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Y Pwyllgor Cydraddoldeb, Llywodraeth Leol a Chymunedau

Equality, Local Government and Communities Committee

11/07/2018

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Bethan Sayed AM
David Melding AM Yn dirprwyo ar ran Janet Finch-Saunders
Substitute for Janet Finch-Saunders
Gareth Bennett AM
Jenny Rathbone AM
John Griffiths AM Cadeirydd y Pwyllgor
Committee Chair
Siân Gwenllian AM

Y rhai eraill a oedd yn bresennol

Others in Attendance

Alun Evans Uwch-swyddog Ymgyrchoedd ac Eiriolaeth, Cyngor ar Bopeth
Senior Campaigns and Advocacy Officer, Citizens Advice
Bethan Jones Rheolwr Gweithredol, Rhentu Doeth Cymru
Operational Manager, Rent Smart Wales
Jamie Matthews Uwch-swyddog Polisi, Cyngor ar Bopeth
Senior Policy Officer, Citizens Advice
Jennie Bibbings Rheolwr Ymgyrchoedd, Shelter Cymru
Campaigns Manager, Shelter Cymru
Matt Dicks Cyfarwyddwr, Sefydliad Tai Siartredig Cymru
Director, Chartered Institute of Housing Cymru
Matthew Kennedy Rheolwr Materion Cyhoeddus a Pholisi, Sefydliad Tai Siartredig Cymru
Policy and Public Affairs Manager, Chartered Institute of Housing Cymru

Swyddogion Cynulliad Cenedlaethol Cymru a oedd yn bresennol

National Assembly for Wales Officials in Attendance

Gerallt Roberts Dirprwy Glerc
Deputy Clerk
Jonathan Baxter Ymchwilydd
Researcher
Naomi Stocks Clerc
Clerk
Stephen Davies Cynghorydd Cyfreithiol
Legal Adviser

Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.

The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.

Dechreuodd y cyfarfod am 09:15.

The meeting began at 09:15.

1. Cyflwyniad, Ymddiheuriadau, Dirprwyon a Datgan Buddiannau
1. Introductions, Apologies, Substitutions and Declarations of Interest

Welcome, everyone, to this meeting of the Equality, Local Government and Communities Committee. The first item on our agenda today is introductions, apologies, substitutions and declarations of interest. David Melding AM is substituting for Janet Finch-Saunders for today's meeting. We haven't received any other apologies. Are there any declarations of interest? No.

2. Bil Rhentu Cartrefi (Ffioedd etc.) (Cymru): Sesiwn Dystiolaeth 5
2. Renting Homes (Fees etc.) (Wales) Bill: Evidence Session 5

We will move on then to item 2, which is evidence session 5 in our scrutiny of the Renting Homes (Fees etc.) (Wales) Bill. I'm very pleased to welcome here today Jennie Bibbings, campaigns manager for Shelter Cymru; Alun Evans, senior campaigns and advocacy officer for Citizens Advice; and Jamie Matthews, senior policy officer for Citizens Advice. Thank you all for coming along to give evidence to committee today. We will start off with some questions on general principles from Jenny Rathbone.

I think you've already highlighted that fees are a barrier for tenants. What impact do you think this Bill will have on addressing this barrier?

It's going to have a positive effect. It's not a panacea, of course, and the big upfront costs of a new tenancy are the rent in advance and the bond, but certainly for a lot of people who come through our doors, there is some help available from local authorities, very often, for rent in advance and bonds, but letting fees—sometimes there's help and sometimes there isn't, and often people are having to get letting fees out of their own pocket. For our clients, it's the risk, really, of handing over a few hundred pounds, which is a big chunk of people's household budget. Very often, people are going into debt to get that money together, and there still isn't a guarantee either that you're going to get that money back or that you're going to get a roof over your head, because the agent might turn round and say that you didn't meet the credit checks or they give it to another tenant who was a better prospect, and so, as the tenant, you could be £100 or £200 out of pocket and still be at risk of homelessness. So, it's that financial risk that is going to be removed.

I think we echo what Jennie's saying really, but in addition to that as well what we're finding is that the inability for some tenants that our networks see who can't borrow or find the money to move out of inappropriate housing that might be in disrepair or where they might be experiencing discontent due to neighbour issues and then are forced to remain living in those properties or look at other less suitable accommodation because of the barrier that any kind of upfront fee raises.

Okay. We heard evidence last week from the landlords and letting agents organisations. One of them calculated that the rents would be likely to rise by up to £100 or so year, as letting agents dump the issue onto the landlords and landlords pass it onto the tenants. Do you think that is a fair exchange for abolishing letting agency fees?

From what we've seen in Scotland, there isn't that clear evidence that that actually will happen. If we do go down that road and it does increase and, as you say, £100 is perhaps what they've calculated, I think the general consensus will probably be that, rather than having that upfront payment, it's easier to have those costs spread across the year with rent.

I think that, looking at our casework experience around Rent Smart Wales, when those changes came in, what we saw was that there was a small number of landlords, a handful of landlords, who kind of used it as an excuse almost to put their rents up by quite a lot more than the actual cost of becoming registered. But they were very much a handful of landlords. Certainly, the demand on our service was nowhere near what it was this April just gone, when social landlords put their rents up by 4.5 per cent—most of them—and that caused widespread panic and people handing in their keys because they couldn't afford the increase. So, the demand wasn't anywhere near that level.

I think we also need to just remember that letting agents are only responsible for a minority of privately rented homes. The Welsh Government's research that they commissioned to inform this legislation has got some quite useful figures in that respect, and that suggests that it's only about a quarter of privately rented homes that are actually managed by an agent. So, the majority of rents are going to stay the same, and that is going to have a corrective effect then across the rest of the market. That's our analysis.

09:20

Okay. We had some evidence last week that banning letting agency fees would mean that agents would be able to spend less time helping vulnerable tenants. Do you think that's something that might happen? Is it an issue at the moment?

I think we've both got views on that, haven't we? Do you want to go first? [Laughter.]

I'm trying to think how to phrase it. Initially, we were quite surprised by the evidence that was given in that regard because we were uncertain what actual assistance is given to tenants who may be in a vulnerable situation. Some of the examples given, such as giving some kind of financial support and some benefits advice was quite concerning, because there are lots of free providers of that service on lots of different tariffs and lots of different methods. I think our organisational position is that the letting agent is there to let the property on behalf of the landlord, and part of that process is to support tenants to make sure that they are in place to provide the financial return that the landlord wants by entering into that commercial agreement. So, that may mean, for some tenants, that there's a little bit of extra work that's done, but that is something that they are doing on behalf of the landlord in order to fill the vacant property in order that the landlord can get some return on their investment. We were uncertain as to what actual activity would no longer be able to be provided on the basis of introduction of fees.

We've got some quite interesting survey data on the role of letting agents in terms of letting to tenants who are in receipt of benefits. So, we did a survey last year. It was a Wales-wide survey of private renters in Wales, funded by British Gas, and that found that the proportion of tenants who were receiving housing benefit was quite a lot lower if they had a letting agent managing than if they had a self-managing landlord. That does tend to accord with our own experience where, by and large, if you've got a tenant who is receiving housing benefit, you've got better luck with a landlord who is self-managing, who will meet you and kind of go by trust and building a relationship rather than going through all the formality of credit checks and references and so on. So, I would question—. Certainly, some agents probably do do that level of help with their tenants, particularly in rural areas, but that I don't think is commonplace.

