Insurance Industry: Whiplash
House of Lords
1 March 2016
Prayers—read by the Lord Bishop of Durham.
Retirement of a Member: Lord Browne-Wilkinson
The Lord Speaker (Baroness D’Souza): My Lords, I should like to notify the House of the retirement, with effect from today, of the noble and learned Lord, Lord Browne-Wilkinson, pursuant to Section 1 of the House of Lords Reform Act 2014. On behalf of the House, I should like to thank the noble and learned Lord for his much-valued service to the House.
Insurance Industry: Whiplash
Asked by Lord Hayward
To ask Her Majesty’s Government whether they have any plans to meet representatives of the insurance industry to discuss their treatment of claims for whiplash injuries.
The Minister of State, Ministry of Justice (Lord Faulks) (Con): My Lords, meetings have been held with representatives’ groups from both claimant and insurer sectors at both ministerial and official level to discuss the reforms announced in the Chancellor’s Autumn Statement. Ministers and officials are continuing to engage with interested stakeholders as work on the detail of the Government’s whiplash reform programme develops.
Lord Hayward (Con): When my noble friend next meets representatives of the industry, will he ask them to explain cases such as that of Mr John Elvin of Watford? Mr Elvin was involved in a negligible traffic incident where there was no apparent damage to either vehicle. At the first opportunity, he notified his insurers—esure—that he was subject to what he believed was going to be a false whiplash and damage claim. Despite a series of requests, esure has given no indication that it has investigated this case in any way. Is this not an example of the reason why the industry is known in this country as “the whiplash capital of the world”? It is the consumer who ultimately pays for this cavalier attitude.
Lord Faulks: My noble friend is quite right to draw the House’s attention to the very major problem of the significant increase in the number of claims and our large number of claims in comparison with other European countries. One of the reasons that insurers give for settling these claims is that it costs them too much to fight the case. Of course, if our plans to raise the small claims limit to £5,000 come into effect, this will no longer continue to be a valid reason for not contesting claims. Anyone who is notified of what
1 Mar 2016 : Column 694
sounds suspiciously like a fraud should not do anything to encourage it. If individuals are invited to take part in such an endeavour, they are potentially committing a criminal offence.
Lord Thomas of Gresford (LD): My Lords, the Minister referred to the court costs. Have the coalition’s policies of banning referral fees produced any results? Has the number of frauds gone down? Are there any statistics on that as yet, following the Insurance Act 2015?
Lord Faulks: The Government are attacking this problem on a number of different fronts. Referral fees is one; the LASPO reforms is another; and there is the MedCo portal, which means that all whiplash injuries must go via a neutral evaluation with limited costs. All are contributing to a decrease in the number of whiplash claims, but there are still too many, and we still feel that there is fraud at the root of all this.
Lord Beecham (Lab): My Lords, of course no one would defend fraudulent claims, whether for whiplash or other injuries. However, the raising of the small claims limit to £5,000 will represent a further reduction of access to justice to people and even businesses of modest means with valid claims. Given that the Government claim the insurance industry—in which motor insurers alone receive £15 billion a year in premiums—will save £1 billion from the increased limit, having already saved £7 billion in the last four years, what steps are the Government taking to ensure that any further savings from their latest surrender to the industry’s interests will be substantially passed on to policyholders? Or is this to compensate the industry for the insurance tax levy increase, which it will no doubt in any case pass on to policyholders?
Lord Faulks: There is no question of the Government surrendering to the insurance industry, as the noble Lord puts it. The insurers already announced that they will reduce the premiums to insurance companies by £50. We will watch insurance companies very carefully to see whether they translate their promises into action. Of course, as all noble Lords will know, insurance is a highly competitive world. All of us will have been irritated by the invitations to compare the market. Ultimately, the market should prevail.
Lord Walton of Detchant (CB): My Lords, the whiplash phenomenon is thought to occur usually when a vehicle is struck heavily from behind, with the result that the passenger or driver in the vehicle that is hit has a sharp flexion of the neck followed by a sharp hyperextension. If it happens that the individual in question already has disc degeneration in the neck, there is no doubt at all that this may on occasions result in actual damage to the spinal cord with significant physical results. However, in the great majority of so-called whiplash cases, no organic abnormality can be detected. Indeed, there is considerable evidence that some of the claims for whiplash injuries are spurious. Having said that, is it not time yet again for the Government and the medical profession experts in this field to come together to see if they can promulgate some objective means of assessing the significance of these claims?
1 Mar 2016 : Column 695
Lord Faulks: The noble Lord, with his experience as a neurologist, highlights the complicated nature of this injury and the fact that it is not usually detectable on scans. He also made the point about pre-existing degenerative injury. The effort to achieve some sort of consensus among medical experts has been helped by the MedCo portal. It is remarkable how many of the reports now have a more favourable prognosis than used to be the case before it was introduced.
Lord Hunt of Wirral (Con): I declare my interests as set out in the register. Will my noble friend the Minister accept that there is serious concern not only in this House but also in the insurance industry at the way in which we have allowed a situation where 80% of all personal injury claims are said to be whiplash claims? Will he find some way of stopping these cold calls? One of my colleagues just had a cold call from a claims management company calling itself the “Department of Compensation”. Will my noble friend please get across to everyone that these people are potentially committing a very serious criminal offence?
Lord Faulks: My noble friend is, of course, absolutely right. The Government are determined to stamp down on this. Legislation is already in place, primarily enforced by the Information Commissioner’s Office. The Government have recently consulted on bringing forward secondary legislation to require all direct marketing callers to provide their calling line identification. Individuals can have a Telephone Preference Service installed on their telephones and we are also exploring the possibility of call-blocking devices for vulnerable consumers.
When somebody rings me, as they do from time to time, inviting me to take part in a fraud, I endeavour to extract details from them without revealing the position I hold. Unfortunately, my voice appears to cause them only to put down the phone.
Lord Dubs (Lab): My Lords, will the Minister confirm that the rate of whiplash claims in Britain is 20 times as high as it is in France? Have we something to learn from our friends across the channel?
Lord Faulks: It is surprising that that comparison should take place at this particular time in the political weather. The noble Lord is quite right. Some 9%, or 225,000, of bodily injuries in France were whiplash, but 76%, or 375,000, in the United Kingdom were.
Armed Services: War Crimes
Asked by Lord Naseby
To ask Her Majesty’s Government whether it is their position that the proper law for determining whether British troops have committed war crimes should be the laws of armed conflict, otherwise known as international humanitarian law, rather than the European Convention on Human Rights.
1 Mar 2016 : Column 696
The Minister of State, Ministry of Justice (Lord Faulks): My Lords, international humanitarian law and domestic criminal law are the bodies of law to determine whether British troops have committed war crimes. Our Armed Forces are among the best in the world and operate to the highest standards of discipline. The forthcoming Bill of Rights will protect their ability to do their jobs without being subject to persistent human rights claims.
Lord Naseby (Con): Does the Minister agree that British troops should only be sued for violation of human rights if they have already been convicted of crimes contrary to the laws of armed conflict?
Lord Faulks: All our troops should, of course, be subject to the law: none is above it. However, the question of the Human Rights Act raises rather different matters. There has been a number of claims based on alleged contraventions of the convention and, thus, the Human Rights Act. These have caused considerable —and sometimes unjustified—difficulties for soldiers and the Armed Forces. This is why our forthcoming Bill of Rights will attempt to deal with these persistent human rights claims.
Lord West of Spithead (Lab): My Lords, long-retired members of our military who fought for us in Northern Ireland are open to arrest, bail and investigation for events that happened up to 40 years ago. Is it true that members of the retired military community who believe there is no even-handedness between the treatment of the terrorists who are trying to kill us and the military who are protecting us are raising with the PSNI a raft of incidents—some 40 so far—where members of the IRA and splinter-IRA have killed or maimed uniformed people? How are these cases being taken forward?
Lord Faulks: The noble Lord makes a good point. I am unable to answer his specific query, but the Prime Minister has tasked the National Security Council to produce a comprehensive plan to stamp out this industry of claims, which is causing precisely the sort of difficulties which the noble Lord has highlighted.
Lord Craig of Radley (CB): My Lords, will the Government introduce any form of Crown immunity for operations overseas?
Lord Faulks: The noble and gallant Lord asks an entirely pertinent question. The Prime Minister has asked the Defence and Justice Secretaries to prepare a legislative package to redress the balance. That is clearly one of the matters under consideration, as is derogation from the Human Rights Act. There are a number of other matters which I would rather not go into detail about now, but I can assure the noble and gallant Lord that all these matters will be carefully considered.
Lord Lester of Herne Hill (LD): Is not the Minister in some difficulty in his replies? So long as we remain bound by the European Convention on Human Rights and subject to the jurisdiction of the Strasbourg court, if the Minister and his colleagues introduce a new-fangled Bill of Rights that in any way is incompatible with the convention, it would be futile because the Strasbourg court—if not our own courts—will rule on that
1 Mar 2016 : Column 697
incompatibility. Is it not better, therefore, to answer this Question by indicating that for the sake of our soldiers, sailors and airmen, as well as others, we need the proper law to be both a human rights law and an international humanitarian law?
Lord Faulks: I am sure that the noble Lord will not have forgotten the margin of appreciation. Provided our British Bill of Rights respects the European convention but tailors it to suit the particular challenges that the military faces, it is likely that Strasbourg will respect our interpretation. Of course, we will continue to protect human rights under any regime that exists, and also to respect our international humanitarian law obligations.
Lord Vinson (Con): My Lords, is the Minister aware that the French, much earlier on, exempted their armed forces from prosecution under the Human Rights Act, so we would be following an excellent precedent?
Lord Faulks: I am grateful to my noble friend. We are aware of that and it is a matter that shall be taken into consideration.
Baroness Symons of Vernham Dean (Lab): My Lords, the Minister was unable to answer the specific point raised by my noble friend Lord West of Spithead in relation to Ireland. Would he be kind enough to write to him on that?
Lord Faulks: I am happy to do that when I have the relevant information to hand.
Lord Dannatt (CB): My Lords, given that there can be no blanket, technical explanation for these circumstances, is the Minister prepared to give an undertaking that where a soldier, sailor or airman acts in palpable good faith, there will be a presumption by the Government to stand with him and behind him in his defence against any action that might be taken against him?
Lord Faulks: The Government always stand behind our soldiers but to give a blanket undertaking like that would be exceeding my authority. With regard to battlefield immunity, which the noble Lord may be referring to, combat immunity remains part of the common law, although its contours are rather unclear at the moment, particularly in light of the Smith v Ministry of Defence case about the interrelationship of the Human Rights Act and that immunity. These are matters on which the Prime Minister and the Government are profoundly exercised.
Baroness Nicholson of Winterbourne (LD): Will the Minister allow, under the current military law, for some information to be given to the families of the military police who were killed in Karmat Ali, and which they have so far not received. I was in that city the day after the deaths and all the information is readily available. When will the ministry allow it to be released to the families concerned?
Lord Faulks: I will take that request back to the Ministry of Justice and try to have some inquiries made.
1 Mar 2016 : Column 698
Lord Bach (Lab): My Lords, when can we look forward to the draft Bill of Rights and will its timing be affected by the EU referendum?
Lord Faulks: My Lords, we are in the hands of the Prime Minister, who has a number of elections to consider —local elections, elections of the devolved assemblies, and the small matter of the European referendum. Noble Lords may have to wait a little longer, but it will of course be well worth waiting for.
London: Housing Costs
Asked by Lord Kennedy of Southwark
To ask Her Majesty’s Government what action they are taking to help people on the living wage in London to own their own homes.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Williams of Trafford) (Con): My Lords, this Government are working closely with the mayor and the GLA on measures to increase supply and boost home ownership for all Londoners. These include London Help to Buy, which provides equity loans of up to 40% of a property’s price to homebuyers in the capital, and London shared ownership, which could see Londoners in a borough such as Lewisham buying a home with a deposit of as little as £3,500.
Lord Kennedy of Southwark (Lab): My Lords, first I declare an interest as a councillor of the London Borough of Lewisham. The Minister recently confirmed to me in a Moses Room debate:
“I agree that not everybody will be able to afford a starter home”.—[Official Report, 22/2/16; col. GC 40.]
There lies the problem. Funds are being diverted into the starter home scheme, for homes which are unaffordable to most people on modest incomes, from other housing schemes. Why does the Minister think it is acceptable that the Government are reducing the options for people on modest incomes and the living wage, who are often at the poorer end of the private rented sector, which will mean that often their dream of owning their own home will remain only a dream.
Baroness Williams of Trafford: My Lords, there are a number of products on offer to first-time buyers, including shared ownership, which might require a deposit of as little as £1,400. There is Rent to Buy and a number of other products should people want home ownership.
Lord Harris of Haringey (Lab): My Lords, three weeks ago today the Minister answered a Question about the £140 million that the Prime Minister had announced for estate renewal. We now understand that that £140 million was payable as a loan—it is seed corn that you have to give back. Was the Minister aware at that time that it was a loan? If she was, why did she not tell the House? If she was not, what is going wrong at the Department for Communities?
