A legal expert has highlighted a “serious omission” in the Draft Tenant Fees Bill, which could leave local authorities able to impose fines of up to £30,000 on letting agents and landlords without a conviction.
The revelation came to light during the first pre-legislative hearing by the Communities and Local Government Committee into the Bill yesterday. However, Shelter stood up for ‘meaningful’ fines.
Professor Ian Loveland of the City Law School at the University of London warned MPs of a number of his concerns about the way in which the Bill is currently drafted, with the enforcement mechanism for fines on unlawfully charged deposits among his chief concerns.
Loveland, who broadly welcomed the Bill, said the range of initial fines that can be levied by local authorities was likely to lead to “very wide discrepancies” and that £5,000 was likely to be a disproportionately large amount in relation to what may have only been a few hundred pounds in terms of prohibited payment.
“I am curious why there doesn’t seem to have been any effort to link the fines strategy with the damages provisions in the tenancy deposits scheme, which fixes the ceiling at three times the deposit which has been unlawfully charged,” he said.
“There does not seem to be in the Bill itself, nor in the explanatory notes (although it may be in the subsequent guidance), any attempt by the Government to structure local authorities’ discretion in relation to the size of fine that they charge and I think that is a serious omission.”
He added: “It becomes a more serious omission in my view because of the way Clause seven interacts with Clause nine, Clause nine being the criminal offence provision, and if one reads back from Clause nine into Clause seven, one finds that the fine can now go up to as much as £30,000.
“It appears the local authority can raise its fine to £30,000 if it is satisfied beyond reasonable doubt that the landlord or the agent has committed an offence under Clause nine.
“That, I must say, seems to me a quite extraordinary proposition because it appears to be empowering the local authority itself to decide that someone has committed an offence, even if the person has not been brought before a magistrates’ court and actually convicted.”
He warned that there would be “great difficulties in reconciling” such a situation with the Human Rights Act.
But Kate Webb, head of policy at housing charity Shelter, said she hoped that fines would be large enough to act as a deterrent.
She said: “I do think that what we have to remember the Bill is trying to do is to disrupt an industry.
“I think that there is a risk that if the fine is not meaningful, then given what we know about lack of enforcement and given what we know about tenants often not being aware of their rights and being able to exercise their rights, you do run the risk that with small fines, letting agents will simply try to price them in as the price of doing business, so you do need something which acts as a deterrent.”
Meanwhile, Dr Julie Rugg, senior research fellow at the Centre for Housing Policy, University of York, warned several times that there is not currently enough evidence of what impact the Draft Tenant Fees Bill would have on letting agencies, the way in which they change their business models to cope, and what effect this would have on tenants and landlords.
She said: “We don’t understand the economics of lettings agencies as an industry. We don’t understand where the fees go. There’s a presumption that letting agents charge as much as they can get away with.”
And she warned that while rents had not risen in Scotland, where a ban on letting fees has already been introduced, it is still too early to see all of the effects of the legislation there.
She said: “We don’t know how the economic basis of those businesses might have changed as a consequence and where those letting fees might have disappeared somewhere else within the business model.”
She also appeared to caution that the Bill could have unintended consequences if passed into law in its current form.
Rugg said: “I am not saying that the rents might necessarily go up as a consequence [of a ban on fees]. I am always more concerned that actually the quality will go down rather than rents going up because markets are such that a certain rental level will be maintained but the quality of the property might decline, the landlords’ willingness to attend to repairs might go down if the letting agents’ fees go up.
“It’s a piece of legislation that has decided there is a particular issue and it has targeted that issue in a very piecemeal way. We are not asking what we want letting agents to be doing in the market. We are just pinpointing what we don’t like them doing.”