I think there are some issues, as Alun said, around the additional kind of responsibility that this might place on tenants, and what we've seen in Scotland is that tenants have been put more in the driving seat in terms of having to get their own credit checks, their own referencing and their own paperwork. A lot of tenants really welcome that, I think because it makes sense to do it. You can do it yourself for free, so why pay someone else £75 for it? But some tenants probably are going to struggle with that, and I think we do need to think about our homelessness legislation and the fact that we've got this focus on reasonable steps in the legislation now. So, I would expect that housing options professionals are probably going to be adding these as additional reasonable steps for people when they approach and they're threatened with homelessness. In a way, that does create more potential hurdles for people who are at risk of homelessness, not always thinking clearly, not always performing at their best, and yet they've got these additional tasks to do. Some people are going to rise to it, no problem, but other people are going to need help, otherwise they're going to be at risk of being found to be unreasonably failing to co-operate.

So, I think Welsh Government needs to produce some guidance for housing options so that people have got access to proper tenancy support to help them with that if they need it, or proper accredited money advice, but certainly not unofficial advice by an agent who is actually being paid by the landlord and doesn't have a clear responsibility for that tenant.

Under what circumstances does a landlord or letting agent require a guarantor? Because that is obviously a slightly complicating factor. If you can show that you're in work, in regular receipt of a salary to cover the rent, are you still required a guarantor?

Usually, as I understand it, it's if you were either going to fail credit checks or you were on a low income, then they would ask for a guarantor.

09:25

Okay. So, is that where a letting agent is no longer able to charge a fee for that and might just say, 'Oh, I'll move on to somebody else'? 

If they were to charge a fee for—

Well, they won't be allowed to charge a fee for checking out a guarantor. Do you think that that might be an incentive to pass this prospective tenant by?

To pass on that person—well, you would hope not, wouldn't you? I mean, the guarantor requirements—

You'd hope not, but what do you think is likely to happen?

Letting agents have threatened to recede even further from letting to tenants on benefits and tenants on low incomes, so they may well do it, because they've threatened to do it, haven't they? And we do have to rely on the market as a whole and the fact that most of the private rented sector isn't funneled through agents to balance that out.  

Okay. Now, obviously, letting agencies on the high street are now being challenged by online letting agencies. To what extent do you think that might be an alternative way to eliminating outrageous letting agency fees if people online are offering to do it for a lot less? Is that not another way of sorting out the problem of obviously really exorbitant letting agency fees?

I think it's a potential option, but as Jennie has already indicated, the majority of landlords will not use an intermediary, whether that be digital or a high-street letting agent in terms of securing a tenant. So, you will see disruptors coming into the market, such as digital places—I'm trying not to name them—and they are obviously a lot more cost-effective, and for some tenants that wouldn't be an accessible means for them accessing property.

What we wouldn't like to see is that all prospective tenants have to go through some kind of a digital portal in order to access the private rented sector, but I don't think the market would adapt itself in order for that to happen. Whilst it may be more cost-effective in the future, it still needs prospective tenants to actually enter the portal and look for the properties at the end. So, I think it's a viable model for certain landlords to use, and for some tenants—they quite like that option, particularly tenants who may not be physically located in the area where they wish to secure the property. I think it's a useful tool in that respect, but I don't think, in and of itself, it has a big impact on some of the fees that are charged by agents.

Because the explanatory memorandum does explore alternatives to legislating to sort out this problem, for example having a much more robust attitude towards enforcing consumer rights. I wondered if you'd just like to give your views as to whether that might have been a useful alternative.

I think we're all agreed—we've discussed this—that a non-legislative approach just simply won't work and I've seen some of the previous evidence sessions where I think nearly everyone's agreed on that, even some of the landlords, so I think it's essential that it is very clear, a very tight piece of legislation, to prevent it happening. It's just simply not going to happen.

A range of different solutions have been talked about and caps have been talked about. I think if we all accept this principle—and I think the Welsh Government accepts it and the Department for Communities and Local Government accepts it—that the agent is contracted by the landlord and it's the landlord who should pay, because the agent is doing work that the landlord would be doing otherwise— they're basically taking some of the landlord's job off them—so it's only right and fair then that it's the landlord that has the relationship and that the tenant pays through the rent.

So, there's a principle there, which I think this legislation is very much in tune with. And I think even if the Consumer Rights Act 2015 was enforced really well, it's doubtful the effect that that would have on fees, which we understand better now, I think. We understand how tenants shop for homes—they don't choose the agent, they choose the home, don't they? It's the landlord who chooses the home and that's where the market forces are effective and that's where we need transparency and openness. But as far as tenants are concerned, it was never going to have the positive effect that we would have hoped.

Were we to pass this Bill, what do you think is going to be the best way of communicating the ban on letting agency fees, both to landlords and to prospective tenants? In your answer, you might want to also let us know what you think about using Rent Smart Wales for that role, as they obviously hold the register.

I think, particularly for landlords, you have the vehicle in Rent Smart Wales to ensure that all registered landlords are fully aware of that. I'd like to think that there were going to be fewer and fewer unregistered landlords in Wales. So, if Rent Smart Wales have that database, then they would seem to be the most natural means of communicating to landlords. There are obviously partner agencies that Welsh Government could work with in terms of accessing wider consumers, and I think we would definitely be more than willing to support in any small public awareness campaign, both digital and press, in order to ensure that people are fully aware of the changes. 

And, potentially, with the introduction of standard contracts under some other legislation, then there's the opportunity for a tenants' rights handbook, which would contain all this information as well, so that the tenants are fully informed of all the rights that they have when moving into the private rented sector. 

09:30

Do you think that's going to be sufficient where people are using online adverts, where they've seen a property online? Are they going to know that a landlord has no right to charge a fee?

It's part of having that digital campaign, really. You can put the message out there in as many different means as possible, and there will always be a very small cohort of people who are new entrants to the market. There could be new arrivals in the country who are looking for somewhere new to stay, or could be renting for the first time. If they haven't got an intermediary who they could approach, like an advice agency or an information source, or a local authority or a housing options department, then there could be some things on some general public information sites, like the Welsh Government site, like our site and Shelter's site, where a lot of prospective tenants will initially look to help them choose property in the first place. 

I think the only thing I'd add would be that you're right to raise communication because it is the key to the entire piece of legislation really. And I think the only thing I would add perhaps is that—and certainly in your constituency's sense—students in particular need to know their rights, and I think I would encourage student unions, universities, all to be singing from the same hymn sheet to promote this piece of legislation, so that they know their rights when they're going into the market. 

Yes, absolutely, but they're probably not the ones I'd most worry about. I'd be more worried about somebody who was about to be made homeless, and being desperate, not realising that this is an illegal charge. But, presumably, we have to rely on organisations like yours to make it clear to them. 

It is a great challenge, though, definitely. And even with all the money that was put into Rent Smart Wales, tenant awareness is still pretty low. Services like ours have got really high demand, especially at the moment. We've got 1,000 calls to our helpline every year that go unanswered and several weeks' waiting list for some of our surgeries. A lot of people need housing advice out there and we do have concerns about people falling through the net. So, there is a risk, and, as Alun and Jamie say, it's about getting the whole housing sector up to speed on this, so that, where people do go to a local authority, or go to a support service, the people there know what they're talking about and can inform them of their rights as well. But it is going to be difficult. 