1 Mar 2016 : Column 699
Baroness Williams of Trafford: My Lords, the day that I answered the Question on estates regeneration was the day that the panel met for the first time. I was not aware of the actual structure of the fund, but perhaps that is understandable given that the panel had yet to meet when I answered the Question.
Lord Hylton (CB): My Lords, will the Government consider restricting the 20% discount for first-time buyers to present occupants of social housing? That would immediately release a dwelling for rent.
Baroness Williams of Trafford: My Lords, the 20% discount for the starter home is to address a specific need in a specific demographic: first-time buyers under the age of 40, whose ability to purchase a home has declined dramatically over the past few decades. This priority is an attempt to address that.
Lord Tope (LD): My Lords, on 26 October I reminded the Minister that according to Shelter research an annual income of at least £77,000 would be needed to purchase just an average starter home in London, and I asked her what the Government’s estimate was of the number of people who were likely to access starter homes in London. She was unable to answer the question then. Would she like to have another go now?
Baroness Williams of Trafford: My Lords, it is very difficult to tell these things until the policy is under way. But the average starter home in London is estimated to be about £318,000; in England, excluding London, it is £145,000. So a joint income of significantly less than that outside London would make a starter home much more affordable. But of course there are things such as the Help to Buy ISA, which will help people save up for their deposit. I am sure that as this policy develops and we get the figures in, I will be able to inform the noble Lord.
Lord McFall of Alcluith (Lab): My Lords, as of December 2015 the Mortgage Advice Bureau stated that the average down payment for a London home is £179,248. How can any young couple, never mind those on the lower living wage, afford such a price?
Baroness Williams of Trafford: My Lords, products such as the Help to Buy ISA and the equity loan that the Government are proposing to raise from 20% to 40% in London should help first-time buyers. But I appreciate that house prices in London are not cheap.
The Lord Bishop of St Albans: My Lords, there is much concern that the focus on starter homes could threaten the provision of alternative housing schemes that are more suitable for those on low incomes, such as shared ownership. Will the Minister assure the House that Her Majesty’s Government’s emphasis on these starter homes will be in addition to other affordable schemes such as shared ownership rather than replacing them?
Baroness Williams of Trafford: I can certainly assure the right reverend Prelate that the £4.1 billion that the Government are putting into shared-ownership homes, to achieve 175,000, demonstrates their commitment to things other than starter homes.
1 Mar 2016 : Column 700
Baroness Taylor of Bolton (Lab): Is the Minister aware that a Conservative MP has moved back in with his parents because he cannot afford to buy a home anywhere near here? What signal does that give that we should have confidence in the measures that she is talking about?
Baroness Williams of Trafford: My Lords, funnily enough that Conservative MP was at my house on Saturday night, and we were talking about this—
Noble Lords: Oh!
Baroness Williams of Trafford: I assure noble Lords that he is not living with me. When he was standing for election, he did move back in with his parents. I think that he is something like 26 years of age, and we are absolutely committed to providing starter homes for people in that age group.
Lord Campbell-Savours (Lab): My Lords, has the Minister been following the progress of the project being promoted by an organisation called London Citizens, which is developing a site on Mile End Road in London—the former St Clement’s mental hospital? It can sell flats at a fraction of the normal price that properties are being sold for in London because of the way that it handles the land value. Might Ministers have a look at that project and see whether any lessons can be learned, particularly while the Housing and Planning Bill is going through the House of Lords?
Baroness Williams of Trafford: I am afraid to tell the noble Lord that I have not heard of the scheme but I would be very interested to hear about it. If he could write to me, I certainly would be interested to have a look at it.
Calais: “Jungle” Camp
Asked by Baroness Sheehan
To ask Her Majesty’s Government what views they have expressed to the government of France about the bulldozing of the south section of the Calais “Jungle” camp.
The Minister of State, Home Office (Lord Bates) (Con): My Lords, the management of migrant camps is the responsibility of the French Government. I understand that the French authorities have increased the capacity in alternative accommodation for vulnerable groups. We are in close touch with the French Government, and the UK has pledged £7.2 million to provide help and facilities for migrants at centres in Calais and elsewhere in France.
Baroness Sheehan (LD): My Lords, having visited the camps in both Calais and Dunkirk, I am more convinced than ever that the protection of children and the protection of refugees are two of the most important pillars of international law. However, the violent images on our TV screens show that the French and British Governments have failed to uphold either
1 Mar 2016 : Column 701
in Calais. Will the Minister urge the Prime Minister to set up the processes necessary to assess the rights of the estimated 300 unaccompanied children in Calais, rather than hide behind the skirts of dysfunctional Dublin III regulations?
Lord Bates: We are certainly aware of the situation, which is very difficult for the French Government. They have tried to deal with it correctly: they have applied to the courts for the right to take the actions they have taken and have provided another 100 welcome centres across France to look after these people. The reality is that no one needs to be in those camps. If they are seeking asylum, they should claim it in France. They will then enter the asylum system, and if they have a claim to family reunion in the UK, that can be dealt with expeditiously. We announced just yesterday that through the exchanges of key personnel, we are increasing interoperability between the two departments to ensure that that happens within two months.
Lord Pearson of Rannoch (UKIP): My Lords, does the noble Lord agree that the Prime Minister was guilty of pathetic scaremongering when he suggested that if we leave the EU, France will allow the refugees through to set up camp in Kent? Would it not be the duty of government to stop them at our border and would those who did get through not simply disperse into our community, which is, after all, where they want to go?
Lord Bates: The Prime Minister is absolutely right to point out that the protection of our borders is inextricably linked to co-operation with our European partners. The migrant crisis shows that very clearly. On the other hand, our relationship with France, particularly over Coquelles, is the result of the Le Touquet treaty, which was negotiated bilaterally between the UK and France. We have similar understandings with Belgium, the Netherlands and, of course, the Republic of Ireland. So both hold true.
The Archbishop of Canterbury: My Lords, while we would all agree that the situation is difficult for the French authorities, I am sure we also feel that it is significantly more difficult for the 300 unaccompanied children. I recently visited the Marsh Academy near Romney Marsh and saw a school and community fostering and caring with the utmost compassion for significant numbers of unaccompanied children. Given that example, does the Minister agree that issues of compassion should easily trump those of administrative efficiency and tidiness, and narrow definitions of family links, and that we should, therefore, take more children very quickly?
Lord Bates: Of course that is true but, on compassion, the Prime Minister said in September that we would bring 1,000 people into the country by Christmas, and so far we have 1,200, half of whom are children. The case in Romney Marsh that the most reverend Primate mentions, is in Kent, which has a particular responsibility in this respect, in terms of the numbers of unaccompanied asylum-seeking children arriving there and needing to be cared for. I was very grateful to the right reverend Prelate the Bishop of Rochester, who undertook to
1 Mar 2016 : Column 702
write to other authorities about taking more of these unaccompanied asylum-seeking children, to share the burden that currently falls too heavily on Kent.
Lord Rosser (Lab): A tribunal has recently ruled that the unaccompanied children with a strong claim to be in this country under the Dublin regulations should be able to come to the UK to be in the care of their close family while they make their applications. Do the Government now intend to let some or all of the estimated 150 such unaccompanied children in Calais who have a strong claim to be in this country under the Dublin regulations, also now come to the UK to be in the care of their families while they make their applications?
Lord Bates: The protection of children is paramount in this situation. There should be no child in Calais who is not being encouraged by all authorities to claim asylum there. Once they claim asylum there, they enter the multilateral Dublin agreement, and then their claims can be expedited to ensure that they are reunited with their families—if they have families in the UK—and, if not, more importantly, that they get the protection they need from the dreadful conditions we have seen and heard about.
Lord Brabazon of Tara (Con): My Lords, given the widespread and justifiable concern about the unaccompanied children in these camps, can my noble friend tell the House what age these children are and how they got to the camps unaccompanied in the first place?
Lord Bates: Of the unaccompanied asylum-seeking children arriving in the UK, 61% are aged 16 or over and only 7% are under 14. Another point to bear in mind is where they come from; it may be of interest to the House that they come from Eritrea, Afghanistan and Albania. As for how they get here, a chilling report from Europol estimated that 90% of all people seeking asylum in the European Union have got to Europe by paying criminal gangs.
Housing and Planning Bill
Committee (2nd Day)
Relevant document: 20th Report from the Delegated Powers Committee
Moved by Earl Cathcart
24: After Clause 54, insert the following new Clause—
“Requirements relating to tenancy deposits: relevant persons
(1) The Housing Act 2004 is amended as follows.
(2) In section 213 (requirements relating to tenancy deposits)—
(a) in subsection (5) omit “and any relevant person”;
(b) in subsection (6) omit “and any relevant person”;
(c) in subsection (10) omit all the words after the second “property” to the end of the subsection.
(3) In section 214 (proceedings relating to tenancy deposits), in subsection (1) omit “or any relevant person (as defined by section 213(10))”.”
1 Mar 2016 : Column 703
Earl Cathcart (Con): My Lords, the first two amendments are in the name of my noble friend Lord Flight, who, unfortunately, cannot be here today. I should declare that I am a landlord.
My noble friend’s Amendment 24 provides that the relevant persons concept be removed, on the grounds that it is confusing and gives little or no protection to tenants. Where someone other than the tenant contributes to or pays in full the deposit for a home, they, as well as the tenant, are required to be given the prescribed information. Such a person is known as the relevant person. Failure to give the prescribed information leads to financial penalties, and the landlord’s inability to recover possession of their property should the need arise.
There is little need for this requirement, as the arrangement between the tenant and the relevant person is private, one that the landlord is not required to know about, despite being required to provide the relevant person with information. After all, the contract is between the landlord and the tenant, not some third party. Obviously, if the third party is party to the contract—for example, acting as a guarantor—that third party would and should receive the relevant information as to the whereabouts of a deposit, but not if the third party just helps out with the deposit. Surely that is a private matter between the third party and the tenant. A provision which can be forgotten about easily creates a needless trap for landlords, who are potentially hostage to unscrupulous tenants entering into such an arrangement and then seeking to conceal it from the landlord, who is left in breach of his obligations.
My noble friend’s second amendment concerns providing information electronically. Landlords are legally responsible for ensuring that deposits provided for a rented property are kept safe for the duration of the tenancy in an official tenancy deposit scheme. They are obliged to provide the tenant with details of where the deposit has been secured, known as the prescribed information. At present, the prescribed information must be issued to the tenant in paper form. In houses of multiple occupation, this can lead to volumes of paper.
The amendment would enable legal information on the location of deposit money, once secured in an official scheme, to be provided to tenants electronically. This already applies to some other communications, including the How to Rent guide, but would be best applied across the board, including to gas safety certificates and tenancy agreements. A recent survey of landlords found that 91% would prefer to send prescribed information to a tenant by email; 92% felt that their tenants would prefer such information to be sent by email and the emails stored; and 95% felt that serving information electronically would make the administration of letting out a property more efficient. We are constantly told that we now live in a paperless society, so it seems archaic to insist that prescribed information should continue to be sent only by paper.
My Amendments 26 and 31 are designed to address a particular issue which some landlords and tenants can face when seeking to reclaim a tenancy deposit held by the custodial tenancy deposit scheme. Under the Housing Act 2004, landlords are required to protect tenancy
1 Mar 2016 : Column 704
deposits by either registering the deposit with an insured tenancy deposit scheme or physically transferring the tenancy deposit given by a tenant to a custodial tenancy deposit scheme, which holds the deposit during the tenancy. The Government have included in the Bill a streamlined repossession procedure when a tenant has abandoned the property. This presents an opportunity to amend Schedule 10 to the Housing Act 2004 to similarly streamline the custodial deposit repayment procedure where a tenant or landlord is not contactable at the end of the tenancy.
The problem that I seek to address can arise at the end of a tenancy when a landlord or tenant seeks to obtain a repayment of the tenancy deposit from the custodial tenancy deposit scheme that holds it. Both the landlord and tenant have to agree on the amount of deposit to be returned for the scheme to release the funds to the relevant parties, failing which the matter can be referred to the dispute process of the scheme or to the courts. However, one of the significant issues which landlords and sometimes tenants face is recovering the deposit from the custodial scheme when the other party is simply not contactable or fails to respond to letters and emails. In these circumstances, a landlord has to go through a lengthy procedure to secure a repayment from the deposit held by the custodial scheme if they have suffered a loss. This involves the landlord drawing up a statutory declaration before a solicitor, setting out what deductions should be made and why the tenant is not contactable and forwarding this to the custodial scheme. It is a long-winded process which leads to delays and additional costs for the party making the statutory declaration.
Interestingly, legislation in Scotland and Northern Ireland approaches this problem in a different way, and my amendment to Schedule 10 to the Housing Act 2004 proposes that we should adopt that process here. In Scotland and Northern Ireland, where a tenant fails to respond to requests from the landlord regarding the deposit repayment, the portion of the deposit requested is paid by the custodial scheme to the landlord once the custodial tenancy deposit scheme is itself satisfied that the tenant has failed to respond. A similar process applies where the tenant says that the landlord is not responding. This means that the deposit is repaid more quickly, without recourse to solicitors and statutory declarations, while ensuring that if the tenant or indeed landlord later reappears, they can seek to recover any disputed deposit through the courts. I am further advised that the proposed process has been working very successfully in both Scotland and Northern Ireland for the last three to four years.
