§ 6.4 p.m.
§ Lord Evans of Temple Guiting rose to move, That the draft regulatory reform order laid before the House on 13th January be approved [8th Report from the Regulatory Reform Committee].
§ The order proposes a small and quite detailed change to the procedure under Section 13 of the Housing Act 1988 for increasing rents for assured periodic tenancies. The change is small, but its potential impact is significant. It could change the timing of rent increases for over 1 million tenants in England and Wales. These are tenants of both private landlords and registered social landlords, commonly known as housing associations, with tenancies of less than one month.
§ First, I need to summarise for your Lordships the current ways in which rents are increased to set the context for the change that we are proposing. There are three ways in which rents for assured periodic tenancies can be raised. Landlords can include a provision in the tenancy agreement or come to a specific individual agreement with the tenant. By far the most common, however, is the notice procedure in Section 13 of the 1988 Act.
§ Section 13 contains three rules governing the timing of rent increases under this procedure. One is that the starting date for the proposed new rent must not be earlier than the first anniversary of the date on which the rent was last increased or, if the tenancy is new, the date on which it started. This "anniversary" rule was intended to provide what was regarded by Parliament as a reasonable annual period between rent increases. However, in combination with another rule—that increases can take place only at the start of the period of the tenancy—the anniversary rule has an unintended administrative consequence for tenancies of less than one month.
§ I shall explain with an example. In the case of a monthly, quarterly or annual tenancy starting, say, on Monday 1st April 2002, the timing rules enable subsequent rent increases to occur on the standard 412 date of 1st April each year. For tenancies of less than one month—most commonly, weekly tenancies—the timing rules mean that the date of increase advances each year. For a weekly tenancy starting on Monday 1st April 2002, the earliest date for the first increase will be Monday 7th April 2003. For the second increase it will be Monday 12th April 2004, and so on.
§ For housing associations with many thousands of weekly tenants, this drift forward in rent increase dates is administratively inconvenient. For those with a mix of tenancies there may be the added administrative burden of having different and increasingly divergent rent increase dates for different types of tenancies. This drift forward of dates can be confusing to tenants.
§ The impetus for the order came from a number of housing associations and their professional representative body, the National Housing Federation, on their behalf. We know that many associations want to set a fixed day for increasing the rents for tenancies of less than one month. A fixed day is a day which, though it does not always fall on the same date, recurs predictably at the same point each year. Many associations wish to increase the rents for their weekly tenants on the first Monday in April each year. The order amends the existing rent increase procedure to allow this.
§ The order replaces the current anniversary rule with a provision that rent increases must take place at not less than 52 week intervals The provision is qualified by a condition that a minimum period of 53 weeks applies intermittently. The condition acts as a corrective mechanism to avoid the slight back ward drift in increase dates each year that would otherwise occur if landlords chose to increase rents at the first opportunity after 52 weeks. This prevents the cumulative drift back of rent increase dates, which would be to the detriment of tenants.
§ The order allows landlords to choose to set a fixed day for rent increases for tenancies of less than one month. It also allows landlords to continue to increase rents on a fixed date for tenancies of one month or more. We believe that the order removes or reduces the administrative burden imposed by the current timing rules. It also provides greater clarity and certainty for tenants because they would have a rent increase at the same time each year.
§ The Office of the Deputy Prime Minister consulted extensively on this proposal. The proposal received overwhelming support from both landlords and tenants, with over 90 per cent of respondents in favour. Many respondents thought that the proposal would be simpler to administer and make financial planning easier and that the incorporation of a fixed review day into a tenancy agreement would be easily understood by all parties. In addition, respondents said that the proposals would provide clarity for both parties and would be easier to explain to tenants.
§ The Select Committee on Delegated Powers and Regulatory Reform concluded that the proposal to allow landlords to set a fixed day for rent increases was appropriate within the meaning of the Regulatory Reform Act 2001 and that the order, as it now stands, is in a form satisfactory to be submitted to the House 413 for affirmative resolution. I thank the members of the committee for the time they spent scrutinising the proposal and for recommending the proposal to the House.
§ The Regulatory Reform Committee in another place considered that the proposal reduced a burden imposed on landlords but that it also imposed a new burden on tenants. The new burden is that tenants may be required to pay increased rent at slightly less than full yearly intervals. However, the committee concluded that the new burden was proportionate to the benefit expected to result from its creation. The Office of the Deputy Prime Minister also provided an assurance to the satisfaction of the committee in another place that no landlords, or only very few landlords, are likely to apply the minimum 52/53 week period and increase rent at the first possible opportunity. We firmly believe that landlords will choose to set a fixed day for rent increases.
§ Finally, the committee in another place is satisfied with the guidance that the Office of the Deputy Prime Minister intends to give about the change in timing rules in the notes to the new prescribed forms for notifying rent increases. Those forms will come into effect the day after the order is made. The order was approved in another place. I now commend it to this House. It introduces a small but useful change of particular benefit to landlords with many weekly tenants. It also ensures that the rent increase notice procedure more closely reflects the original intention of Parliament. I beg to move.
§ Moved, That the draft regulatory reform order laid before the House on 13th January be approved [8th Report from the Regulatory Reform Committee].—(Lord Evans of Temple Guiting.)
§ Baroness Hanham
My Lords, I thank the Minister for that quite long but very welcome explanation of what this order is all about. Having heard the explanation, I understand why the lunar calendar was abandoned—it made life so complicated. I have only one question, on which he may already have touched, to which I should like a brief answer. What notification will be given to tenants in advance of these new changes taking effect?
§ Baroness Sharp of Guildford
My Lords, I, too, thank the Minister for his extensive explanation. We on these Benches agree that it is a small but useful reform. We, too, have just one question. We gather that the new order will require a new form, which is being prepared. Will the new form be ready at the same time as the order comes into force? If not, what will happen?
§ Lord Evans of Temple Guiting
My Lords, it might help the House if I explained how this new rule will be explained to tenants. The form will be available to be sent to tenants and to be put on the web almost immediately after the order is approved, if it is approved.
As regards what notification is given to tenants in advance of the change, the period of notice is likely to be—the one word that I cannot read is the final, all-important word. In the circumstances I shall have to 414 write legibly to the noble Baroness. I apologise for not being able to answer what is a very obvious question. However, I am now informed that the relevant period is one month.
§ On Question, Motion agreed to.