Okay. Just one further question on general principles, and that's the experience from Scotland. To what extent do you think we can learn from the Scottish experience, and to what extent are the similarities between Wales and Scotland around these matters strong enough for us to draw those comparisons and lessons? 

I think there's a fair bit we can learn from Scotland. I mean, obviously, it happened differently, whereas we've got the advantage of being able to make it clear right from the outset. We've got the advantage that we have Rent Smart Wales as well, which is, in our view, an effective enforcement body. They've achieved good things, in great challenge, to achieve as much as they've done. But they've got good compliance and they are focused on enforcement, we would say, and they're bringing the sector along with them by and large. So, we are in a stronger position in that sense, but we can look to Scotland for lessons on—. For example, I think they've had to bring in some later legislation to make sure that agents aren't kind of covertly getting commission from referencing bodies. This came out in the Welsh Government research, so we might want to think about that upfront—if tenants are being expected to get their own credit checks, that they are free to go to any agency and they're not being told you have to go to that particular one, for example. 

Yes. Okay. That's fine. Thank you very much. We will move on, then, to Bethan Sayed. 

Thanks. I wanted to ask about default payments. I know that Citizens Advice have said that it should be set out clearly in regulations what that would look like, and I know Shelter have gone further in saying what should be deemed to be default payments or not. Would you be able to just explain whether you think that that should be on the face of the Bill, for Shelter, and if Citizens Advice could just explain a bit about what your thinking is as well in relation to the unfair and excessive default payments that are put on us. I think that, from the evidence we've had, I've not really got the view that it's a serious issue, but, from your papers, I've certainly seen the other side of it.

09:35

If you don't mind, I'm going to jump in, because late payment fees is something that we do see a fair bit of in our casework, and I would be really keen to stress the potential that, if we don't address default fees on the face of the Bill, there will be an additional focus on default fees moving forward and more creative use of default fees in order to increase income. Late payment fees are the main concern here, and we see quite a lot of evidence of people being penalised unfairly. In the main, we're talking about people on low incomes, people who might be vulnerable. There are certainly some agents who view late payment fees as a source of income. There's an agent in Swansea at the moment and that agent charges—I've written about it in the written evidence—late payment fees every single month, and it's not because the tenants are in arrears; it's because they're in receipt of universal credit and the rent due date is then and the universal credit date is then, and he won't change the rent due date. And it's been in front of a district judge, and the district judge says that there's nothing that can be done about it because it's contractual. So, that is a revenue stream for that agent, and I know that that kind of practice is frowned upon at the respectable end of the sector but it still happens.

We also see late payment fees that are levied at really extortionate levels—£26.30 a day was a recent call to our helpline—and we see them written in quite confusing ways in tenancy agreements as well. So, we're not saying, 'Never charge a late payment fee', and I think that is a concession on our part because there is an argument to say that everything should be for the security deposit. I think we do have to recognise that there is some additional cost to agents, but people don't need incentivising to pay their rent; they're going to be at risk of homelessness if they don't pay their rent. So, it's not about incentives. It's about recouping the reasonable costs that the agent has. So, we've got some recommendations about capping late payment fees, making them apply only once a month, not on a daily basis and not to apply on day one of rent being late.

I think we also do need to look at this issue about refusal to change the rent due date to get it to match up with universal credit. The Renting Homes (Wales) Act 2016 has got some provision in it to say that the landlord mustn't unreasonably refuse a request to vary the terms of the contract, and that's very welcome, but that's a duty on the landlord, not on the agent. And, as we know, the communication isn't always brilliant between agents and landlords, and landlords don't often know what tenants are being charged anyway. That came out really clearly in the Welsh Government research. So, I would strongly urge that we do something about late payment fees, because it's vulnerable people who are getting the brunt of this.

I think we would slightly disagree with Jennie and Shelter in this and aren't quite as willing to make the concession. Our initial point would be that all default fees should be banned initially. We don't feel that tenants should be charged for things that are outside of their control. We particularly wouldn't want to see the opportunity for landlords or letting agents to gain a revenue stream when somebody is dealing with problem debt, for example. We see lots of examples of tenants who have other debts, who have had a change of circumstances and are in difficulty, and adding late payment fees and charges and interest rates to the underlying debt just makes the situation worse for them.

Do you think that if it's put on the face of the Bill that it would be seen as something that would be acceptable, then? Is that what you're saying—that's why it shouldn't be there in the Bill itself?

What we're saying is that the default fees shouldn't be allowed—

People shouldn't be charged for things that are outside of their control. What we are saying is that, if the decision is made that there are certain things whereby it is only right that letting agents can recoup an actual cost that's been incurred, that those are very clearly itemised on the face of the Bill so that there aren't creative interpretations of the legislation. We see examples of tenants who are charged for the most ridiculous things. We have tenants in north Wales who have quite an affordable market rent but then, when they want access hot water, have to buy a £10 token for the week in order to access that. So, there are lots of fees and default payments that just exist in the market that, if they are going to be allowed, need to be clearly stated as to what they would be.

Well, that was my next question really, because this Bill doesn't allow for requiring contracts for utilities, communications services to be entered into by the contract holder. Do you think that that's something that should be permitted under this Bill and does it pose any risks to the contract holder?

09:40

We don't see any risk at this point. It's the sort of thing that could cause an unnecessary barrier if it wasn't there, so it's okay.

Okay. Just on this, before I leave this point of default payments, obviously, we haven't seen the model contracts yet from the renting homes Bill, so I'm just wondering whether you think that that would have been useful for this, because, as you said, I find it difficult to understand how this potentially couldn't be violated by virtue of the fact that we don't know what that ideal contract would look like? Is that why, potentially, you've outlined what should be on the face of the Bill, or would you be happy to see a model contract and use that? What would be your view on that?

It would have helped, wouldn't it, to have understood how all these different elements are going to work together, certainly? I think, for example, with this issue about the rent due date not being changed, if we had the model contract and we could see that there was a clear term in there that we could rely on, then that would be great. But I think the other point about renting homes is that there is quite a strong reliance on the county court to resolve disputes, and that's okay for some people—and we're going to get on to redress shortly, aren't we?—but it's preferable for tenants to be able to resolve disputes in a variety of less formal ways, as well as through the county courts. So, I guess that would be my reservation with relying too much on the model contract. 

And I just think if you can keep things clear, then it's much easier to communicate. So, if things are on the face of the Bill, then it's less easy to have any confusion when you're trying to communicate a message to prospective tenants.

Okay. Just with regard to security deposits, I know that you said that perhaps some of the issues that we've talked about here should be reflected in security deposits potentially. Is it appropriate that the limit for security deposits should be set in the regulations and what's your general view on security deposits?