I am advised that the current statutory declaration process is used in over 4,000 cases each month. My amendment will lead to a significant streamlining of the deposit repayment process where parties fail to respond to repayment requests, and will lead to reduction in time, expense and worry for landlords and tenants who need to get the deposit repaid by the custodial scheme. I beg to move.
Lord Best (CB): My Lords, as this is my first intervention in Committee, I draw attention to my various housing and planning interests on the register.
1 Mar 2016 : Column 705
Amendment 33B, to which I am pleased to note that the noble Lord, Lord Kennedy, has added his name, seeks to address, in a modest way, the key issue that arises in this Bill. That issue, for me and I think many others in your Lordships’ House, is that the Bill seeks to do good things in increasing the supply of housing and supporting first-time home buyers, but it neglects, indeed disadvantages, those who simply cannot become owner-occupiers. While there is widespread support for the Bill’s measures to help more young people to buy, there is also widespread alarm that this is not additional to helping the less affluent but is in place of doing so. We are worried that the options for poorer households are being closed off. Councils and housing associations, as we will be exploring in later amendments, are likely to be doing less for those on average and below-average incomes. Where, then, can these families and single people go?
This amendment seeks to put in place one small but significant opportunity for the Government to assist those who, with all the good will in the world, are not going to be buying a property anytime soon, yet are most unlikely to obtain council or housing association accommodation. It would give the Secretary of State the power to underwrite a national scheme that enables organisations like Crisis—the leading charity in this field—to give private landlords a guarantee against damage, rent arrears et cetera. Where there is a bond guarantee, the landlord does not need the usual month’s rent as a deposit. As well as overcoming an insuperable barrier for a tenant with very little money, this approach avoids the administration in collecting, chasing up and returning deposits.
Now that social housing is so hard to come by, this is seldom a possibility for single homeless people since they are unlikely to get classified as in “priority need”. Even where the local authorities have a legal duty to find accommodation for homeless households, the majority of councils now look to the private rented sector to discharge that duty. This sector may be far from ideal for many people in terms of security, affordability and quality, but it is now the only answer in so many cases. The problem is that, since private landlords are not charities and are running their businesses, they do not want to take risks so even this avenue is blocked for many applicants.
The latest survey commissioned by Crisis from Sheffield Hallam University shows that 55% of landlords are unwilling to take in anyone in receipt of housing benefit, not least because the local housing allowance does not cover all their rent, and 82% of landlords were unwilling to rent to homeless people. So numbers are growing of people in bed-and-breakfast hotels, hostels, or indeed living on the streets. This is vastly more expensive than finding a place for them in the private rented sector.
With a rent deposit guarantee in their armoury, local PRS access schemes have something concrete to offer private landlords. There are currently over 280 of these schemes, many supported by Crisis with funding from the Department for Communities and Local Government. I should say in passing that the future of this grant aid is now unclear and I hope DCLG is minded to renew it. An evaluation by Sheffield Hallam
1 Mar 2016 : Column 706
University found that in four years these PRS access schemes had secured homes for 8,000 people who had been homeless and these tenancies were shown to be sustained in 90% of cases.
Bond guarantees mean these local groups can overcome the huge and understandable reluctance of landlords to take any risks in whom they house. What is needed is watertight government backing which local PRS access schemes can deploy. Only that part of the guarantee which gets called down actually costs any public money. Experience shows that in only about 15-20% of cases is the bond called upon at all, and in many of these instances the amount claimed is relatively modest. Compared with the bricks-and- mortar cost of a new home, this government subvention is miniscule and it achieves immediate revenue savings.
This amendment, therefore, paves the way for a national deposit bond guarantee scheme, along with a set of quality standards for the organisations who could draw upon it. As so many doors close on housing for those in the most acute need, this arrangement would give Government the chance to be helpful in a modest but important way. Since it also saves public money into the bargain, I hope the Minister finds it appealing. After all, we will shortly be discussing the very generous guaranteed support for home buyers that to date requires underwriting to the tune of £9.7 billion—hundreds of times more than this guarantee scheme that would enable much poorer people to get a roof over their heads.
Lord Beecham (Lab): My Lords, I congratulate the noble Earl, Lord Cathcart, and the noble Lord, Lord Best, on their practical and sensible amendments, which I hope the Government will accept. In terms of difficulties for people, we are dealing with a sensitive area because their homes are at stake. It is quite reasonable to adopt the proposals that we have just heard outlined in detail, and we support both amendments.
My amendment, Amendment 28, is rather different. It would require the Secretary of State to undertake a review of the tenancy deposit scheme, which was introduced in the Housing Act 2004. One reads from time to time of difficulties experienced by tenants, in particular, although it could also, I suppose, be landlords who have difficulties, in recovering deposits they have paid. Very often, one reads that allegations are made that the tenant has damaged the property and so forth. Given that usually not large sums are at stake, it seems to be the case that some tenants give up the ghost rather than pursue the matter. There is a scheme for dispute resolution, which is operated by the relevant agency without charge. However, it is not binding on both parties to accept the scheme’s involvement, so if a landlord, or it could arguably be a tenant, is at the wrong end of a claim, the other party would have to seek redress through the courts. We have already had a reference to the small claims limit this afternoon, and it is probable that most deposits would be within the range of up to £5,000. No legal aid is available and no costs are recoverable on a successful claim. This is going to make it less likely than ever that tenants will exercise their right to recover a deposit which is being wrongfully withheld.
1 Mar 2016 : Column 707
I have only one relatively direct experience of this matter inasmuch as the daughter of a Newcastle City councillor colleague of mine and her two friends were living in accommodation in London and had paid a deposit. Issues arose about to whom the deposit had been paid and so forth. It dragged on for a considerable time. It was clearly necessary for these three young people to get some legal advice—fortunately for them, they were not seeking it from me—but it got a little too much for at least two of the three tenants, and they decided that they would rather move on and forget about it. However, they lost a modest sum of money, by most people’s standards, but money they could ill afford to do without.
This amendment is calling only for the Government to review the operation of the scheme. It has now been in existence for 11 or 12 years. I do not know whether it has been reviewed before, but given the pressure on the private rented sector, which has grown considerably with the proportion of private rented properties in the market in the order of, I think, 20%, whereas a few years ago it used to be 9% or 10%, it is a growing area and the issue of deposits potentially becomes a matter of growing concern.
I hope the Minister will indicate the Government’s willingness to inquire into this. There are various agencies and interest groups which would no doubt be willing to collaborate. It would be as well to institute such a review at an early stage and then, if necessary, to amend the scheme or amend the 2004 Act, in particular, to see that proper accessible protection can be afforded to those who might be at risk of unscrupulous landlords, in this case, taking advantage of them and relying on them to give up the ghost before seeking redress, which is difficult and potentially expensive to obtain.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Williams of Trafford) (Con): My Lords, I thank my noble friend Lord Cathcart for explaining on behalf of my noble friend Lord Flight the reasons behind Amendments 24 and 25. If enacted, Amendment 24 would remove the requirement for a landlord to notify a “relevant person” that their tenant’s deposit has been secured in a Government-authorised tenancy deposit protection scheme.
Section 213 of the Housing Act 2004 defines a relevant person as,
“any person who, in accordance with arrangements made with the tenant, paid the deposit on behalf of the tenant”.
This can be a family member but in most cases it is a charity such as Crisis or Shelter, which offers deposit loan schemes to vulnerable people with a history of homelessness, or a local authority, which pays the deposit through housing benefit in cases where tenants are out of work or on a low income.
I welcome proposals which reduce burdens for business and I understand the spirit in which this amendment has been tabled. However, the proposals set out in Amendment 24 have the potential to adversely affect the willingness of a charity or a local authority to pay a deposit on behalf of a tenant. This could lead to vulnerable people or those on low incomes being unable to access the private rented sector, which is something we would want to avoid.
1 Mar 2016 : Column 708
Amendment 25 would allow tenancy deposit protection information to be provided to the tenant by their landlord electronically by email. The Government welcome proposals that seek to reduce burdens on business but in this case primary legislation is not required. The aim of this amendment can be achieved through secondary legislation, using powers in the Electronic Communications Act 2000. I will be happy to look further into the proposals outside this Chamber and consider introducing secondary legislation at a later date. I hope that this explanation will reassure my noble friend and I hope that he will withdraw his amendment.
Amendments 26 and 31, which were tabled by my noble friend Lord Cathcart, seek to reduce the time taken to repay a deposit to a tenant or landlord where either party is absent or unco-operative. I accept that there is a minor cost to a landlord or tenant in arranging for a solicitor or magistrate to witness a statutory declaration, but this process is necessary for the landlord or tenant to prove beyond any doubt that they have attempted to contact the other party and that they have not been able to reach an agreement on the amount claimed from the deposit before it is repaid. The example that the noble Lord, Lord Beecham, gave just before he sat down underlines this. Removing the requirement could leave the process open to abuse, with no independent verification that the other party had been contacted to give their consent. With this explanation, and given that the vast majority of claims are settled without a problem, I hope that the noble Lord will not press his amendments.
Amendment 28, in the names of the noble Lords, Lord Kennedy and Lord Beecham, would require a review of the tenancy deposit scheme. I understand that this amendment has been tabled in order to ensure that tenants are treated fairly at the end of their tenancy, and I know that we can all agree with that aim. My department has a governance role to ensure that the schemes are working well. The performance of the schemes is monitored through monthly key performance indicators, regular governance meetings and information provided by the tenancy deposit scheme users’ group, which includes landlord and consumer representatives.
From the overall feedback received, we are satisfied that the alternative dispute resolution system generally works well. Of the 11.5 million deposits which have been protected since the launch of the scheme, less than 2% have gone to adjudication. On average, following adjudication, 27% are awarded to tenants, 17% to landlords or agents, and just over half are split between the two sides.
Looking to the future, we are satisfied that the tenancy deposit protection schemes awarded contracts for new custodial schemes from 1 April this year have the necessary alternative dispute resolution processes in place to ensure that tenants will continue to be treated fairly. This was a key evaluation criterion in our re-procurement exercise carried out last year.
In conclusion, I hope that this explanation will assure noble Lords that tenants’ deposits are and will continue to be returned to them fairly and quickly at the end of the tenancy, and I hope that they will not press their amendments.
1 Mar 2016 : Column 709
Finally, I turn to Amendment 33B, tabled by the noble Lords, Lord Best and Lord Kennedy, which gives the Secretary of State powers to underwrite a national tenancy deposit bond guarantee scheme. In 2014-15, 220,000 households were prevented from becoming homeless. Of these, 54% were assisted to remain in their own home and 46% were helped to a new home. Statistics show that in at least 42% of cases households were assisted into private rented sector accommodation. In support of this, many local authorities, housing associations and charities in England already have a rent deposit or bond scheme.
The Government have already funded Crisis to the tune of nearly £14 million to develop a programme to help single homeless people to access the private rented sector. Nearly 9,000 single homeless people have been helped into private rented sector accommodation so far, with a 90% tenancy sustainment rate. This Government’s approach is to support a provision of resources to local authorities at a local level. This is because they can then use the funding flexibly to meet local needs. Of course, different areas have particular requirements. To divert scarce funding into a single national approach would not always be the best or most effective use of resources and to specifically underwrite a national scheme may not be the best use of resources.
I hope that this explanation will reassure noble Lords and I hope that they will not press their amendments. But before I sit down I will answer a specific question from the noble Lord, Lord Best, about DCLG continuing to fund in the private rented sector access programme. We have not made any decision on further funding, but from the start of the programme all funded schemes were required to attract funding from other sources and make plans for future sustainability. I will keep the noble Lord updated on this.
Lord Kennedy of Southwark: Before the noble Baroness sits down, I think her response to the national rent deposit guarantee scheme is quite disappointing. Will she say why? She said that a number of authorities have these schemes, but what is the objection to having a national scheme? We are talking about very modest sums of money.
Baroness Williams of Trafford: I think that the noble Lord will accept that the fact that the scheme is currently working very well and that some local authorities may actually decide to underwrite the schemes themselves in certain cases to prevent homelessness is—and we are looking after every single penny—a reason not to do something unless there is evidence to say that we would need to do it.
Baroness Hollis of Heigham (Lab): I am aware that this is Committee stage. How many local authorities have such schemes in place, and what would be the additional cost, in the Minister’s estimate, of producing a national scheme?
Baroness Williams of Trafford: May I come back to the noble Baroness on those specific details?
Baroness Hollis of Heigham: Of course, but I would have thought that if the Minister was responding on cost plans, she might have the information.
1 Mar 2016 : Column 710
Baroness Williams of Trafford: That is very true. If the noble Baroness will forgive me, I will come back to her. I may well have those figures in my notes, and, during the course of Committee, I will come back to her.
