HC Deb 11 May 2004 vol 421 cc258-63

  1. '(1) Where a landlord requires payment of a deposit in relation to any premises occupied as a dwelling under a tenancy, the occupier must pay that deposit into the Deposit Scheme unless subsection (2) applies.
  2. (2) Landlords, or their appointed agents, who are members of national self-regulated bodies that are bonded by insurance schemes approved by the appropriate national authority may request in writing the payment of any deposit lawfully demanded directly to themselves.
  3. (3) Where subsection (2) applies, the occupier must pay the deposit directly to their landlord, upon which the landlord must provide a written receipt.
  4. (4) Any dispute between the landlord and the occupier over the return of the deposit is to be resolved by independent adjudication.
  5. (5) The appropriate national authority may by regulations specify—
    1. (a) The terms, conditions and management of the Deposit Scheme;
    2. (b) Approved bodies and schemes under subsection (2);
    3. (c) The mechanisms and procedures to be followed under subsection (4).
  6. (6) The appropriate national authority may by regulations specify that a failure to adhere to such sections of this Part as it sees fit constitutes acts or omissions for the purposes of section 211(2) of the Enterprise Act 2002.'.—[Dr. Desmond Turner.]

Brought up, and read the First time.

Dr. Desmond Turner

I beg to move, That the clause be read a Second time.

I apologise for the earlier confusion. I was becoming anxious because time is running out so fast.

The new clause sets out enabling powers for the Government to introduce a national mandatory tenancy deposit scheme. I shall not detail the arguments in favour of such a scheme or the copious abuses that happen, but many millions of pounds are milked from tenants by unscrupulous landlords and letting agencies every year. Everyone, including respectable and responsible landlords associations, wants that abuse to be stopped.

Matthew Green

I remind the hon. Gentleman that good landlords also lose out from the absence of a tenancy deposit scheme, because they lose money when tenants withhold their last month's payment. A good scheme would help both tenants and landlords.

Dr. Turner

The hon. Gentleman is right. As far as the Government are concerned, I am knocking on an open door. However, it is only partly open, the hinges are a bit rusty, it needs oiling and it takes a bit of a push to open. That is what my amendment seeks to do. In principle, the Government are minded to move towards a national tenancy deposit scheme. They have carried out a voluntary pilot scheme and their conclusion appears in evidence given to the Office of the Deputy Prime Minister: Housing, Planning and Local Government Committee, which reads: It has been a very worthwhile pilot for us because it has proved that the principle of tenancy deposit protection through either of the two methods used—guarantee or the third party custodial approach—does work and it has also shown to us that a voluntary scheme is not going to work". The principle has therefore been clearly established.

The scheme need not be expensive. Once established, the administration costs could be covered by the interest paid on the deposits held. Some relatively small costs would be incurred as the scheme was set up, but it would be cost-effective once it was set up. I do not foresee many disputes, because after a few cases that demonstrated that abuse of the system no longer worked, neither tenants nor landlords would see much point in trying. I am convinced that it would work and would not need to be as complicated as my right hon. Friend the Minister seems to think. He pointed out that a few outstanding issues remain, such as the need for written tenancy agreements, funding for a custodial deposit scheme, the nature of industry schemes, adjudication, enforcement and how to define a deposit. However, none of those issues is particularly complex or could not he readily resolved during the further progress of the Bill.

I know that my right hon. Friend the Minister has referred the matter to the Law Commission, but I ask him not to wait for the outcome of its considerations. The Law Commission is also considering tenure, and we could have to wait a long time for its conclusions. The Bill is a suitable vehicle through which to establish a tenancy deposit scheme. In the days before congestion charging, one never knew when a London bus would come along. Well, here we have an opportunity and I appeal to my right hon. Friend to get on the bus and do the business. I shall not press the issue to a vote because I know that the Government are well disposed towards it. I prefer instead to stroke the Government into submission, and I ask them to accept the new clause.