Looking at Shelter's deliberation in England, they've been calling for a cap on security deposits. There's no evidence that they're being levied at ridiculous levels at the moment, so there is an argument for leaving it and seeing what happens and having a power in regulations. I get that it's clearer if it's in the Bill and that there is the potential for deposits to rise. Part of my concern in this is that, sometimes, an agent, or a landlord rather, might be more likely to take a tenant on, if they've got pets, for example, or if they've got kids, if they can have a little bit of extra deposit. While that's not great, it's better than, in my view, the quite inhumane approach of saying, 'You're not allowed any kids and you're not allowed any pets'. So, if there is some flexibility in deposits, then that might help in that regard, but I'm aware that that does depart from Shelter's view in England, for example, which thinks that there should be a four-week blanket cap on deposits and that it should be in the legislation.

I think I agree in principle with what Jennie says about the humane approach to allowing people to enter into properties, but our concern is that, without a cap on the security deposit, then there may be an end of the market that uses the loophole to exploit that. Certainly some of the research that we've done, particularly in England, has shown that the average rent that's been asked is four weeks, and when there is a dispute about rent, the average amount that's reclaimed is only 75 per cent of the deposit that's been secured against. So, we would suggest that, maybe, on the face of the Bill, there's a maximum cap on a security deposit of three weeks' rent. Because the evidence so far shows that when people claim against the security deposit, that's roughly the amount that is agreed upon anyway. We certainly wouldn't want to see that have any disproportionate impact on people who want to live in the property as their home, and a lot of people will want to have pets, and you can entertain the argument of whether children should be allowed in them or not—[Laughter.]—but they most certainly should be allowed to have pets in their home. That's what the security deposit is there for—it's in order to secure against any damage that is caused in whatever means. We need to recognise as well that there is an insurance market that is also available to landlords to protect against unforeseen or foreseen damage to the property. So, for tenants, a cap on the face of the Bill of the security deposit of three weeks' rent, we think, would be fair.

09:45

Is that widespread then, Jennie, prohibiting children from tenancies? I'd heard of the 'no DSS, no pets', but I hadn't really heard of the 'no children' policy so much.

Yes, we've seen properties advertised in Cardiff: 'a three-bed family home. No pets; no kids.' And it's advertised as a family home.

I know, yes.

Just on the security deposit, do you think there should be a passporting system potentially as well for this? Because, obviously, we've heard from the landlords that they feel that that would be something that would be useful, but I just wanted to hear it from your perspective, because obviously they'll give us one side of the coin, so to speak.

That's definitely something that we—. You know, we looked at it. I looked at the evidence session and thought, 'Actually, yes.' We had a discussion about it and looked at some of our clients, and absolutely, it's another way in which it makes it accessible for people to move from one to another and I think we'd certainly support that.

Yes, because, just to put it on the record, I did ask Welsh Government this and they said that it wasn't within the scope of the Bill. I didn't really get that, because I thought this would be a way of helping tenants, so that they could be, you know, not paying double—. Because what they have is, keeping that there for a while if there's a dispute, and then having to find the extra money then for a new tenancy—

Exactly, and it's the timings as well, isn't it? Obviously, even if you're waiting on your deposit to come back from another, then you're borrowing more money for a new one and then you get into more of a mess. So, I think I'd absolutely support that.

So, you think it would come within the scope of this Bill.

I think that if the principle of the Bill, and obviously Members need to decide that, is to make the private rented sector more accessible for people, particularly vulnerable people, then that's another way of making it more accessible, so, absolutely.

And just with regard to exit fees, I know you've mentioned this quite strongly in your evidence. Can you just tell us a bit about that in relation to: will this, again, be something that agents or landlords could use as a way to get more money off the tenants? The charge for keys at the end of a tenancy seems quite steep in what you gave as evidence, Shelter.

Yes, I'm not sure why it's not in the Bill, because exit fees were talked about in quite a lot of detail in the Welsh Government research and there was a recommendation that fees for ending a tenancy should be included in the list of prohibited payments, so I don't know whether it was just an omission or what, or whether there was some thinking behind that.

Exit fees. There are two types of exit fees we're talking about here: number 1 is when the tenancy comes to the end of a fixed term and you're in a monthly rolling and you bring it to an end in the natural way, and a few agents do charge check-out fees at that point. It's not a common practice, but it does happen. We've seen fees of £89. It wasn't that long ago—it was only a couple of years ago—that Peter Alan had their fees listed on their website and there was a check-out fee of £40—£40 to hand your key in. So, they're not widespread fees, but they are charged and we think that they should be included.

The other type of fee is when a tenant needs to leave early and we think that that is a slightly different situation, because that is work that the agent wouldn't have to have done otherwise and there should be some allowance for them to claim back, again, a reasonable amount of money for that. I should stress that it's still the tenant who has to do most of the work in that situation, because it's usually they who are required to find a replacement tenant and what not, and then it's the new tenants who have to pay for all the credit referencing and things, but it's still a money earner for some agents. We've got a case in the written evidence of a young couple who came to us not long ago. They were in shared accommodation and they found out they were expecting, so, obviously, they had to move because you can't raise a baby in shared accommodation. They'd signed a 12-month contract; they were three months in. They found new tenants to move in and they also found somewhere new to live, which was let by the same agent, and the agent wanted to charge them to do all the credit checks and all the referencing again, which was almost £500, even though they'd only just done it 12 weeks before. And that was a respectable agent—a market-leading, household-name agent. So, there does need to be some regulation around the ending of tenancy certainly. At the moment, they're just not mentioned in the Bill, and that's our recommended approach anyway.

Just to be devil's advocate on the keys situation, is it because they just don't get a lot of them back and people can't be bothered? How important is it that the key—? There seems to be an obsession with keys being given back, when you can just make a new copy of a key. I don't want to make light of it, but it seems to be a massive thing for the agents.

It's a big deal, keys, isn't it?

I think, to be fair, technically some of the case law that did develop around housing was that it was only upon receipt of the keys that you could actually confirm that the person had surrendered or ended the tenancy.

09:50

So, there might have been a misinterpretation of what the case law indicated to people, although I have a feeling that it may have been more to do with having physical possession of a set of keys for some landlords.

In terms of what Jennie was saying, I think I agree that, on the face of the Bill, there needs to be some acknowledgement of the issue around exit fees. We certainly agree that there should be no blanket allowance for somebody at the natural end of a tenancy, whether it be a fixed term or at the end of a rolling term, to have to pay a fee just because they've come to the end of the contract. But there should be some regulation around what happens when somebody is looking to end their tenancy early, and some kind of reasonable fee should be allowed to be recouped on that basis.

And, just quickly, one quick question is: do you have any concerns about the fines incurred for requiring prohibited payments? They're not subject to an upper limit. So, your views on that.

We don't really have a view. I think it looks like an effective incentive as it is.

I'd just like to pick up on default fees and people being charged for late payments because universal credit hasn't been paid. I just wondered whether that could be dealt with in a different way by landlords asking for the payment to be made directly from the benefits system, so that then, obviously, there would be a risk for the landlord, but the state's not about to go bust.

The agent couldn't levy a late-payment fee against the DWP, could they? [Laughter.]

No. Good luck on that one.

It is possible, under the way in which the benefits system is run, for a landlord to request to receive the rent money directly. Is that something that might be a way of safeguarding tenants against these late-payment fees through matters beyond their control?

It could be. It's the issue about the late-payment fee. It's about understanding the concept of what the late-payment fee is for from the letting agent's perspective. So, if we can guarantee that the payment is going to get to the letting agent, to the landlord, via an alternative payment arrangement from benefits, then that could be a useful way to persuade letting agents that it's not required.