Lord Beecham: I wish to return to the issue of the deposit scheme. The noble Baroness relies on the apparent success of the alternative dispute resolution scheme. She is right to do so for those who use that scheme, but of course the scheme is, in a sense, optional. Both parties have to agree to use the resolution scheme. If one party does not—and it might well be the landlord—then there is no resolution through that mechanism, so merely quoting the figures which are produced by that scheme does not necessarily reflect the situation in the marketplace. I do not know whether the Minister has or can procure any evidence of the incidence of problems outside the ADR scheme, or what the impact might be of making it not a matter to be agreed between the parties, but something in place for either party without necessarily having to sign up to an agreement. That might be a way of facilitating access to the scheme, usually for tenants, who would otherwise have to deploy other methods, including possibly their own resources. For the reasons I have already given, that will often be difficult.
With respect, while the ADR scheme is very useful, it does not necessarily cover the whole area. My amendment seeks the involvement of the Government in looking at the situation in the remaining area and deciding whether changes need to be made. I hope the noble Baroness will agree to have another look at that aspect of it.
Baroness Williams of Trafford: I will look at it again, but this is covered in How to Rent. I certainly know from my own experience, and I declare a past interest in this, that within a certain period from the start of a tenancy—I think it is 28 days—not only does the tenancy deposit scheme have to be set up, but the landlord has to produce the certificate in the house. We talked about an electronic version of it. Alarm bells should ring for a tenant if such a scheme has not been set up and evidence produced of it, but maybe I am not getting the right end of the stick.
Lord Beecham: I understand the difficulties of all this, but I do not think that the noble Baroness quite has the point. You can enter into the scheme but, as I understand it, it requires both parties to agree to the alternative resolution of a problem. If one party—usually the landlord—does not, that way of disposing of the matter does not exist. The question therefore is: what other methods are available and how can the system be improved? One way is to make not just the deposit but use of ADR compulsory where there is a dispute. Perhaps that is worth looking at but, as my amendment suggests, an overview of the whole situation would be a useful start.
Baroness Williams of Trafford: I will go away and explore the points that the noble Lord has made. I will write to him.
1 Mar 2016 : Column 711
Lord Kennedy of Southwark (Lab): I will come back briefly to the national deposit scheme. When the noble Baroness writes to my noble friend about the amount of money and the authorities involved in such schemes, will she also say what percentage of tenants are protected by them, and about the thought processes behind how the Government decided not to go for the national scheme? I think she will say that most of it is covered, but what consultation took place to decide not to come forward with a national scheme?
Baroness Williams of Trafford: I am happy to do that.
Earl Cathcart: I think my noble friend has finally sat down. I thank the noble Lord, Lord Beecham, for supporting all the amendments. I only wish that the Minister’s response had been the same. Unfortunately, it was rather like a curate’s egg—good in parts. I thank her for agreeing to take away the idea of giving the information electronically. However, I am disappointed in her response to the other two amendments I spoke to. I will read what she said and no doubt my noble friend Lord Flight and I may come back to her, but at this stage I beg leave to withdraw the amendment.
Amendment 24 withdrawn.
Amendments 25 to 28 not moved.
Moved by Lord Kennedy of Southwark
29: After Clause 54, insert the following new Clause—
“Security of tenure
(1) After section 19A of the Housing Act 1988 (assured shorthold tenancies) insert—
“19B Minimum length of certain assured shorthold tenancies
Any assured shorthold tenancy (other than one where the landlord is a private registered provider of social housing) granted on or after 1 April 2018 must be for a fixed term of at least thirty-six months, and it is an implied term of such a tenancy that the tenant may terminate the tenancy by giving two months’ written notice to the landlord.”
(2) In section 21 of the Housing Act 1988 (recovery of possession on expiry or termination of assured shorthold tenancy), after subsection (4) insert—
“(4ZZA) In the case of a dwelling house in England, no notice under subsection (4) may be given before the end of the period of thirty-six months beginning with the first day of the tenancy.””
Lord Kennedy of Southwark: My Lords, I declare an interest as a councillor in the London Borough of Lewisham. Amendment 29 in my name and that of my noble friend Lord Beecham seeks to amend the Housing Act 1988 to make the minimum length of an assured shorthold tenancy granted on or after 1 April 2018 a fixed period of 36 months. Most assured shorthold tenancies usually last between six and 12 months at present. The contract says how much rent to pay, how long the tenancy lasts and who is responsible for the repairs. The landlord cannot increase the rent during the fixed term of the assured shorthold tenancy unless the contract sets that out. When the tenancy ends and the tenant decides they wish to sign up for further fixed period the rent can be increased in the new agreement.
1 Mar 2016 : Column 712
Even an assured shorthold tenancy for one year is a relatively short time and this amendment seeks to give tenants a longer period to live in a property, enjoy more security and put down some proper roots. It is a longer period than at present but not excessively long. The private rented sector is increasing all the time, and providing more stability and a longer tenure for tenants must be right. We hear of “generation rent”—people not being able to afford to buy their own home and more people living in properties they have to move round from more regularly. That is not good for them or the wider community. It is not great for landlords either.
As I said earlier, a greater proportion of people are living in the private rented sector. It is not only single people and couples but also people with children. People with children do not want to move round needlessly and have less certainty about their living arrangements, certainly with things such as their children’s schools. I am sure that noble Lords have seen the English housing survey for 2014-15 which showed that over the last 10 years the number of tenants in the private rented sector with dependent children had risen from 30% to 37%. I think that that trend will continue.
The amendment also allows tenants to give two months’ notice if they wish to move and leave the property. This is important as it does not hold people to a tenancy when they need more flexibility because their circumstances have changed. At the same time, it gives tenants more security in the length they can rent a particular property, subject to conforming to the other requirements of the contract they agree with the landlord. The rights of the landlord are not affected in any other way by this amendment. I will listen with interest to the Government’s response. I beg to move.
The Earl of Lytton (CB): My Lords, I hate to voice a tone of slight dissent from what the noble Lord has introduced because I know where he is coming from. I declare an interest because I am a private rented sector landlord. Some of our assured shorthold tenants had six months or one-year lettings originally and now double-digit years later are still there, with or without dependent children. I think we have seen at least two families grow up and the next generation start to fly the nest. I am very proud of that. The critical point is that there is no bar in letting longer term at present.
There are also many reasons why it is convenient for both parties to rent shorter term. I live in an area that is customarily known as the “Gatwick diamond”. It is an area of Sussex and part of Surrey where the great driver is the industrial and commercial activity associated with Gatwick Airport. Many people move in or have temporary secondments to places such as that or indeed may be seconded elsewhere to postings abroad for varying times—six, 12, 18 months and so on. This applies whether they are landlord or tenant. Whether it is job secondment, moving home or being in the process of selling a property somewhere else and moving in, my wife and I have a constant source of applicants for accommodation. There is a need for the short term—it is very important and part of the fluidity of this section of the market.
1 Mar 2016 : Column 713
Another thing I would be slightly fearful of in the noble Lord’s amendment is when a buy-to-let situation exists on that sort of mortgage. The deferral of the reversion might have undesirable effects in terms of how the mortgagee would see the risk. A mortgagee, of course, needs to be in a position to lay claim to the property and dispose of it on the open market to redeem the mortgage, and needs to be able to do so at reasonably short notice. That obviously should not be operated to the disadvantage of a contractual tenant under an AST, but if it is deferred for three years, I can see that that might interfere with the way in which a mortgagee could perceive that particular bit of the risk.
The basic premise is a little bit unbalanced as between the parties. I have some sympathy with the noble Lord here, but not every part of the country and not every sector suffer from the issue that I suspect this amendment is trying to address. The private rented sector is important. I like to think that most private sector landlords think as I do, offering a quality product and treating our tenants as decent people, as human beings, as neighbours, as friends and, indeed, seeing their children grow up and taking great pleasure in that.
However, we have been down this road before on creeping security of tenure. Memories are quite long in that respect. I remember that from the 1960s until the 1980s the private rented sector was more or less annihilated in all but name. I would not like to think that the message here is that this is a harbinger of that situation. With the benefit of those thoughts, I suggest that the Committee should not go along with this amendment, although I have some sympathy with the rationale behind it.
Baroness Hollis of Heigham: I very much support my noble friend’s amendment, which proposes that any tenancy must be offered for a fixed period of three years. Of course, there may be people who have sold a house and are waiting to buy who need a short tenancy, or there may be students who want it for less than a year—nine months, perhaps—and will then move on. Obviously, no one is saying that any tenant and landlord should be locked into it irrespective. The tenants themselves will be the best judge of how long they are likely to need that tenancy.
As it stands, all the power is with the landlord. I was interested to hear in the speeches opposing this no recognition of the fact that something like a third of all privately rented property is below the decency standard and that if any tenant in that situation asks for repairs, they risk—I am not saying it will happen—losing the right to extend their tenancy. After six months, 12 months, or whenever that tenancy is up for renewal, they can and will be out. As a result, we know, not just from Crisis and Shelter, but from our own environmental health officers in local authorities, how often tenants are afraid to require repairs to be done because if they do, they will lose their home. There is too much of an imbalance of power between the landlord and the tenant, given the legal situation in tenancies, the level of rents and the shortage of supply.
Who is most interested in six-month, short-term tenancies? It is not necessarily the landlord. A good landlord may be delighted to have a long-stay tenant
1 Mar 2016 : Column 714
without the risk of voids, the cost of churn and so on. I am sure that there are many such landlords in that situation; I do not doubt that the noble Earl, Lord Lytton, is one such.
Who does have an interest? The letting agencies, of course. Every time there is a new letting after six months, they get a new set of fees. The six-month limited tenancy is gold to the letting agencies. It is desperate news for tenants who might need repairs. There is also a problem in respect of mortgage providers: I understand that only a couple of building societies, one of which is Nationwide, are willing to underwrite buy-to-let where the assured tenancy is likely to last for more than six months. Therefore, everything colludes to prevent a good landlord doing what he might like to do and to prevent tenants having the security of putting down roots in their community. It is not in the interest of a bad landlord who does not want to do repairs; it is not in the interest of the letting agency; it is not in the interest of the mortgage providers. There is, therefore, a complete imbalance of power. I am not speaking about those tenants who, quite rightly, see the rented sector as a temporary tenure on their way through to either a different home in a different part of the country or to a different form of tenure. I am talking about those who are locked into the private rented sector with children who need to go to schools, with GPs’ surgeries that they need to get placements in, and who may have a disability in the family and need the support of neighbours who will help them. They should not be at the whim of a bad landlord, a bad letting agency and overly risk-averse mortgage providers for buy-to-let.
This amendment would say that that tenancy must be offered; rogue tenants would be sent on their way, as they should be. It would help good tenants and strengthen the arm of good landlords to provide what is needed, which is homes in which people can put down their roots.
The Earl of Lytton: My Lords, will the noble Baroness comment on the following scenario, which happens very often in the part of the world I inhabit? A family takes a foreign posting; they have a house in the UK and the posting is, perhaps, for a year, which is quite common. During that year, they wish to let the house that they own in the UK. When they come back from that foreign posting, however, they need the house back. In the circumstances that would occur under this amendment, they would not be in a position, as I understand it, to let for a certain period of a year and get their house back. Might I have the noble Baroness’s observations on that?
Baroness Hollis of Heigham: My Lords, in that situation I would expect there to be an agreement. Where a landlord is seeking to regain possession for their personal use—as their own home—that, in my understanding, has always been recognised in law as a different situation from someone being a permanent landlord and seeking merely to churn their tenants.
Baroness Gardner of Parkes (Con): My Lords, I am very interested in this subject—noble Lords know my interests as declared—and I am interested in what is being said today. I think the noble Earl, Lord Lytton,
1 Mar 2016 : Column 715
deals with a market that he clearly understands well, and that is interesting. However, I have had many different comments and reports sent to me by different people. My own personal experience is that, when I offer people two years, they say they do not want that; they do not want to be tied to that and would like only a year. Is the landlord obliged to offer them renewals for three years, even if the person wants it for only a year?
Baroness Hollis of Heigham: My Lords, the proposal is that the landlord should be required to offer it, but that does not in any sense preclude the tenant and the landlord deciding that they want a different tenure.
Baroness Gardner of Parkes: All the agreements for letting residential properties in this country are extremely complicated. In Australia, there is just one in New South Wales. I do not know about other states because there is not a federal law. In New South Wales, you just go into the local paper shop and pay $7.50. That is your letting agreement and everyone—big and small, rich and poor—abides by those. There is about an inch and a half in which you could type quite a lot of special agreed clauses but the rest of the format is a basic thing. It is so simple.
The point made by the noble Earl, Lord Lytton, that this amendment is rather over-balanced against the landlord is relevant and important. Are you going to create a different type of tenancy from the assured shorthold? What will you do in cases where the landlord dies and his family is obliged to pay all death duties in advance of getting probate? What will happen under those circumstances? If you must sell the property with a sitting tenant, of course you will not get anything like the full value. Will the Exchequer allow for that and value the property down accordingly, or will it be done on the open-market value of the vacant property? What would be the special provision where the tenant was not paying the rent and that had built up? Would that all be covered by a new type of tenancy agreement? There are so many complexities that we need to look at here, so this is rather badly balanced.