Mr. Syms

This suggestion is often brought up by citizens advice bureaux and in surgeries, but the official Opposition are not yet persuaded that it is the right direction to take. Many voluntary schemes work well and the first option should be to consider those. A great deal of money is involved, as it is estimated that there is £790 million in tenancy deposits. The Government should certainly consider the issue to see whether practice in the area can be improved, but we would not be happy to see a regulatory scheme introduced. The argument for doing so is not overwhelming. Best practice and voluntary schemes can improve matters in many areas.

Some of the landlords who deal with the poorest tenants do not take deposits, because those tenants tend not to have deposits. Therefore, a mandatory scheme would not meet some of the objectives of those who favour one. However in order to allow the Minister to put the Government's views on record on this important and topical subject, I shall conclude my remarks.

Matthew Green

I support a tenancy deposit scheme and I know that the Government need a little push to ensure that it gets into the Bill. However, we need to ensure that any scheme would not be universal. The Government scheme should be a fall-back position for cases in which someone has not joined an industry scheme.

Dr. Desmond Turner

Does the hon. Gentleman agree that the deficiency of voluntary schemes is that only the good landlords join them, and we are not worried about them?

Matthew Green

I agree that that is why it should be mandatory. If the Government scheme is a fall-back scheme and the industry schemes are retained, landlords will have a range of schemes from which to choose. I hope that the Minister will agree that that is the best way forward and will also confirm that the Government will include this provision in the Bill. It would enhance the Bill and this is the best opportunity that we will have to introduce it for several years.

Mr. Clifton-Brown

I am grateful to have caught your eye, Mr. Deputy Speaker, and I shall speak briefly as time is short.

Before the Government introduce a scheme, will they assure themselves as to the scale of the problem? Will they make certain that the costs would not be detrimental to tenants, as tenants would receive no interest on their deposit? Can the Government tell us how quickly each tenant would get back their deposit from that bureaucratic body? Can they also explain how disputes would be dealt with? It would be nonsense if every dispute, however small, had to be dealt with by an adjudicator.

Yvette Cooper

We held a constructive debate in Committee on three amendments that proposed changes to accommodate provisions on tenancy deposits, one of which is now new clause 2. In that debate, my right hon. Friend the Minister for Housing and Planning pointed out that we were extremely sympathetic to the sentiments that had been expressed by Members who supported embedding a tenancy deposit scheme in the measure. As he made clear, the Government support the principle of statutory provisions to safeguard tenancy deposits from wrongful misappropriation.

As the hon. Member for Poole (Mr. Syms) said that the main Opposition party is not convinced of the case for legislation on the issue, we should bear in mind the responses from the voluntary pilot scheme. There was an extremely slow take-up of the pilot and the results suggest that a voluntary approach would have considerable limitations. It would not recognise the need to ensure that irresponsible landlords and those who exploit their tenants are involved in a broader scheme to protect tenancy deposits.

We held considerable consultation on the issue and we have set out our support for the principle of statutory provisions to safeguard tenancy deposits. We need to recognise the scale of the problem. About 20 per cent. of tenants say that they have faced problems with their landlords over the return of their deposits.

The Government are considering how we should proceed. The hon. Member for Cotswold (Mr. Clifton-Brown) put a series of questions, but at this stage we are not able to say exactly how a deposit scheme might work. We are considering what might be required in drafting such legislation and in the light of those considerations what might be a suitable legislative vehicle.

The hon. Member for Ludlow (Matthew Green) asked about the scope for alternative arrangements and their promotion by trade and professional bodies. We are sympathetic to that idea.

A series of detailed issues needs to be considered, including the balance between primary and secondary legislation. We cannot simply deal with such matters through secondary legislation. In Committee, we explained why the proposals in the new clause would in many respects fall short of what is required.

On several occasions, the Government pointed out that we were keen to consider the scheme as part of the proposals for tenure reform published by the Law Commission.