But not something you'd push at the moment, to safeguard the tenants.

I don't think we have a fair enough view at the moment as to whether or not we'd want to see that as a requirement.

Nor us. Not at this point.

Buaswn i'n hoffi edrych ar y blaendaliadau cadw a'ch holi chi a ydy cyfyngu ar flaendal cadw i wythnos o rent yn briodol. Ac a ydy'r Bil yn glir ynghylch sut y dylid ymdrin â blaendal cadw?

I'd like to look at the holding deposits and ask you whether restricting the holding deposit to one week's rent is appropriate. And is the Bill clear about how the holding deposit should be treated?

It's a great improvement on the situation as it is at the moment. I thinks it's really important to say that. There's a great lack of clarity at the moment around holding deposits/non-refundable admin fees/fees in advance. So, it is a great improvement. We would like to see some additional amendments, first of all in terms of giving tenants a cooling-off period. This is because we do see some quite forceful sales tactics sometimes.

There's an example in our written evidence of a young woman, a mother, who was pressurised into handing over £250, and she was told, as they often say, 'Oh, there are multiple people interested in this property; you've got to hand the money over.' So, she did. Subsequently, they looked at the paperwork, her and her dad who was going to act as a guarantor, and they decided that, having looked at the paperwork, this wasn't fair for them and they didn't want to do it, but they couldn't get the money back. So, right, that's an example where you're handing over money and you don't even know what the service is yet that you're going to be getting. Once you see it in black and white, you decide that it's not for you, and yet you're £250 out of pocket. We are taking that further, to the ombudsman, to be fair, but that's an example where a holding deposit can be unfairly retained and where a cooling-off period would have been really beneficial to allow them to—. And that is a consumer principle, isn't it? You know, it's a defence, if you like, against hard sales tactics. So, I think that's one of our major issues.

We would also like to see them restricted to one holding deposit at a time, because why would you need more than one? If you're serious about it, then you only need one holding deposit. And it's about when they can be returned as well, which I think we would need a bit more clarity on, because we think that if an agent can hold onto the holding deposit, they probably will. Because it's not a small amount of money and this thing about false and misleading information is open to wide interpretation. So, we would like to see some additional guidance or, perhaps, the wording of the Bill made more specific so that we're clear that it's not just because you've failed a credit check or a referencing.

09:55

I think all we'd add, really, is that Citizens Advice believe very much that the holding deposit should be returned. That should, absolutely, be the norm. And tenants shouldn't be penalised if they withdraw either, because that's the whole point. I know there's been an argument made that perhaps there will be rent loss if that happens. Well, of course, the whole principle of a holding deposit is that it's a competitive market, so, you've got tenants interested in a property and so there won't be a rent loss. So, ultimately, that's our view—that it should be returned.

Yes. It's not something that we've given thought to or put in our evidence, but we haven't got any opposition to that whatsoever. It sounds like a sensible idea.

I think that would be the compromise. I think the principle would be that all holding deposits should be fully refundable or offset against any ongoing liability, just because, sometimes, things may happen after 48 hours, particularly if you're trying to secure a property after travelling from a distance, for example. We've got examples of people who'd asked a family member to look at a property in Carmarthenshire whilst they were based up in north Wales, and by the time they came down to look at the property, which was three days after the holding deposit had been paid, and talked to the neighbours, they found out information about the number of reports that had been made to environmental health around the property. So, they were looking to ask for their money back. But they had no redress to get back, what was, I think, about £400 that they'd paid in terms of the holding deposit on this property.

Again, it was a case that ultimately went to the ombudsman and was successful. It just meant that that was a long protracted process, and I think if the principle was that all holding deposits are fully refundable, or are offset against ongoing liability, it still meets the principle of tenants having to commit financially to a property. You still have to hand over money, physically, so there aren't going to be lots of tenants who are going to be running around putting down a week's worth of rent on lots of different properties, because it's still leaving their accounts. But I don't feel that they should be penalised either, because they've pressured into signing up to take a property or because their circumstances may have changed in a very short time frame. Because the Bill does allow for things to move within that week process and as things change. So, I think, the principle of having a fully refundable holding deposit should work.

A ydych chi'n pryderu y gall hi fod yn fwy tebygol y bydd asiantiaid yn gofyn am flaendal cadw yn y dyfodol? Rydym ni wedi clywed nad ydy pawb yn gofyn am y blaendal cadw, ond tybed a ydych chi'n poeni y bydd hyn yn dod yn arfer mwy cyffredin yn y dyfodol fel ffordd o godi ffioedd achos nad ydynt yn gallu codi ffioedd eraill. A ydy hwn yn rhyw fath o unintended consequence fuasai'n gallu digwydd?

Are you concerned that it could be more likely that agencies will ask for a holding deposit in the future? We've heard that not everyone is asking for a holding deposit, but I wonder whether you're concerned about this becoming a norm in the future, as a way of raising fees because they are unable to raise different fees. I wonder whether that would be an unintended consequence.

I think that's mitigated, isn't it, if the fees are returnable? If they have to be returned, then it's not an extra fee that the landlord can recoup.

And I think it's interesting that, in Scotland, it's been the opposite experience, where they found that holding deposits are used less, which I think is quite an interesting effect. It's not what we would have expected, in a way, but it seems that the evidence from Scotland is that, now, the whole thing takes place a lot more quickly and the focus is on getting agreement and getting signed up rather than handing over cash and then having long delays while the credit checks and everything are done. Because they're already done—the tenant's already done them—so it just means the process is much quicker and there's less reliance then on handing over cash as a formal commitment.

So, you wouldn't think that there are any circumstances, really, where the holding fee shouldn't be returned.

I don't think so, because in a competitive market, where they'd be used, there wouldn't be any loss of income because there would be tenants looking to secure the property. In terms of what activity might have happened by the agent at that point, there may be a reference fee, which is a negligible amount, if any fee is attached to that. So, we don't understand where the actual loss would be. We're open to somebody showing exactly where that loss would be and how that couldn't be minimised, but at this stage, we haven't seen any evidence supporting why a holding fee that's not refundable is a valid—.

I mean, in theory, you could have a vexatious application from someone who's really not upfront about their financial circumstances, for example. That could happen. And I guess agents want to be protected against deliberately wilful and misleading applications, which waste their time and waste the landlord's income and whatnot. But the danger with that kind of thing is that people end up falling foul of it when it wasn't deliberate and it was just because maybe they're self-employed and their income fluctuates, or maybe they've put the wrong zero in the wrong box, or maybe they're vulnerable and they haven't done it all properly. There is potential for vulnerable people to fall foul of that kind of thing. So, I think, in theory, maybe there does need to be some protection for agents—and I say this as someone from Shelter Cymru—but in the vast majority of cases, if a tenant changes their mind, it's because additional information has come to light, or their circumstances have changed. We had someone in our written evidence and she changed her mind because her mother died and she was moving to be close to her mother, and the agent wouldn't give her her money back. I know that that, again, would be frowned upon by professional agents at the respectable end, who think that you should be humane, but that's a discretionary reaction, you know, and agents do have, at the moment, the ability to keep that money, regardless of people's changes in circumstances. It's a minefield, really.