I think the noble Baroness, Lady Hollis, described people as being at the whim of bad landlords. I am sure that anyone who has a bad landlord is pretty unfortunate but there are so many honest, reliable landlords and, likewise, many good tenants who are happy. I know many people who have rented for years and are still in the same property after well over a decade, as was mentioned. There is a difference between that and the fact that the landlord is obliged to offer three years while the tenant can go any time at two months’ notice. That seems a bit extreme, one way or the other.
Lord Campbell-Savours (Lab): My Lords, perhaps I can deal with the noble Baroness’s comment on what happens in the event that the landlord dies. This is an amendment moved by my colleagues on the Front Bench, and if there is a difficulty with it there is no reason at all why the Government cannot come back with an amendment to deal with the thrust of the case laid in the amendments by my Front Bench but which
1 Mar 2016 : Column 716
includes a provision for those circumstances. That is what we are here to do: to legislate. These amendments have been proposed but Ministers could take them away and say, “Yes, there is a point here but if we build in a system of exemptions then these particular problems will not arise”.
I can also deal with the question of tenants in arrears, which the noble Earl, Lord Lytton, referred to. As I understand it, under Clause 55—in Part 3, which is headed “Recovering abandoned premises”—the Government’s position is actually to simplify the whole process of dealing with what happens where,
“the unpaid rent condition is met”.
That would cover where people are in arrears and where mortgages are being paid, as I presume that under that provision the landlord would then be entitled to secure possession of his property. That deals with one of the main objections in the contribution of the noble Earl, to which I listened carefully.
Finally, the noble Earl referred to people working at Gatwick Airport who did not necessarily need longer-term tenancies. The amendment says that,
“it is an implied term of such a tenancy that the tenant may terminate the tenancy by giving two months’ written notice to the landlord”.
The tenant is not locked into the agreement at all. The tenant can pull out of the agreement at a moment’s notice simply by saying, “I gave two months’ notice to the landlord”. What we are doing here is protecting tenants by not locking them in, in the sense that they can pull out. We are protecting landlords—or the Government are protecting them—under the provisions of Clause 55 in terms of arrears. In terms of landlords dying, as I said, that could be dealt with by further consideration by the Government.
However, what we are doing more than anything else is giving people who take on tenancies a sense of security as to where they live. From what I hear from tales brought to me by my sons’ friends, who have had different tenancies in London over a period of years, many tenants in London do not know where they are going to be. They do not know whether the landlord will want the property back at the end of 12 months. People are entitled to know that the weight is moving at least a little more in favour of the tenants to give them more rights. We are not granting people long-term security of tenure and indefinite tenancies. We are simply extending it from one to three years to give more balance to the way that tenancies operate in the United Kingdom.
Lord Greaves (LD): My Lords, I want to put this problem in a slightly wider context. The noble Baroness, Lady Hollis, said that the present system of short tenancies was bad for tenants, bad for landlords and bad for housing. It is also bad for the local community. There are areas in the north of England of cheap, mainly terraced, housing and former council estates. The houses are cheap—as I will explain later—the rents are cheap, and keeping them in a decent condition is a constant struggle for owners, for the council and for people living in them. The result of the system is that there is a high churn—that is the technical word—of tenants. Many people live in a house for only a short period. That is clearly linked to the system of tenancies.
1 Mar 2016 : Column 717
More than 10 years ago, I was chair of the governors of the local primary school. One problem the school had was the children who were living in that kind of property. It is a traditional area of working class owner -occupation. Some 50 or 100 years ago, people bought the houses from the mills that they worked for. When I first knew the area, owner-occupation was 80% or more, but private landlords have moved in very significantly and taken over many of the properties: one-third or more in the period I am talking about. Two-thirds of the children in the school spent most of their primary education there. In that respect, it was a very stable school: children went into the nursery or infants at the age of three or four and left at 11 when they went to secondary school. However, one-third of the children turned over every year. Every year, one-third of the children in each class were new and did not stay long enough to settle, to get a proper education and have the stability of being in the same school for some time.
That is just one example. When I first knew it 40 years ago, this was a pretty stable working class community of extended families. People who bought houses there as young couples had their parents living in the next street and their grandparents round the corner or in the sheltered housing just down the road. That has been broken down. There are lots of reasons for that, but the single most important one is the growth of private sector housing at the bottom end of the market. There are some good landlords. In that area, the best ones are those who live in the street and own one or two other properties in it. Other very good landlords are those who were left a house when their parents died, look after it well and live in the same town. However, there are absentee landlords who operate through housing agents. I have had people ringing up from Bognor Regis demanding to know why, as their councillor, I was not doing something about the rotten tenants in their house who had just done a moonlight flit and taken all the copper. I had to explain that I was not their councillor but that I was concerned about the house. But I also had to ask why they put those tenants in. I said, “Well, you know what the street is like. It is like that. We are desperately trying to hang on to the good residents there, but you know what it is like”. They said, “No, we have never been there, why should we?”. It is that kind of landlord in the private rented sector which is a disaster. That it is why I would tend to support this amendment, which is just one of the things that might be done.
Baroness Williams of Trafford: My Lords, Amendment 29, if enacted, would introduce a minimum of three-year tenancies in the private rented sector in England and would mean that landlords would not be able to rely on the notice-only or no-fault ground for possession—known as Section 21—within the first three years of a tenancy. Tenants would be able to end the tenancy by giving, as the noble Lord said, two months’ notice at any time.
Let me make it clear that this Government are committed to building a bigger and better private rented sector which provides security and stability for tenants and flexibility for landlords. We have taken action to support the supply and quality of private
1 Mar 2016 : Column 718
rented accommodation by resisting unnecessary and unhelpful regulation while cracking down on the worst practices of some rogue landlords.
Our model tenancy agreement, introduced in September 2014, promotes longer tenancies for those landlords and tenants who want to sign up to them, but there is no one-size-fits-all approach to tenancy lengths, as noble Lords have said. Many landlords are looking to rent out a property for the longer term, but there will be some for whom letting a property is a short-term plan and who will need the property back at some point, perhaps for their own family to live in, as the noble Earl, Lord Lytton, said. So, the system does need flexibility.
Although I understand the spirit in which this amendment is tabled, the amendment would be counterproductive. It would overburden the market with restrictive red tape, stifling investment and the supply of rented housing at a time when we most need to encourage it. This would not help landlords or, indeed, tenants.
Let me explain. Before assured shorthold tenancies were introduced in the Housing Act 1988, the private rental market was in decline. Lifetime tenancies and regulated rents meant that being a landlord was simply not commercially viable for many property owners. But since 1988, the private rented sector has grown steadily—growing from just over 9% of the market in 1988 to 19% today. Landlords, and in most cases tenants, welcome the flexibility of the current assured shorthold tenancy regime, which does not lock either party into long-term commitments and promotes mobility.
We must be mindful that recent figures show that tenancy lengths are on average three and a half years. However, without the certainty that landlords can seek repossession when required, many would be reluctant to let their properties.
Baroness Hollis of Heigham: If the landlord were reluctant to let the property, what would then happen? It would go on the market for sale, making it more available to young owner-occupiers, or would-be owner-occupiers. Is that a bad thing given the Government’s philosophy?
Baroness Williams of Trafford: It may not go on the market. It may, as I and other noble Lords have said, be for the use of the landlord who owns the property. There are a variety of reasons why a landlord should wish to repossess a property.
The noble Baroness’s question on retaliatory eviction is very valid. She will remember that the intention of the Deregulation Act 2015 was to provide tenants with protection from such eviction. Where a tenant has raised a legitimate and verified complaint with the local authority they cannot be evicted using the no-fault Section 21 procedure for six months.
The noble Baroness also talked about buy-to-let mortgages. Mortgage lenders have told us that following the introduction of our model tenancy agreement, with appropriate break clauses, there is no longer any impediment to permitting longer tenancies for their landlord customers. The Nationwide Building Society permits tenancies of up to three years and Barclays for
1 Mar 2016 : Column 719
up to two years. Lloyds, the biggest player in the buy-to-let market, is in full agreement in offering three-year tenancies and plans to implement the policy by the summer of 2016. The Housing Minister wrote to the Council of Mortgage Lenders in January, urging it to encourage those lenders who have not changed their policies to do so, and further discussions will be held.
The noble Lord, Lord Campbell-Savours, suggested that when the tenant is in arrears the landlord could use the abandonment procedure to regain possession. The abandonment procedure, which is introduced in Part 3 of the Bill, is designed specifically to deal with abandoned properties—which may also be commensurate with not paying rent—but it is not intended as a route to remove a tenant in arrears. It is for a property that has genuinely been abandoned. Where a tenant was in arrears but confirmed that they were still in occupation of the property, you could not use that procedure.
The noble Lords, Lord Campbell-Savours and Lord Greaves, talked about the impact on communities. Recent figures from the English Housing Survey for 2013-14 show that tenancy lengths are, on average, three and a half years. According to the English Housing Survey, three in four private renters ended their last tenancy because “they wanted to move”. Tenants value the flexibility that private renting offers, with the majority of people under 35 saying that they do not want longer tenancies, as my noble friend Lady Gardner of Parkes pointed out.
I believe the current framework strikes the right balance between the rights of landlords and of tenants. I hope that that will encourage the noble Lord to withdraw his amendment.
Lord Kennedy of Southwark: My Lords, I thank all noble Lords for participating in this short debate. I say to the noble Earl, Lord Lytton, that I have great respect for him and his knowledge of this sector but there are landlords in the private rented sector who want a longer period to rent to tenants. My amendment seeks to address that issue by retaining the flexibility that both the landlord and the tenant want. It is only a probing amendment but it highlights an issue for some tenants and landlords; namely, allowing longer assured shorthold tenancies where these are wanted. There are, of course, many excellent private landlords, including, I am sure, all the noble Lords who are landlords. I beg leave to withdraw the amendment.
Amendment 29 withdrawn.
Amendments 30 to 33B not moved.
Clause 55: Recovering abandoned premises
Moved by Lord Kennedy of Southwark
34: Clause 55, page 25, line 29, at end insert—
“(e) the local housing authority responds to a request by the landlord confirming that they suspect the property to be abandoned.”
1 Mar 2016 : Column 720
Lord Kennedy of Southwark: My Lords, at Second Reading I and many other noble Lords expressed reservations about the proposals on abandonment. Creating a fast-track process to reclaim possession of a property that has been abandoned has a number of risks. Taking the courts out of the process leaves the tenant in a potentially very difficult position. What is also odd about this provision is that we have spent the first day and the first part of this second day in Committee talking about rogue landlords and seeking to protect tenants from their unfair and often illegal practices. But this part of the Bill could be seen as a rogue’s charter.
It creates a court-free process to get rid of your tenant if you do not like them so that you can get other people in who may pay a few more quid in rent. In 12 weeks the landlord can get possession of their property, after eight weeks of rent arrears and if the tenant has failed to respond to three notices. There do not appear to be any significant problems regarding properties being abandoned. Can the Minister point to the evidence for these proposals being necessary?
Landlords already have powerful rights to regain possession of their property. They can evict tenants through the courts using Section 8 or Section 21 notices and can also use implied surrender in cases of abandonment. Under implied surrender, a landlord may take instant possession of a property without court approval if the action of the tenant clearly implies that they have surrendered the tenancy. We should be clear that genuine cases of abandonment are rare and this is a simple protection for tenants.
Can the noble Baroness also set out how vulnerable tenants will be protected from rogue landlords seeking to make use of these clauses? People can be called away or their circumstances might change. It could take more than eight weeks to get their benefits or other matters sorted out. Vulnerable people in particular may not respond to letters or emails that are sent to them. So although the landlord is not getting any response, it does not mean that the property has been abandoned. The provision allowing tenants to challenge abandonment at the county court after they have been evicted is very weak indeed. Who is going to do that with their possessions on the pavement? Getting a roof over your head will be your overriding concern.
The whole of Clause 55 should go, as tenants seem to have very little protection under it. If the Government are not going to do that, Amendment 34, in my name and that of my noble friend Lord Beecham, would add an additional subsection (e) to the clause, which would require the local authority to respond to a request from the landlord, confirming that it believes the property is abandoned and that the landlord can serve notice on the tenant. This should cause the Government no concern whatever. It would enable the landlord to recover their property if it has been abandoned —in addition to the powers and ways that they have at present, which I have outlined already—but would add a small but significant protection for the tenant.
Amendments 35 and 36, which both come under Clause 57, concern warning notices. Amendment 35 would give the person occupying the property an additional four weeks to respond to the warning notice,
1 Mar 2016 : Column 721
while Amendment 36 increases the maximum period within which the second warning notice can be given from four to eight weeks. The purpose of these amendments is to increase the time available to resolve these matters without the abandonment procedures being invoked and for the tenants to be able to confirm they have not abandoned the property. I beg to move.
Lord Campbell-Savours: My Lords, this is a particularly important amendment, as I read it. I am sorry that I slightly misinterpreted the wording in the legislation on this whole question of abandonment. It seems to me that this provision as it stands is wide open to abuse. Clause 58 has a reinstatement principle, which I suppose is a sort of appeal, but many landlords will believe that this is an open door to them to bring a tenancy to an end by simply asserting the fact that they believe the property to be abandoned.
