My Lords, I remind the Committee that we have also tabled amendments to put the enforcement provisions on the face of the statute, which means that our provisions on lettings will take effect on the common commencement date of 6 April next year. I will try to address the noble Baroness’s points in turn, without talking at too great a length. I will say upfront that my colleagues in DCLG are frequently in discussions with the organisations that she mentioned. It was good to have the intervention of my noble friend Lord Palmer of Childs Hill on Amendment 81D, and to hear from the noble Lord, Lord Harris.
Turning to Amendment 81B and fees, most letting agents offer a good service, as I think has been acknowledged, so a blanket ban cannot be the answer to tackle a minority of irresponsible agents. We are not convinced that banning fees will make renting cheaper for tenants. An outright ban would mean that agents would either absorb the charges or pass them to landlords. Many small letting agencies have small profit margins and if they were unable to pass the charges on to landlords, they could struggle to remain in business. Given the high demand for rental properties, it is extremely likely that any increase in costs to landlords will simply get handed down to tenants through higher rents.
That is what has happened in Scotland, where fees to tenants are banned. The Office for National Statistics has confirmed that average rents have been rising faster in Scotland than in England. In fact, average monthly rents in Scotland before fees were banned in November 2012 were around £508 and had been stable since 2010. In July 2014, average monthly rents had risen to £534, which is 2.7% higher than in the previous July. This suggests that tenants in Scotland have been paying perhaps an extra £26 a month in rent on average than they paid before the legislation was introduced. That is £312 over a year.
We believe that the course we have adopted—transparency of fees—is a better answer than banning them. Forcing agents to publicise their fees will mean that, while every business remains free to set its own fees, competition, which is strong in this area, will ensure that the fees are justified.
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Moving on to Amendment 81C, I agree with my noble friend Lord Palmer of Childs Hill that many letting agencies do a good job but that poor practice exists in some parts of the letting sector. Our concern is that the extra regulation proposed could harm an important sector and risk perverse effects. For example, the transitional costs of moving to a new estate agent-style regime could be significant and might require the development of a new mechanism for issuing warning and banning orders. Introducing new costs into the sector would push up rents and discourage landlords from investing in their properties, so reducing the choice and availability of accommodation on offer to tenants.
We think it is better to tackle current problems in other ways. These are similar but more specific to the lettings rather than the estate agent sector. Letting and
management agents are already subject to consumer protection legislation, which covers issues such as giving false or misleading information and not acting with the standard of care that is in accordance with honest market practice. For example, a lettings agent who describes a property in a misleading way to encourage a potential tenant would be in breach of the Consumer Protection from Unfair Trading Regulations 2008.
Moreover, as a result of amendments made in this House to the Enterprise and Regulatory Reform Bill last year, we have already introduced an important feature of this amendment. As from 1 October this year, all letting agencies and property managers must belong to one of the three government-approved redress schemes providing tenants and landlords with an effective way of dealing with complaints.
We have deliberated at length on the specific details of the improvements needed to the lettings market. As a result, we consider that some light-touch additional regulation is necessary but, given the costs involved, we see no need to go further than we have already proposed. Therefore, in the light of what we are doing and the protection that is in place, we have no current plans to introduce further statutory regulations.