10:00

I'm just thinking about the specific situation of students: a group of students, they want to rent property X, and they put in a holding fee many months in advance of when they're actually planning to take up the tenancy. So, in those circumstances, it seems to me that the landlord is somewhat vulnerable to the students changing their mind or falling out between each other. You know, it's a long gap, as opposed to somebody who needs to rent next month: 'I definitely need this property now.' So, I feel that landlords need to be protected. If they're going to take a property off the market, the holding fee needs to be large enough to constitute a serious deterrent to the students messing somebody around.

I think I would go back to our argument that it's an extremely competitive market and, as you say, they're doing it months and months in advance so they've got plenty of time to then put it back on the market and find another tenant. I think it would be quite rare that the landlord would really lose out in that scenario, in that competitive market, with that timescale.

Okay. So, you're saying that they would need to enter into a tenancy that wouldn't start until some months ahead.

I think what we're saying is that if it's a property that students want to live in, and it's about whether or not this will all drive up standards, to some extent—. If it's a property that students want to live in, then the market will always have a place for that. So, even if something happens and tenants can't move into a property in eight months' time, if it's a property that students want to live in, then they will find a place in the market, because there will still be people who are looking for somewhere to live. If the prospective tenants are handing over an amount of money—and if you're talking about students in shared accommodation, we could be talking about between £500 and £1,000 being passed over—that's still a large sum of money and a large financial commitment. So, again, it is going to be a genuine change of circumstances that has resulted in them no longer proceeding. A prospective landlord may feel more comfortable knowing that they haven't got somebody moving into a property and things have fallen apart and now they have to look for tenants to move in, or sublet part of the property. It's easier for them to market a property as a whole, possibly, rather than trying to deal with some tenants who have fallen out with other tenants during the term.

Before I move on to enforcement issues, this bit on the holding deposit—I just wanted to ask Citizens Advice this. If we move to a system where you could only charge one deposit on each property, isn't that a compromise? You could say, 'Well, that property's being held for you,' and if you had not indicated you wanted that property, they could have got another tenant in, and would have done that quicker, and would have had the rent from that. So, then, it is compensating, to some extent, for a potential tenant withdrawing. Under those circumstances, if there was no fault on the letting agent, wouldn't it be reasonable not to return the deposit?

I think there would need to be more research into how frequently it happens that holding deposits are asked for and then the tenant doesn't proceed due to a personal choice, and what the actual loss is, then, for the landlord, because what we're talking about are potentialised economic losses. We certainly haven't got experience of clients coming in to us saying, 'We applied for that property and then we decided to withdraw.' What we tend to find is that people have applied for a property and then their circumstances have changed, normally in a very short time frame, within a day or two. Our casework tends to show that the tenants would view a property on that day, make a payment to secure that property in terms of a holding deposit, and the next day—we raised an example where the father had died that evening, so the next day they phoned up the agents when the office opened and said, 'Could we have the return of the £200 we've paid, because you haven't even done anything with the property yet?', and they said, 'No, because you've paid that, and we've already started the process'.

So, in principle we don't want to see anybody out of pocket. I just find it really difficult to quantify where that actual loss of income is, and our concern is that it would be tenants who, through no fault of their own, can no longer proceed with the tenancy who are then penalised for this. I'm not saying that there aren't occasions when letting agents and landlords will have a loss of income, and I think if they can be justified, then there's an argument about whether or not that could be explored at a future date. But at this point, I haven't seen any evidence where there has been actual loss.

10:05

Okay. Let's move on to enforcement. A general question: the Bill would allow fixed-penalty notices at the discretion of local authorities, at the moment, as enforcement is envisaged; do you think that's a reasonable regime, to allow the issuing of fixed-penalty notices? That's obviously short of court action, and the evidence base you'd need for that, potentially. Do you think that's a reasonable approach? And then the second part of that is: should we set the fixed-penalty at £500 or is that too low?

I think we're all agreed that fixed-penalty notices are appropriate, but I think we'll join the growing consensus of all the other people who've given evidence that the £500 specified on the Bill is by no means enough. You could go down the route of increasing that—we were joking about adding a couple of noughts. But there are other sanctions that I know Shelter have looked into that could also be used as a method.

The section 21 restrictions, is it? Yes. I gather that in England they're adding a restriction in possession powers if you have an outstanding prohibited payment that you haven't repaid. That's been used really effectively with Rent Smart Wales, so we have been doing that with landlord licensing for the last few years, and we use it a lot in casework, and there's no doubt it's been effective at driving up compliance. It's a very powerful tool. So, yes, I think there is merit in exploring it in Wales. There are a couple of potential issues with it, and I think the first point to make is that, if we're going to restrict possession proceedings, we need to do it for all possession proceedings, not just section 21, and—. We're jumping ahead, are we?

We are a bit. It is my next question, but I'll infer that you think the English system has a lot to recommend it in terms of repossession. But what about this issue of a fixed-penalty regime, and then the penalty at £500?

We think that it's sensible. It would be good to hear the WLGA's view on it, but certainly they've been issued in their hundreds for Rent Smart Wales. Again, I would echo that £500 is way too low, and it doesn't seem to make sense to put it on the face of the Bill, because it's stuck then, isn't it? You would want to remain responsive to the market and perhaps allow it to be revised in future.

There is no automatic requirement for the offender—let's call it that—who receives a fixed-penalty notice to repay the illegal fee. What do you think about that?

It would make perfect sense to require that along with a fixed-penalty notice, absolutely, and then that is stage 1 for the tenant in terms of reclaiming the unfair fee. When we come to guidance and helping tenants through this process, it's going to have to be a very stepped approach, and it would help them enormously if that was there at the beginning to help the process, and then if they don't get it, there are all these different routes to address it. Tenants might decide that it's too much hassle. We had one to the helpline just this week. It was an unfair fee, we outlined all of her options and she said, 'It's just too much hassle'. So, to help tenants with that first step, it would be desirable, absolutely.

10:10

We've heard that enforcement is key, and I think we'd all agree with that. I think several times you've both referred to Rent Smart Wales. Do you think a lead authority approach here would be helpful, or are you fairly comfortable that all local authorities would have the capacity to enforce? Indeed, they are permitted under law to combine if they wish. You could have several local authorities voluntarily doing that to increase their capacity for enforcement. What do you feel about the concept of a lead authority?

A centrally co-ordinated organisation would make sense, actually, and as you say, Rent Smart Wales is emerging. I think we're also mindful of the pressure that trading standards are under in a difficult financial climate, with the wide range of areas that they cover. So, I think there is a concern there, and it should be centrally co-ordinated.

Yes. And again, we point to Rent Smart Wales because they are a lead authority for landlord licensing, but there is also enforcement carried out by other local authorities too—some more than others, it has to be said. But having that central authority there means that there is a co-ordinated approach, and that additional capacity. It would need to be resourced, of course, and I know that, already, they do a lot on quite a low budget. So, we would need to factor that in. But for us, I think it makes great sense to give them the capacity to be the lead authority, because they know where the agents are, and they're already doing some good work auditing, doing random audits of agents and things. So, for us, that would be the sensible option for Wales.