I cannot see how it is possible to reject the amendment that has been tabled by my noble friend Lord Kennedy of Southwark, which says that the “local housing authority” has to respond,
“to a request by the landlord confirming that they suspect the property to be abandoned”.
In other words, the local authority has to give the seal of approval before the landlord can bring the tenancy to an end.
I hope that the Minister will not simply follow what is in her brief, assuming it says, “Reject”, but will perhaps put this back to people in her department. It is a perfectly sensible and reasonable amendment. It would provide a checking arrangement to make sure that landlords do not abuse their position and I hope that it will be supported by the House.
Baroness Hollis of Heigham: My Lords, I also support my noble friend’s amendment. I understand from briefings from Crisis and other organisations that this is quite a small problem. There are approximately 1.4 million landlords and I think the Government believe that only about 1,750 tenancies are abandoned every year, which is less than 0.5% of private rented households. However, the problem is that there does not seem to be enough security or protection for tenants against greedy or rogue landlords speeding up the process—whether someone is on holiday, is in hospital or has other problems with the landlord and has gone to stay with friends while work that should be done is not being done. There seems to be no way for the local authority—unless the Minister can assure me otherwise—to guarantee that the property has been properly abandoned, rather than it being a case of the rogue landlord using this as a short cut to regain possession. What is needed is an authoritative checking device—for which the local authority, the environmental health officer, the housing officer, or whoever, is best placed—to ensure that the keys have been handed in, the furniture has been removed, the tenant has moved away and the children are no longer there. That is the sort of evidence we want, not the landlord’s hope that because the tenant has not been seen for eight weeks—which might be because they are in hospital, or have gone back to a family home elsewhere in the continent for the summer—they can gain speedy possession that is not legitimate.
1 Mar 2016 : Column 722
Baroness Gardner of Parkes: May I ask for some clarification? When I sat as a magistrate, we had a case of a tenant whose landlord stopped taking the rent; it was never collected. After some years he was able to come to the court and get the right to buy the property, because, technically, it was abandoned. At the time this seemed to me quite a complex procedure and I wonder where it fits in—whether the tenant is disadvantaged by this amendment, or the owner of the property. I am not sure what the amendment means.
Baroness Hollis of Heigham: There should, of course, be no problem over landlords repossessing genuinely abandoned property. As I was saying, Crisis estimates that there are 1,750 such cases every year. We want a procedure to ensure that the property has genuinely been abandoned, rather than the process being exploited by rogue landlords to cut corners to regain possession when they should not.
Lord True (Con): My Lords, I declare an interest as leader of a local authority. I have not so far intervened in this Committee and I apologise for the fact that, as we are setting a budget this evening, I will have to abandon the Committee almost as soon as I have arrived.
One of the features of that budget is that we are not going to be setting any new burdens or tasks for the local authority, because we all know the relevant circumstances. I have sympathy for some of the concerns expressed in Committee, and I acknowledge that at present this appears to be a relatively small problem, numerically, although some of the undertone of the conversation suggests that it might be abused and that there will be a lot more of it if this power goes on to the statute book. Local authorities are not investigative bodies; we are not private detectives. I will think about what the noble Lord, Lord Kennedy, has put forward but it slightly worries me that if the local authority is put in the position of being the body certifying, by definition, that people cannot be found, it potentially places, even in a limited number of cases, quite a strain and responsibility on that authority. Later in this part, the authority would become a party to any legal proceedings, because it would be challenged on whether it had given a proper certification. While I understand, therefore, where the noble Lord, and others who have spoken, are coming from, I would want to understand much more clearly what burdens, requirements and responsibilities on local authorities it might lead to if this were to go on the statute book.
Lord Campbell-Savours: I can tell noble Lords what it would lead to. In the event that the rogue landlord manages to get the tenant out for these spurious reasons, the local authority will be picking up the bill, and may end up having to house the people concerned. So it is better at least to have a checking mechanism in place, to ensure that the local authority is not placed in that very difficult position.
Baroness Hollis of Heigham: Doing some quick mental arithmetic, I suspect that we are talking about four to five instances per housing authority per year; compared to the responsibilities of local authorities for fitness standards, inspection of houses in multiple
1 Mar 2016 : Column 723
occupation, electrical safety and the like, this is trivial. As an ex-local authority person myself, I absolutely understand why the noble Lord is concerned, but we are dealing with a very small number, and probably the same landlords who are already well-known to local authority housing officers or environmental health officers as being too often on the wrong side of the law.
Lord Kennedy of Southwark: I am not a leader of a local authority, but I am a member of one, so I understand the noble Lord’s point. I am not a fan of the Bill, but this part has some very good things in it strengthening protection for private tenants. By this one provision, we are opening the back door for the rogues. Good landlords would not get involved in this, but there are always the few people who see a quick way to pull a stroke, and we seem to be opening the back door for them as we shut all the other doors. That is odd. The amendment may not be right—it is only a probing amendment—but it highlights a real issue.
Baroness Evans of Bowes Park (Con): I thank all noble Lords for their amendments and contributions to the debate. As the noble Baroness said, the provisions are hugely important to a small number of landlords whose properties are abandoned by tenants who have stopped paying rent. We estimate that 1,750 properties in the private rented sector are abandoned a year at a cost of about £5 million to recover them. The Government want to ensure that the proper processes are in place before an abandoned property can be recovered.
Amendment 34 would require local authorities to certify for landlords in their area when a property has been abandoned. We are not convinced, and would echo the words of my noble friend Lord True, that local authorities, which may not have the resources, are necessarily in a better position to pass judgment on the matter. Such a requirement may also cause delays and hinder hard-working landlords and families from renting out empty accommodation. Amendments 35 and 36 would ensure that the minimum warning period before a landlord can recover an abandoned property was 12 weeks, and that a second warning notice was served at least four weeks and no more than eight weeks after service of the first.
I reassure noble Lords that this is absolutely not about opening a back door to landlords. It is about putting in place a procedure for dealing with abandoned properties that would allow a reputable landlord to recover a property that has been abandoned without the need to obtain a court order. The process includes a number of safeguards to ensure that a landlord can use it only where a tenant has genuinely abandoned a property. As my noble friend Lady Williams said, this is not about rent arrears.
Lord Campbell-Savours: Who will check that the landlord is not acting like a rogue and that the property is actually abandoned?
Baroness Evans of Bowes Park: I will go through the process, which contains checks and balances which will ensure that a tenant has genuinely abandoned the property.
1 Mar 2016 : Column 724
The landlord can recover a property only where warning notices have been served on the tenant, with a copy of the first and second warning notice sent care of any guarantor. The first warning notice could not in practice be served unless there were at least four consecutive weeks’ rent unpaid. The second warning notice can be served only when at least eight consecutive weeks’ rent is unpaid. It must be given at least two weeks and no more than four weeks after the first warning notice. Each warning notice must state that the landlord believes the premises to have been abandoned, that the tenant or named occupier must respond in writing—which could be by email—before a specified date, which must be at least eight weeks after the first warning notice is given, if the premises have not been abandoned, and that the landlord proposes to bring the tenancy to an end if neither the tenant nor a named occupier responds in writing before that date.
Following service of the second warning notice, where the tenant has failed to respond, the landlord must then put a third and final notice on the door of the property at least five days before the end of the warning period. That notice must state that unless the tenant or the named occupier responds in writing within five days—as I said, that could include email—the landlord will bring the tenancy to an end and repossess the property. The Secretary of State will prescribe the content of the final warning notice. This requirement was added in Committee in the other place to add a further safeguard to the process. Finally, if a tenancy has been brought to an end using the abandonment procedure, where a tenant had a good reason for failing to respond to the warning notices, they may apply to the county court for an order reinstating the tenancy.
I hope from this explanation that it is clear that landlords will continue to have to go through a lengthy and detailed process before they can regard a property as being abandoned. In addition to a requirement that at least eight consecutive weeks’ rent remains unpaid, they must serve a series of warning notices on a tenant and, when applicable, any other named occupiers. We believe that it would be an unnecessary burden on local authorities to impose an additional requirement that a local housing authority must also confirm that a property has in its view been abandoned. It may be difficult to determine whether this is the case or not, and requiring it to do so could place it in a difficult position. It would also be likely to introduce further substantial delay into the process of recovering an abandoned property, depriving the landlord of income and a family of the chance to occupy a property sitting empty.
It is already effectively the case that in the Bill the minimum period before a landlord can recover an abandoned property would be 12 weeks, as I have outlined. The clauses are carefully drafted but complex and, subject to Royal Assent, the department will issue guidance to landlords to help them to understand the new process. Amendments 35 and 36 would also replace the current provision in Clause 57, which specifies that a second warning notice must be served at least two weeks and no more than four weeks after service of the first warning notice. We have sought to strike the right balance between ensuring that tenants are given
1 Mar 2016 : Column 725
adequate notice, that the landlord believes that the property may have been abandoned, and to respond if they have not, in fact, abandoned the property, while also ensuring that landlords do not have to wait an unreasonable amount of time before being able to recover the property. Requiring that the second warning notice is served at least four weeks and no more than eight weeks after service of the first warning notice would add further delay and deprive the landlord of an income and another family of the chance to occupy the property when it is sitting empty.
Lord McKenzie of Luton (Lab): This is my first foray into this Bill, and I draw attention to my interests in the register. Clause 57(6) says:
“The first warning notice may be given even if the unpaid rent condition is not yet met”.
On what basis can the landlord assume that the unpaid rent condition is eventually going to be met?
Baroness Evans of Bowes Park: The first warning notice would not in practice be able to be served unless four consecutive weeks’ rent is unpaid, and the second warning notice may be served only when at least eight consecutive weeks is unpaid. So there are specific timescales for which there is unpaid rent. I am not sure whether that fully answers the question; if it does not, perhaps I can come back to noble Lords.
Lord McKenzie of Luton: I would be grateful if the Minister could do so because, on the face of it, the provision seems odd. The unpaid rent condition has to be met for the abandonment provisions to proceed. Obviously, the concern is that warning notices may come thick and fast without the chance of the tenant to have due consideration. The basis on which that first warning notice can be given if the unpaid rent condition is not met is somewhat bemusing. Could the Minister, if she cannot say more today, write to us on that?
Baroness Evans of Bowes Park: Yes, I am happy to clarify. I have talked about a lot of notices and warnings; perhaps it would be better to put it in writing so that it is clear.
Baroness Hollis of Heigham: Under the provisions for universal credit—it is something that I regret very much, although it is a structure that I very much support—you are not allowed as a social landlord to start alternative payment arrangements in which there is direct payment to the landlord until there is at least six weeks’ non-payment of rent. It looks to me as though a private landlord can start possession behaviour faster than a social landlord can seek direct payment of rent to the landlord.
Lord True: My Lords, I do not want to intervene on the Minister, but Clause 56(1)(a) states:
“The unpaid rent condition is met if … at least eight consecutive weeks’ rent is unpaid”.
I follow what the noble Lord, Lord McKenzie, said. Clause 57(6) states—perhaps officials could note this—that the,
“first warning notice may be given even if the unpaid rent condition is not yet met”,
1 Mar 2016 : Column 726
In construing the clause, the landlord could think, “Five or six weeks have gone by and I have not had any rent, so I am going to send out a warning notice without waiting for the eight weeks”. That is how I would read the Bill.
Lord Kennedy of Southwark: The Minister explained the process for getting possession of a property believed to have been abandoned but she did not mention vulnerable tenants. Will there be any special provision for vulnerable people? I am worried that those people will not be opening their mail or looking at their emails or engaging in things and all of a sudden they will find themselves on the street.
Baroness Evans of Bowes Park: I set out the overall process but of course we will have to be mindful of people being able to access it. That is why we have put so many checks within the process to ensure that there is an opportunity for the tenant or someone else named as an occupier to respond. The final thing will be a public notice on the property to say what the situation is. We believe that this process as a whole will ensure that tenants are not disadvantaged and, of course, vulnerable tenants are on our mind.
Lord Kennedy of Southwark: The Minister also said that when the tenant of the property believed to have been abandoned has been evicted, they can go to the county court. Will legal aid be available for the county court action?
Baroness Evans of Bowes Park: I will have to get back to the noble Lord. I am afraid I do not have that information.
Lord Kennedy of Southwark: That would be very helpful. In this short debate we have highlighted a few issues with this section of the Bill so can I suggest that it might be welcome if a few noble Lords got together with the Minister to discuss some of them? There are issues which are not clear and could cause problems. The last thing we want is to get something on the statute book that causes everybody confusion.
Lord McKenzie of Luton: I have one further question. If the rent condition is initially not met but then there is a payment which starts the process again, where does that leave the warning notices that have been issued? Will they remain in place for a possible second bout of the application of these provisions?
Baroness Evans of Bowes Park: I am happy to agree to meet with noble Lords interested in this area so perhaps they could list all their questions and we will try to respond to them when we meet in due course.
