My Lords, Amendment 44ZA seeks to bring some trust into the overheated housing market and to ensure that tenants are treated fairly. We start with the simple proposition that estate agents should not charge both buyers and sellers for the same service and that letting agents should not charge landlords and tenants for the same thing. That sounds obvious. An estate agent surely can have only the seller or the buyer as his client, not both. It is unethical, not simply being paid twice for the same job but to have a conflict of interest since the seller wants the highest price and the buyer the lowest. The estate agent is selected and paid by the seller to represent his interest. It is therefore indefensible to take money from the buyer and de facto have him also as a client and owe him a duty of care. The amendment would therefore outlaw a contract which allowed agents to charge both buyer and seller or indeed both landlord and tenant.
It is particularly important to deal with estate agents as they are not covered by the Government’s own amendments requiring letting agents to disclose their fees. Furthermore, with instances of estate agents charging buyers up to 2.5% of the house price, that is thousands of pounds not going into the housing market but to those who prey on its consumers. These rip-off
charges—and there is no other word for them—which exploit buyers and tenants and breach the client relationship with a vendor or with a landlord must be stopped. We know that the Minister has serious concerns about double charging as she said so in Committee. However, instead of doing something about it, she worried about what she called “unjustified new burdens” and the risk of damaging this important industry. It was unclear whether she was referring to the estate agency industry or to housing. However, it can surely only help the housing market if agents are trusted and act ethically.
The second part of Amendment 44ZA would ban letting agents from taking a finder’s fee from tenants. This is a new and growing—and I think unacceptable—practice. Again, as we mentioned in the earlier amendments, letting agents are chosen by and work for landlords who are seeking tenants. The client is therefore the landlord to whom by contract and law obligations and duties are owed. The letting agent is paid by the landlord to find a tenant though often does other things such as collecting the deposit, handing over keys and collecting rent. It is done on behalf of the landlord who pays for the service. However, what we are now seeing, especially where young people are desperate to find somewhere to live, is that potential tenants are being charged by the letting agent to show them a flat. Alex Hilton, the director of Generation Rent, says that a ban on the “abusive practice” of charging fees to tenants is long overdue. He says:
“Tenants are being milked by agents taking advantage of a housing market that’s failing to provide enough homes”.
It is bad business where one person has a duty of care to both sides of a contract. Whose interests, after all, are they then representing? Traditionally, it has been the landlord, but once money has been taken from a potential tenant, there is surely an obligation to that tenant, who under the Bill will have rights because they have paid for a service. However, there is a clear conflict of interest for the agent. Under the Bill, tenants will get these new consumer rights if they pay an agent, so it is hard to see how the agent can square that with the obligation he has to his original client, the landlord.
We have no problem with letting agents charging tenants for an individual service, such as obtaining the credit reference for a landlord to accept them. However, letting agents should not be paid twice for the same work. Furthermore, just when we are keen for more landlords to enter this market and provide more accommodation—but where tenants, needless to say, have fixed amounts to spend on their housing—a chunk of money out that is going to neither the landlord nor the tenant is being leeched of the housing market if letting agents are charging this extra amount to the tenant.
Scotland made charges to tenants, other than for rent and deposits, illegal in 2012, so letting agents can no longer charge tenants, since when this Government have tried to argue that this meant increased rents in Scotland. One study, admittedly from an estate agent, purported to show this. However, that study by LSL Property Services, which claimed that a 2.3% a year increase in Scottish rents had proved that that was because of the ban on fees to tenants, did not actually
prove that—partly because that figure was only marginally higher than that same organisation’s own figures for the increase in rents in England and Wales, but even more because the Scottish figure was lower than for the north-west of England. Furthermore, the Scottish increase started a whole year after the ban on fees to tenants, which suggests that other factors were at play.
Meanwhile, Shelter commissioned two independent reports, by Rettie & Co and by BDRC Continental, which found that landlords in Scotland were no more likely to have increased rents since 2012, when the ban on letting agents charging tenants was introduced, than landlords elsewhere in the UK. Indeed, fewer than one in five agents had increased their fees, even to landlords, while 70% of landlords had not noticed any increase in their fees paid to letting agents.
There is an issue of principle here. The renter is not the consumer of letting agents’ services and has no contractual relationship with the agent. The renter cannot shop around or negotiate on price. These fees must stop.
Finally, I turn to Amendment 50E in this group, which would help protect tenants against retaliatory eviction—that is, having made a complaint about their landlord, being evicted under a Section 21 notice, which does not require the landlord to give any reason. We do not seek to outlaw Section 21 altogether but to stop it being used to stop tenants getting necessary repairs done. Our amendment would require the Government to issue guidance on how tenants can be protected from such retaliatory evictions. Sadly, Citizens Advice and tenants cite far too many cases of retaliatory eviction or threats of it for this simply to be a rare occurrence. As the Observer reported yesterday, when a tenant told the landlord,
“our shower was dangerous, his response was to evict us”.
Shelter says that about 200,000 people a year—about 2% of renters—are subject to revenge evictions. In preparing its report on creating a better private rented sector, the all-party parliamentary group heard from witnesses of fears that inhibited tenants from expressing concerns, because these sorts of evictions, sadly, are not illegal.
The Government undertook to outlaw revenge evictions and ensure that tenants could not face losing their homes simply because they asked for essential repairs to be made. The Government have given their backing in principle to a Private Member’s Bill in the other House to stop rogue landlords who, rather than meet their legal duty to keep properties up to standard and get rid of safety hazards, instead evict tenants who complain. As the Communities Minister, Stephen Williams, acknowledged, there is a “minority of spiteful landlords”. He said that he wanted to ensure that hardworking tenants are,
“not afraid to ask for better standards in their homes”.
We concur with those views. If the Government want to see progress, Amendment 50E is a natural first step. I beg to move.