I just wanted to ask—. When we've heard evidence previously, we've heard that enforcement seems to be an issue in relation to the fact that we've heard that various legislation has come in with housing, but enforcement has not been as good as it could be. You seem to have come over a bit more positive about the enforcement than I was potentially expecting, just in relation to the housing Act and such. If we put this in place, do you believe that there is going to be enough capacity in the system to enforce it, considering that trading standards across Wales are being cut, and that they haven't got the budgets that they once had? I'm just wondering if you could clarify that a bit.

We are broadly positive about Rent Smart Wales. Yes, more enforcement would be desirable, and there are great pressures on local authority services at the moment. So, I think the worry will be about going just down the one route, with fixed-penalty notices. What we would ideally like to see are tenants who are able to use a variety of different routes to redress, including the redress bodies. All licensed agents do have to be in a redress scheme in Wales, and it would make sense for the tenant to be more in the driving seat in that sense and have a range of options, not just to have to go to the local authority, but potentially to the ombudsman or other redress schemes as well.

I think we agree. I don't think we were definitely intent on painting this rosy picture, as we may have done, in terms of enforcement across Wales, because we definitely do recognise that there are challenges, and things are better managed in some local authorities than others due to how they've managed to move their resources. I think part of our response would be very similar to Shelter's in that fixed-penalty notices are an effective way to enforce in that way, but also there need to be remedies available to the tenant as well so that they can seek their own recourse to what's happened to them.

Is that sufficient as is? Just one supplementary. Is that sufficient as is, or would you need more in terms of, you know, if they were taken to the ombudsman? Can they do that now without it being too bureaucratic or too difficult for them to do? Just so I know; if there's anything else we could put into this Bill that would aid the tenant, I need to know that now so that we're not setting them up to fail before this fixed-penalty notice system is put in place.

Well, I think any solution that puts tenants more in the driving seat is going to be a benefit here, and we're talking about section 21 restrictions in the event that a prohibited payment isn't returned, but you could upstream that, and you could make it a section 21 restriction if a prohibited payment has been handed over, and then it's the court then that decides whether that's the case or not and whether the possession should go ahead. It's worked really well for Rent Smart Wales compliance and, again, that would reduce the reliance on local authorities.

10:15

I think Alun was right to say that it will be interesting to see what the WLGA say on this and how they see their resources working with this, because we know there are concerns over trading standards capacity, and I think to hear from them themselves would probably be the most beneficial.

Just for the record, I infer that Citizens Advice also would like the same process to apply where, if a prohibited payment has not been returned to the tenant, then repossession should not occur.

The sister Bill in Westminster for England takes a somewhat different approach to enforcement, particularly the level of fines. They also, even at the high levels, when there's a criminal sanction because of a repeat offence—that could be discharged by payment of up to £30,000. It seems to many people a useful tool to have to offer that substantial payment as a way of avoiding court action and all the enforcement issues around that. So, that's not in the Welsh Bill, but would it add to the Bill, do you think, if we also had that discretion?

I think any additional—. Let's look at it as a deterrent. That's what we all want, isn't it, ultimately? We don't want people to get into these situations. Ultimately, the more substantial the deterrent, then, hopefully, the better the outcome it will have.

I think that what's different in Wales is that we've got the licensing system and we've got the ultimate sanction of an agent having their licence revoked. That's quite a strong deterrent, isn't it, you know. So, I would be more concerned to see how Rent Smart Wales are going to tackle all of this. I guess we would like some assurance that, if there are repeat offenders or if they're levying really unfair fines, Rent Smart Wales is going to be taking action. And, you know, is it three strikes and you're out? At what point does that ultimate sanction apply? We've got great potential to co-ordinate this with Rent Smart Wales, but I would like to know more about how they propose to record bad practice and take that ultimate sanction if necessary.

And, then—. We're obviously talking about quite a vulnerable market here, often, and tenants are in a position of some financial stress sometimes and they've had a prohibited payment imposed upon them. Do you think that, in the process of refunding that, we should go further and there should be an element of compensation, as some people have said—like up to three times the actual illegal payment that was extracted from them? What are your views on that?

Well that—. Go on. 

I was just going to say that it would seem to make sense when you think about how, if a security deposit isn't secured appropriately, for example, then, as part of getting the return of that money through the court process, you can also get compensation up to three times the amount. So, it would seem to make sense for a similar provision to be in place for a prohibited payment as well. 

Yes, we agree. It might be that additional incentive for tenants to not just write it off as a bad experience and move on with their lives but actually to stick with it. Because it is going to be—. If you're going to small claims court, there's a process that you've got to follow. You have to try and sort it out directly with the agent first otherwise the court might throw it out. And it's a long old process, so it might be more likely that tenants would bother to do it rather than just chalk it up to a bad experience if there was an element of compensation too—and also for the amount of time that they're going to have to go through and the hassle in reclaiming those funds.

I think we talked about how payments are recovered. Is there anything else we need to know about the arrangement? You've said that fixed penalties ought to be attached to a repayment and possibly compensation as well. At the moment, the contract holder would have to go through the court and, under those circumstances, the local authority would have to be prosecuting in the court the agent or landlord. So, are there problems there or what we've earlier said about fixed payments and that regime—would that settle this question?

I think we would want to try and construct a system that sorts things out before court as much as possible. So, as you say, the requirement to repay a payment being on the fixed-penalty notice itself—great, because that's another whole step that we can potentially avoid. And, again, thinking about our clients, court is really intimidating for some people. Even if you don't get to the stage of a hearing, it's still really official and off-putting. I don't know what my colleagues think, but I think it will be beneficial to have a variety of different routes that people could go down, potentially, including the redress schemes. I don't know what their view is on all of this. It seems that they've been a bit iffy about whether this stuff is in scope or not. I would hope that they would decide that it is in scope, so that that is another effective route for tenants to go down if they need to.

10:20

I think we would just echo what Jennie's saying, really. An accessible method of redress is the key thing for tenants, really, and court isn't necessarily the place for them. So, if there were alternatives available, I think that would just make it something that tenants are more likely to (a) participate in and (b) actually feel confident that they're getting their rights exercised in that process. Because what can often happen in a very formalised process is that the tenants still feel that 'justice', in inverted commas, hasn't been done, whereas, if it's a less formal process that they can understand a little bit better, then maybe they feel a little bit more engaged with the process.

So, you want it hardwired into the enforcement agency—that's the local authority, or, possibly ,if we decide or the Government decides to amend it to allow for it, a lead authority—that that's the time that the tenant repayment and compensation needs to be addressed? Because it's a huge barrier to go through court action, isn't it?

And I'm not quite sure what the logic would be of—. Because I've heard some previous discussion about whether the payments should be required to be paid back to the local authority who then pays it to the tenant, and that, to me, just sounds like an unnecessary bottleneck, potentially. Just give it back to the tenant, and then the tenant and the local authority can communicate about what further action is needed, if anything. But it does seem a bit odd to me to place that additional burden on the council.

And then, this would stop—. You've mentioned the ombudsman several times. I mean, that seems a hugely cumbersome process as well. I mean, I'm not—. I think it's useful if that's all you've got left, but we want this to be a self-serving, regulating, efficient system, don't we?

Yes, we do.