Lord Beecham: I declare two interests: one is my local government interest which is in the register. In that context I want to reflect briefly on the burdens that might be imposed on local authorities in terms of enforcement and point out that there is such a thing as the new burdens doctrine. Admittedly it is more honoured in the breach than in the observance by the present Administration—the noble Lord, Lord True, is nodding his wry agreement with that—but technically speaking,
1 Mar 2016 : Column 727
if a new burden is imposed and incurs costs then the Government are expected to meet that cost. We are presumably not talking about large sums of money nationally in any event, as I assume that there will not be a huge number of cases, unless the Bill incentivises such procedures.
I also declare a family interest inasmuch as my daughter practises at the Bar, particularly in the field of housing law, both as counsel and as a part-time deputy district judge. My impression is that legal aid would not be available. At the moment it is confined to cases of eviction. I assume that this case would not fall within the definition of eviction. It is effectively the tenant failing to respond to the procedure that is set out here. If I am wrong about that and if legal aid is applicable, it would be as well to have that on the record. If it is not, then I hope that the Minister will not only reply to that effect but consider very carefully and quickly whether legal aid should be extended to cases of this sort, particularly because, as my noble friend has indicated, there may well be vulnerable people who will need help in presenting any kind of case for resuming possession of a property which appeared to be abandoned.
Baroness Evans of Bowes Park: I believe that the noble Lord is correct about legal aid, but I hope he will permit me to go back and confirm that. In response to the question on what happens when some payment of rent is made, the process starts from scratch and all notices will need to be resent. But as I said, I am very happy to meet noble Lords to discuss some of the detail further.
Lord Campbell-Savours: Before we finish on this amendment, does the Minister understand that very often we are talking about very vulnerable people who simply will not understand this process? We can almost foresee the circumstances in which this is going to go wrong. I wonder whether the Minister will go away and consider the position and how this will affect the vulnerable. It is a very important issue.
Baroness Hollis of Heigham: My Lords, already social housing landlords—housing associations and so on—are beginning to deal with universal credit tenants. I am not confident of my figures, but I understand that something like 60% of them are in arrears and seeking alternative payment arrangements. Social landlords —local authorities or housing associations—are scrupulous in trying to ensure that vulnerable tenants who are finding it difficult to manage their money or whatever are not at risk of losing their home.
I fear that I have no such faith in the interest of private landlords. I am sure that many of them would seek to keep a vulnerable tenant afloat—but they are running a business, they cannot afford not to have rent payments and, as a result, given the changes that are now happening with universal credit for the private sector and the social sector, such tenants, vulnerable tenants in particular, will be more exposed to bad behaviour by landlords seeking a shortcut to rid themselves of an uncomfortable tenant.
1 Mar 2016 : Column 728
Lord True: I do not dissent from what the noble Baroness said, nor from what the noble Lord, Lord Campbell-Savours, said—but, as I read this part of the Bill, it is also designed to address the situation where a bad tenant who does not want to pay their rent disappears and does not want to be found. That is what lies behind my concern about local authorities. If the local authority has to certify that this person has gone—is deliberately not wanting to be found and not answering letters and has actually abandoned the property —it will want to be extremely cautious, particularly if there is a court case potentially pending, or will require very clear regulatory protection before it issues such a certification. So there is a risk if it means that the bad tenant, who is the other side of the question, will not be pursued. These matters clearly need to be discussed and my noble friend on the Front Bench has offered such discussions.
Lord Kennedy of Southwark: I thank all noble Lords who have spoken in this debate and I thank the Minister for agreeing to meet noble Lords from across the House. There are clearly issues here that need addressing. This is about how vulnerable tenants are treated. Another issue is whether they are English speaking; I have just thought of that. There is a question about how people are treated in court when they have no legal aid. Before this gets on the statute book, we need to take a proper, vigorous look at it. If need be, we can seek amendments later on in the process. At this stage, I am happy to beg leave to withdraw the amendment.
Amendment 34 withdrawn.
Debate on whether Clause 55 should stand part of the Bill.
Baroness Grender (LD): My Lords, in the most recent discussion, the noble Lord, Lord Kennedy, suggested that perhaps this section should go. Like his fairy godmother, here I am with that moment. What I am proposing applies to all the clauses relevant to abandonment, and it is that they should go at this point in this discussion.
My reasons are as follows. This is a new and complex change in the law for which there is no need. The impact is on a small percentage of tenancies, so why introduce new legislation? Clauses 8 and 21 already cover this area. This change may be exploited by unscrupulous landlords with vulnerable tenants, especially if it is taken out of the county court process and without any kind of oversight. This goes against the flow of a really good piece of the Bill on rogue landlords. Above all, there is a danger that it will make people homeless.
The section on abandonment of property appears to us to be a sledgehammer to crack a nut. The number of tenancies where abandonment is an issue that would fall within the remit of this legislation is estimated, not by Crisis or Shelter but by the Government’s own analysis, to be 1,750 each year out of a total of 4.4 million tenancies. That is a tiny amount, which makes me question why we should introduce a new and deeply complex layer of additional process and legislation.
This therefore appears to be for landlords who are worried that they cannot quickly reclaim a property where it has been abandoned. Their concern seems to
1 Mar 2016 : Column 729
centre on the fixed-term period for a tenancy, which is most commonly six months—a period in which they cannot use a Section 21 notice. If, on the other hand, a property was abandoned outside the fixed-term period, an uncontested Section 21 notice would mean that possession could take place in around three months, which is about the same amount of time as is proposed in the Bill. So it seems that the issue is about getting possession in the fixed-term period.
In the fixed term, the issue that perhaps landlords have is that Section 8, a fault eviction, takes—in the view of some landlords—too long. However, as I have already said, there are very few cases of abandonment and not all of these will be in the fixed term; by the Government’s own estimate the number of properties that are abandoned within the fixed term is likely to be very few. If the Government are concerned that their own eviction processes—namely, Sections 8 and 21—are not working, should there not be a complete review of that rather than the addition of this complex layer?
This proposal, which sets a dangerous precedent, takes this outside the court’s oversight in any way, so who oversees this? There are already powers for a landlord to take possession when they are convinced that the property is abandoned. For instance, if someone’s possessions have been moved out and they have left the keys, the landlord can immediately and legally reclaim the property under something called “implied surrender”. But the tenant’s actions must clearly indicate that they have abandoned the property. So I would like to hear from the Minister why the current system of implied surrender is not being used in these very rare cases.
Shelter and other organisations deal with vulnerable tenants—and we need to focus on vulnerable tenants with regard to this, since the number of tenancies is so small. First, it opens up the possibility of unintentional evictions, where someone is taken ill or suddenly called away to care for a relative and is unable to respond to notices. If that person pays their rent in cash or their housing payment benefit payment is disrupted, they could easily get into arrears while they are away and could be mistakenly assumed to have abandoned their property.
Secondly, an unscrupulous landlord could use this process to evict a tenant they did not want outside the processes of the court or any kind of oversight. As discussed just now, we are very concerned about Clause 57(6), which states:
“The first warning notice may be given even if the unpaid rent condition is not yet met”.
In fact, by our calculations it means that the process could take as little as nine weeks, not 12 weeks. So we worry that notice could start to proceed at a much faster pace. Is there any concern here at all that landlords can use this, frankly, to jump the gun?
We recognise, as a result of objections in the Commons, that a new third warning has been added, which merely specifies that it would be fixed not to the door, as I read it in the Bill—I ask the Minister to correct me if I have got that wrong—but,
“to some conspicuous part of the premises”,
which will be specified in regulations at a later date. Let us hope that it will not be a yellow Post-it note on
1 Mar 2016 : Column 730
a lamp-post—but how do we know that it will not be? There is no specification at the moment, but how would we know? Above all, who has oversight to prove that that notice was put there, since this is out of the courts? So will the Minister explain how that will be overseen? Who will be the judge of whether the landlord, claiming to have fixed that conspicuous notice, has indeed fixed it?
The main concern is that unscrupulous landlords would be allowed to use the abandonment procedure as a pretence to carry out illegal evictions. Other noble Lords who are familiar with this area are already familiar with some of the things that landlords can do. Let us remind ourselves of some of the illegal things that landlords attempt to do, even under a Section 21 notice. I do not refer to all landlords. There are a lot of very responsible landlords. But some attempt to do things like this.
I will give you a case study with which Shelter provided me. Emma was served with a Section 21 notice. The notice was invalid because it gave only one month’s notice. She informed the landlord of the invalid notice. Since then she has experienced harassment from the landlord and his colleagues. The landlord threatened to jump over her fence, force entry, kick the door down and sublet the rooms in her house, even though she had exclusive occupation of the home—all in an attempt to force her to leave before she has to legally. Her windows have been broken and her phone line has been cut from outside. This is the kind of thing that, obviously, will be done by rogue landlords. There are a lot of good things in the legislation, but abandonment opens up a possibility of abuse by people such as this.
The vast majority of landlords, as I have said, are decent and responsible, but there are some who will try to apply this bit of the law to intimidate and evict tenants. By taking evictions outside the court and through unclear legislation, it is not difficult to imagine that an unscrupulous landlord will lie about sending the notices and tenants will become homeless.
Citizens Advice, which has great expertise in dealing with these kind of vulnerable tenants, is also deeply concerned about this and about the likely costs and implications for local authorities. In contrast to the rest of this Bill, the section on rogue landlords is supported across the parties. It seems a shame to introduce this new, complex and unnecessary addition to the Bill. It has all the hallmarks of something that, frankly, should be submitted to the Red Tape Challenge rather than agreed by this House. The threat remains that it will be used by landlords who are unscrupulous. I asked for reassurances on this issue at Second Reading and I am still seeking them at this stage.
Lord Kerslake (CB): My Lords, I have concerns about this section of the Bill. I am very much taken with the arguments of the noble Baroness, Lady Grender, that this section needs a fundamental rethink and that, in trying to amend it, we risk simply ameliorating what is not a terribly well thought-through part of the Bill. The balance of power between landlords and tenants now is so strongly in favour of the landlord that we should think very carefully about adding a further power to landlords in relation to this issue, or indeed
1 Mar 2016 : Column 731
any issue. We should be very persuaded that there is a big enough problem to solve. We have heard quite clearly from many noble Lords that there is not a sufficient issue to be solved—that, in comparison to the scale of the private rented sector, it is a very small issue. I think we risk putting in quite a bad piece of legislation, seeking to tweak it along the way to make it slightly better. We are actually putting in place something that we do not need and that is not likely to be helpful in tackling the issues we are talking about.
I want to make a point on which I declare my interest as president of the Local Government Association. We talked earlier about the burdens on local authorities from the previous amendments. Let me tell you the burden that will come from inappropriate evictions. I think it will be considerably greater in cost, leaving aside the damage to individuals, so it is right to think again about whether these provisions are needed at all.
Baroness Bakewell of Hardington Mandeville (LD): My Lords, this is the first time I have spoken in Committee today, so I draw your Lordships’ attention to my entry in the register of interests. I support my noble friend Lady Grender, who set out so eloquently our opposition to Clauses 55 to 61. I agree completely with the noble Lord, Lord Kerslake, that this is badly thought-out and not needed.
As has been said, these clauses are designed to solve a problem for which there is already legislation. The Government appear extremely keen to move residents out of housing association and local authority housing into the private sector. This is all well and good if the supply and standard of accommodation on offer is adequate and meets the Government’s standards for what is required. However, as I am sure the Government will readily admit, much of this accommodation is in a very poor state of repair, sometimes not secure against the elements and, in extreme cases, not fit for human habitation.
As has already been said, there is a balance to be struck between ensuring that landlords can run their properties as a viable business and the interests of tenants looking for a secure and comfortable home. In 2015, 115,000 people approached Citizens Advice with problems in private rented homes, 2,053 of which were about illegal evictions by landlords in the private rented sector. This represented an increase in inquiries on this specific issue of 32% compared with 2014. This is part of a general upward trend over more than a year. During 2013-14, 111,960 households in England applied to their councils for homelessness assistance—a rise of 26% on 2009-10. On 30 September, 68,560 households were living in temporary accommodation—13% higher than on the same day in 2014, thus producing considerable pressure on local authority homelessness budgets, as we have already heard, with residents often put in temporary accommodation.
The abandonment proposals in the Bill lower the level of proof that landlords will have to meet to claim that their property has been abandoned. The proposal would also legitimise an illegal practice: evicting a tenant without going through a formal court procedure, even when the tenant has not engaged in any conduct
1 Mar 2016 : Column 732
that might clearly show that he has abandoned the property. This suggests that, if introduced, it would lead to higher eviction rates and a similar rise in the number of homelessness applications to local authorities, resulting in higher administrative and temporary accommodation costs. Will the Minister say whether this is the Government’s intention and what action they are prepared to take to prevent this sorry state of affairs coming to pass?
At a time when the number of households with dependent children living in the private rented sector is increasing, the added financial impact on council budgets is likely to be significant, as it is these households who will have a priority need for housing by the local authority if made homeless. Using the DCLG’s findings, Citizens Advice estimates the increased social costs to the public sector of each homelessness application at between £24,000 and £30,000 per year, producing an average of £27,000 per year per family or individual. This is not a good use of taxpayers’ money. I cannot believe that this is the Government’s intention. I look forward to their response.