Dr. Desmond Turner

The drafting of the new clause is probably open to improvement so I should be happy for the Government to draft a new clause, to their satisfaction, which they could table at the other end of the building. That would not be a problem. Can my hon. Friend explain why the Government feel that the issue needs to be conflated with the tenure question? Deposits are likely to be associated with various forms of tenure—shorthold, long and so on—so they could be considered as a freestanding issue.

Yvette Cooper

That is an important point and I shall try to address it. As I said, we made it clear previously that we were keen to consider the matter as part of the broader proposals for tenure reform that were published by the Law Commission. We have always said that we thought there was a case for addressing the issue of tenancy deposits in the context of those proposals.

We have asked the Law Commission to draft indicative clauses on tenancy deposits to accompany publication of its draft Bill in the summer. We have also said that, by that time, we would attempt to produce legislative proposals as a response to the consultation that ended last year. That work is in hand and I can assure my hon. Friend that we are considering whether such proposals could be developed separately from the Law Commission's other work on tenure. As he rightly says, a series of points have been raised by the Law Commission's work: for example, in relation to written statements of agreement—written contracts. We are keen to look into the question of written contracts, which is important, and we are considering whether it would be possible to address the tenancy deposit issue separately.

I stress that we are carrying out that work as speedily as possible, but my hon. Friend and other Members will realise that we must ensure that we develop robust proposals and that we do not end up with hasty and inappropriate legislation. We need to ensure that we resolve some of the complex issues that have been raised and find the earliest possible legislative opportunity to address them.

I can assure hon. Members that we have been looking into some of the detailed proposals made by Shelter and into some of the other complex questions, such as how to ensure the establishment of an appropriate arbitration system and how to make the difficult decisions that would be needed in that regard. We are considering whether there are alternative models and whether there should be a single custodial scheme or whether professional and trade bodies could be allowed to establish schemes. There is a possibility that we might have third-party guarantees, for example through bonding or insurance.

We have consulted on those options but we are still considering the practicalities of implementing them. There are several existing models, including the letting agents' national approved letting scheme. We are keen to find a way to support professional and trade bodies that are raising standards, rather than simply imposing a single model on everybody that might not enhance the raised standards that already exist.

The pilot scheme showed that disputes over deposits at the end of a tenancy often involved inventories or cleaning, so we should need to prescribe such things as the requirements for inventories. Some of those points might be appropriate for secondary legislation and that would enable us to make speedier progress, but we need to be confident that we are achieving the right balance between primary and secondary legislation. As was noted in Committee, we need to consider the need for independent adjudication and determination of disputes and the means or bodies through which adjudication should be provided and appealed. We need to examine how decisions could be enforced and what redress there might be for an individual tenant in the event of a favourable decision. Schemes guaranteeing that the deposit money is available might need to be established and approved as well.

As I have said, we are still interested in the timing of the Law Commission approach. We expect that the Law Commission will report to us as rapidly as possible before the summer. Of course, when we receive its proposals, we will need to consider them as well. We are also considering the issue as speedily as possible in the Department. I am unable to give the House a guarantee about the timing, but I can assure hon. Members that my right hon. Friend the Minister for Housing and Planning and I are keen to report to the House and hon. Members who have expressed an interest in the issue as rapidly as possible because we recognise that there is considerable interest, not only in the House but throughout the country, given that many people face difficulties with landlords.

Clearly, such proposals would benefit the many good and responsible landlords throughout the country and the private rented sector in general by providing more confidence for that sector. That is why we are keen to pursue the issue, but, equally, why we cannot guarantee—

It being five and a half hours after the commencement of proceedings on the programmme motion, MR. DERUTY SPEAKERput the Question already proposed from the Chair, pursuant to Order [this day].

Question negatived.

MR. DEPUTY SPEAKER

then proceeded to put forthwith the Question necessary for the disposal of the business to be concluded at that hour.

Forward to