the one from which they have moved. In either case, they might decide to rent out a mortgaged property to a tenant without informing the lender. Some owner-occupiers might find themselves in financial difficulty and move to alternative accommodation—to live with relatives or friends, for example—and generate income by renting out their property to a tenant, again without telling the lender. In a recession, the number of owner-occupiers choosing that option is likely to increase. It is very difficult to count how many repossessions involve RTL tenancies. The DCLG estimates that there were between 2,000 and 3,000 such repossession cases last year, but advice agencies believe that that is the tip of the iceberg. The DCLG estimates that there are currently 324,000 RTL households. Many of those tenants, especially if they are single, are not entitled to housing from their local authority should they become homeless. Consequently, they do not end up on any registers when they lose their homes, so it is difficult to count them. Instead, they have to make alternative accommodation arrangements, perhaps by moving in with friends or relatives, if they can. Citizens Advice now deals with about 1,000 homelessness inquiries a year as a result of the problem, and Shelter's website advice page on RTL mortgages had more than 12,500 hits between June 2008 and October 2009. In a Crisis survey of advisers who help people to access the private rented sector, more than 60 per cent. said that they had been in contact with someone whose landlord had had a property repossessed. Undoubtedly, that is an increasingly important problem, which urgently needs the legislation that I am introducing. If a property has been rented to an unauthorised, or RTL, tenant, the only warning that the tenant may receive of repossession before the initial court hearing or the issuing of a notice of eviction is a notice that the lender must now address to "The Tenant or Occupier". Those notices often go astray or remain unopened, and sometimes they are buried in piles of junk mail, especially in blocks of flats. Before 2008, when secondary legislation was brought in, notices were addressed only to "The Occupier". The Government changed the legislation in the hope that more tenants would open such correspondence and engage in repossession proceedings, but that is difficult. Many RTL tenants first realise that they might be homeless only when bailiffs turn up on their doorstep to repossess the property. Some RTL tenants have arrived home to find that locks have been changed while they have been away from the property, at work or on holiday. I think that all Members will consider that to be unacceptable. The Bill is aimed at giving greater protection to this group of tenants.