Lord Kennedy of Southwark: I am grateful to the noble Baroness, Lady Grender, for proposing that this whole part should be abandoned. I support that suggestion. I will not go through the points I made in the previous debate, but I may have a few points when the Minister responds. The removal of the oversight of the courts, as referred to by the noble Baroness, is of particular concern, and the provision that the third warning notice should be fixed in a “conspicuous” place is very weak and offers very little protection to the vulnerable tenant. The Government have not made the case for these clauses, or that these changes are needed or necessary. The Government need to think again over the procedure and the risks involved, as other noble Lords said in the debate.
Lord McKenzie of Luton: My Lords, I agree with those who say that these provisions should be recast. I want to pick up on the third warning needing to be,
“given by fixing it to some conspicuous part of the premises to which the tenancy relates”.
Conspicuous to whom? Is it the tenant, the whole world, the community that passes by the front door? It seems to me that giving notice to somebody by nailing something to their front door is almost medieval. You can imagine that somebody will put the notice up, the mobile phone will come out and a photograph will be taken but half an hour later it could be ripped off and be nowhere in view—certainly nowhere in view of the tenant. It seems an incredibly archaic approach. I think the whole thing should be recast but that particular provision jars immensely.
Baroness Evans of Bowes Park: My Lords, I thank all noble Lords who have contributed to this debate on Part 3 of the Bill. The noble Lord, Lord Kerslake, said that numbers may be small, but these provisions are nevertheless important to good and reputable landlords whose properties are abandoned by tenants who have stopped paying rent. As we have tried to make clear, we want to find a balance between protecting good landlords and good tenants. Presently, when abandonment happens a landlord can go in and change the locks. However, that involves taking a huge risk, since if the
1 Mar 2016 : Column 733
tenant has not abandoned the property the landlord could be liable to prosecution for unlawful eviction and be subject to claims for damages in the civil courts. As a result, many landlords do not take the risk and instead take possession proceedings in the county court.
However, before they are able to commence court action they must bring the tenancy to an end by serving a Section 21 notice giving the tenant two months’ notice, and when they have made the application it can be two or three further months before they get a court order enabling them to repossess the property. In the mean time they receive no rental income for a property which is standing empty, and often will still need to meet their mortgage payments. The landlord will also incur costs in taking court proceedings. As I have said, abandonment may not be a widespread problem but it is estimated that it costs landlords around £5 million a year in legal fees, missed rent and time.
When a person surrenders a property they contact their landlord and hand in their keys, but in this instance we are talking about when a person abandons a property and disappears and stops paying rent. It is a different situation. That is why we think the provisions in Part 3 provide for a simpler and cheaper method for recovering property where the former tenant has permanently left owing arrears of rent that have continued to accrue since the first warning notice was given.
I also make clear that any landlord who abuses this process by not giving tenants proper warning and takes repossession of the property knowing that it has not been abandoned will be liable to be prosecuted for unlawful eviction under the Protection from Eviction Act 1977. As we have also tried to make clear, this is not intended as a route to remove a tenant in arrears. This is about abandoned properties. A tenant will also be able to bring a claim for damages through the civil courts where the landlord has not followed the procedure as set out in legislation. The provisions are not a charter for landlords—
Baroness Grender: Have the Government made an estimate of the cost to a tenant? Since there is a cost of £5 million to the landlords—which is the Government’s estimate—what is the cost to tenants for pursuing this through the courts?
Baroness Evans of Bowes Park: As I have said, we have heard the strength of feeling in the House on this issue and have agreed that we will meet and have a further opportunity to discuss issues. I will attempt also to ensure we have information on hand in that meeting. I reaffirm that these provisions are not a charter for landlords to carry out a do-it-yourself eviction. That is and will remain unlawful. On the basis of the strength of feeling in the House, we welcome the opportunity to discuss further details with noble Lords. On that basis, I ask that these clauses stand part of the Bill.
Lord Kennedy of Southwark: Can the Minister tell us a little about where the pressure for these changes is coming from? We hear that there is not a big issue and not a problem here. The Government are going to meet us and seem quite determined about this. What is behind all this? Where has it all come from?
1 Mar 2016 : Column 734
Baroness Evans of Bowes Park: As I have explained, the rationale behind this is to attempt to provide balance and fairness for both tenants and landlords.
Lord McKenzie of Luton: Will the Minister help me on one other point, please? On the reference to rent not being paid, or rent being unpaid, what happens if a tenant, in struggling to pay the rent, pays an amount on account? Does that count as the rent being unpaid for a week, or a month? How is that dealt with? The Minister has used the expression that someone has effectively given up on paying the rent. There could be many instances where people are struggling to pay the rent, doing the best that they can, and making partial payments. If that is what they do, would that preclude the operation of these provisions?
Baroness Evans of Bowes Park: Obviously, there will be a dialogue between tenant and landlord, and arrangements between the two may be made. As I said earlier, if some payment of rent is made and if a process had been started, it would have to start again from scratch.
Lord McKenzie of Luton: I understand that if the rent is paid in full you go back to square 1. But if the rent is only partly paid, what is the position? Our concern here, as many people have said, is about unscrupulous landlords who will use these provisions for a perverse effect. If somebody has only part-paid the rent that would give them the opportunity of doing so.
Baroness Evans of Bowes Park: In terms of part-payment of rent, if any rent is being paid, the process would be ended. It is about abandoning a property—no rent being paid. It is not about part-payment.
Lord McKenzie of Luton: So, a pound off the rent would secure the position.
Baroness Evans of Bowes Park: There would be a balanced view on this. As I have tried to set out, where payment is being made, that is not abandonment of a property. As I have said to noble Lords, we are happy to discuss this in further detail to, I hope, allay concerns.
Lord Campbell-Savours: Does this not all point to the need to have someone to check? That might well be a local authority.
Baroness Evans of Bowes Park: As I have said, we believe there is a process that has a number of important elements to it. However, we have heard the strength of feeling in the House and look forward to discussing this in due course.
Clause 55 agreed.
Clause 56 agreed.
Clause 57: Warning notices
Amendments 35 and 36 not moved.
Clause 57 agreed.
Clauses 58 to 61 agreed.
1 Mar 2016 : Column 735
Moved by Lord Greaves
36A: After Clause 61, insert the following new Clause—
“Review of effectiveness of empty dwelling management orders etc.
(1) The Secretary of State must, within six months of the passing of this Act, commission a review of the operation and effectiveness of empty dwelling management orders and other provisions for bringing into use domestic properties that have been abandoned by their owners.
(2) A report on the findings of the review must be published and laid before each House of Parliament.”
Lord Greaves: My Lords, my purpose in moving this amendment is to raise a significant problem in some parts of the country. I am very aware that the kinds of areas I am talking about are very different from the areas that the Bill seems to be concentrating on—in London and the south-east and perhaps in similar areas. The sort of areas I am talking about are, for example, east Lancashire or west Cumbria, and lots of other places like them around England. It is a different world, but it is important.
The first point that I want to make is that there is not a housing market in this country that is the same everywhere. There are many different housing markets in different places which operate in different ways. The real problem that many of us have is that legislation is almost always on a one-size-fits-all basis and is written by people with what we would see to be a very south-east England viewpoint, although it is not just south-east England. I mention EDMOs—empty dwelling management orders—in this amendment but I want to talk particularly about the “et cetera” bit to mark the problem rather than just EDMOs. I will come to EDMOs towards the end.
I am talking about areas where the background is of a housing market that is fragile and stagnant. It was identified some 15 years ago now—certainly a long time ago—by the then Deputy Prime Minister, now the noble Lord, Lord Prescott, as a market failure. A scheme was set up by central government for housing market renewal which was targeted at these areas. That was swept away in the early years of the coalition, rightly or wrongly, but we are where we are. There is now no real attempt to look at these areas and implement different policies for the different conditions. We are talking about areasmainly consisting of terraced housing that is 100 or 150 years old, some of it in really good condition now as a result of the efforts that have been made over the years, and some of it in poor condition.
As to my part of the world, the borough of Pendle, the situation is worse in Burnley but the same in Accrington and many similar towns. You can buy a terraced house which is habitable but in not-very-good condition for between £30,000 and £50,000. At least those are the asking prices. I get the sale prices every month and they are usually lower than the asking prices. In good condition in a less-popular area, the prices are £60,000 to £80,000; in more sought-after areas in towns, £80,000 to £100,000. The rest of the housing market, as I will explain further when we talk about starter homes, is depressed as a result of that. There is a real problem of abandoned houses.
1 Mar 2016 : Column 736
These are not houses abandoned in the sense of those we discussed in the last group of amendments but houses abandoned by the owners. They are empty—they might be boarded up if there is a decent council—and they might be derelict inside. They might have been stripped out by tenants at some stage in what is known as a “moonlit”, or moonlight flit.
I can speak for my borough but I know that this applies to a lot of others as well. A lot is being done about empty homes through a combination of carrots and sticks. Much of what is being done is being done with the help of national government. I will set out the overall position to pinpoint the problem. In my own borough of Pendle, the number of empty houses has been reduced from 2,000 to 1,300 in the last couple of years. Of the 1,300, about a third have been empty for more than two years. I will not say that they are basket cases, but your Lordships will know what I mean.
There are a number of things that can be done and we have certainly done, and that is fine. We have set an empty-homes levy whereby, after two years, we are levying an extra 50% on top of the normal council tax, so they are paying 150% council tax. We have directly intervened in a number of streets using our joint venture company or a housing association, and that has rescued and improved 80 to 90 derelict houses in the last couple of years. Like many councils, we have an empty homes officer working on individual houses and owners. It is intensive and expensive work, but it works by targeting the owners and talking to them. We have a system of loans to the owners of these houses, which started off with the government-sponsored empty homes clusters programme, where we will provide a loan of up to £15,000 per house. That works well, and the repayments go back in the pot for more loans. Many things can be done and different councils will deal with this in different ways. We are down to 3.3% empty houses but they are concentrated in areas, particularly those with a lot of cheap private rented properties.
However, the acute problem is not that but individual houses that have been effectively abandoned by the owners. They are often scruffy, boarded up and stripped out—if not by the previous tenants then by other people nicking all the copper and everything else. These are what we call rotten-tooth houses and they have a disastrous effect on streets whose future is in the balance. Local authorities spend a lot of time and resources trying to save them.
In the past, we used powers of direct intervention, particularly compulsory purchase orders, as a last resort. We used to do perhaps nine or 10 of those a year in our fairly small authority. However, that was powerful because everybody else knew that that was in the wings if they did not sort themselves out. In many cases, that led to voluntary sales to the council. We had a regular, annual programme of improvement for sale. The problem was that the money never stacked up. The cost of acquisition plus the cost of renovation to proper public sector standards was less than you could get in a depressed housing market. Therefore there was a gap.
That gap was filled from the council’s housing capital programme, most recently from the housing market renewal funds and the regional housing pot as it was
1 Mar 2016 : Column 737
officially called. Both those have now gone. For councils like ours throughout Lancashire and the north of England, the housing capital programme does not exist any more. Then we went on to back-to-back schemes with housing associations. The council would compulsory purchase, do the work and sell on to the housing association, or perhaps the housing association would do the work. That is now no longer viable and cannot be done so we looked again at EDMOs.
I remember debating EDMOs in this House when they first came in—I think for the Housing Act 2004—and we thought they would be a great thing. They have certainly been around for about 10 years. They were a great hope. What happens is that the council takes over a long-term empty house, repairs it to make it habitable and then lets it to a tenant. The income from the rent is put in a separate account for that house and offset against the cost of the initial renovation plus the continuing cost of repairs and management. However, that does not add up in areas of low rents, particularly if it is only a one-year interim EDMO right at the very beginning, where the owner can reclaim the house and the council loses all the money. After the end of the EDMO period—I think the ordinary period is seven years—the owner gets the house back. It is just given back to them, and if there is a deficit on the account for the house—as there will be—the council carries the can.
So we have a situation where we have rotten-tooth houses which we were, like many councils, brilliant at dealing with, thereby saving streets. However, CPOs and EDMOs do not add up any more, housing associations are not interested any more and the councils have no resources to fill the gap. This is a plea to the Government: please, what can we do to tackle these very real local problems?
Lord Kennedy of Southwark: My Lords, I am very supportive of the amendment moved by the noble Lord, Lord Greaves. Empty homes represent both waste and a missed opportunity. They also leave the property at risk of squatting and subject to vandalism, and there is the blight that brings to the wider community—to which the noble Lord referred.
Empty dwelling management orders are a legal device which enable local authorities to put an unoccupied property back into use as housing, securing its occupation and getting it back into use as a home. The amendment seeks that, within six months of the Bill becoming an Act, a review must be commissioned into their operation and effectiveness. These orders were brought into law with a lot of support but have not proved effective or to be a device that has been used very much in recent years. A review is sensible at this time as it would enable us to identify if there is a problem with them and, if there is, to identify a solution. The second part of the amendment would require a report to be published and placed before Parliament.