Thanks. We've got the Consumer Rights Act 2015, and that requires that letting agents must publicise details of the fees that they charge to tenants and landlords for letting agency work. To what extent do you think that there's non-compliance with this, and, if there is a certain level of non-compliance, why do you think that that is the case? Is there a case that this Bill should contain specific provisions to amend the Consumer Rights Act? I don't know if you want to go first, Jennie.

Yes, sure. Our campaign supporters did a mystery shop of letting agents in 2016, and that found really widespread non-compliance with the Consumer Rights Act. Granted, it was fairly new at that time—it had been in about six months, I think—but, that mystery shop, our campaign supporters found that more than half of agents weren't displaying their fees. And, even if they were displaying their fees, when we rang up and asked them about their fees, very often, we were getting different figures from the ones that were on the website, which was a bit frustrating. Certainly, transparency is still going to be important, moving forward, and it's going to be important for landlords as well as for tenants. So, there probably is a need to amend the legislation so that it's still relevant here, but, yes, it hasn't been enforced very widely at all, and I guess the Welsh Local Government Association would be able to tell us more about why that is. But, certainly, we wouldn't advocate amending the CRA or enforcing it more strongly as an alternative to this legislation.

Echoing everything that Jennie's just said, I think one of the problems with the Consumer Rights Act and the rights that prospective tenants had in that was a lack of understanding of what it meant and the lack of any kind of effective communication of these new rights that have been passed on. We've certainly found examples of people not really understanding how this applies to them. And, particularly problematic with the Consumer Rights Act is the digital portals in order for people to access letting agents. The letting agent themselves have to directly advertise their fees, but, if you're using an online portal, one of the larger online portals, then you don't have to list all your fees; they just need to be available. And our research has shown that prospective tenants aren't necessarily going to click through lots of different pages in order to find out what can be sometimes quite murky information as to what the costs are.

10:25

That's fine, okay. Thank you very much, all three of you, for coming in to give evidence to committee this morning. You will be sent a transcript to check for factual accuracy. Thank you very much. Committee will break, briefly, for five minutes until 10.30 a.m.

Gohiriwyd y cyfarfod rhwng 10:25 a 10:32.

The meeting adjourned between 10:25 and 10:32.

10:30
3. Bil Rhentu Cartrefi (Ffioedd etc.) (Cymru): Sesiwn Dystiolaeth 6
3. Renting Homes (Fees etc.) (Wales) Bill: Evidence Session 6

Okay, welcome back to committee for evidence session 6 on the Renting Homes (Fees etc.) (Wales) Bill. I'm very pleased to welcome Matt Dicks, director, Chartered Institute of Housing Cymru, and Matthew Kennedy, policy and public affairs manager. We haven't got a great deal of time, so we'll move swiftly on, and to Jenny Rathbone.

Thank you very much for coming in. We agree with you that the private rented sector has a key role to play in addressing people's housing need. I just want to explore with you what impact this Bill might have, given that we're proposing to abolish letting agency fees.

Okay, just very quickly, before I get on to answer that question, just to quickly state why we are wholeheartedly behind the ban on up-front fees for letting agencies: (a) because of the huge disparity and lack of consistency across Wales in terms of what's being charged and what's been charged for, but, as you mentioned, more importantly, homelessness is on the rise, we've got an increase in rough-sleepers, we've got an increase in numbers on the waiting list, more people are sofa surfing, more families are living in temporary accommodation, and, if we're to solve that crisis, which is what it is, then PRS are a valuable and important partner in that now, accounting for around 16 per cent of the rented accommodation in Wales. So, up-front letting fees, the evidence suggests they are a barrier to people accessing that market, so that's why we support it. It's not about punitive measures against the PRS; they are a valued and important partner if we are to get anywhere near solving this crisis. So, it's about—. A fundamental part of the discussion and this Bill is about working with them to take this forward.

But, you know, in terms of the question you asked about the possible knock-on effect—

Is it going to have any impact on the size of the sector?

10:35

On the size of the sector? Our view is that the evidence from Scotland doesn't suggest that. So, it's been in place in Scotland, the clarification, since 2012, and since then the evidence coming forward suggests that there's going to be no particular impact on that.

Just to chip in quickly, the survey Shelter did suggested most or many letting agents felt no less optimistic about growing their portfolio after the clarification in Scotland.

Just a quick follow-on point from that: in relative terms, the impact this could have is nothing in comparison to the impact of other issues around the welfare, the local housing allowance cap being a barrier to people accessing the private rented sector et cetera.

Well, we agree on that.

Now, some witnesses have suggested that banning fees could mean agents or landlords will spend less time helping vulnerable tenants who might need a little bit more care and attention, but no particular hard evidence. What's your view on that?

You could argue that that probably happens now, because it's a landlord's market, there's a great demand, so there's an element of cherry-picking at the moment. Going back to the welfare point, the evidence from Shelter and others is suggesting—and the Residential Landlords Association, in fact—that the bigger barrier is not wanting to take on welfare, for example. So, there are bigger barriers to this legislation. I don't know whether you wanted to add anything on that, Matthew.

There's also an element of waiting on culture change arising as a result of the new approach to homelessness in Wales. A lot of local authorities now employ specific members of staff working directly with the private rented sector, looking at, obviously, through that bit of legislation, discharging more and more of their duty to the PRS. Welsh Government's own interim evaluation assessment said that a large amount of people, or the largest amount of people who present to local authorities are discharged. So, clearly, there's a real onus on us to make sure professionalisation in the sector continues to be really strong and quality is maintained really high. But there's a clear need there now, with that coming in and with increased interaction with the homelessness services, that you would expect also a broader change in culture, potentially, in that part of the sector.

Okay. So, these specific initiatives around vulnerable tenants, like housing first initiatives—that should sort out any potential reluctance. There will be specific compensations that will take place.

It will always be reluctance in some elements of the market, and you can have legislation or a rule for that, but, yes, I think—

But not relevant to this Bill. Thank you.

The explanatory memorandum explores an alternative non-legislative approach to taking forward this Bill, including a more rigorous approach to enforcing existing consumer rights, and also having a voluntary fees code. Do you think is a realistic alternative to legislation?

I think that the very fact that we're here discussing this probably says that that's not a realistic option. The Consumer Rights Act, for example—it's about creating transparency and more openness within it, but that just creates more transparency and openness that fees are being charged. The point is that the fees, the upfront fees, are acting—as all the evidence points to—as a real barrier to accessing the PRS. A voluntary system is more than likely to create a two-tiered approach, so we don't feel that would be a positive step forward. If all the evidence is suggesting that this is an issue and it is a barrier, then why not ban it?

Okay. And do you want to just tell us what you think of the evidence that can be drawn from the earlier Scottish law banning letting agency fees?

It was in place for a lot longer, in terms of the lead-in time, but they had to clarify back in 2012. All the same fears were being raised at the time in Scotland, but all the evidence from Shelter et cetera was suggesting that it didn't have a substantial impact on the sector overall. There's a similar market in Scotland to the rental market in Wales, and I suppose the other aspect is that in Scotland Shelter had a big, public-facing communications campaign to inform letting agents and tenants about their rights. So I think that needs to be a fundamental element of going forward with this Bill in terms of the communications, both for tenants' rights and what the impact's going to be for landlords and letting agencies. So, a lot is to be learnt from Scotland I suppose is the quick answer. 

10:40

I think the difference we have as well is that Scotland, even though they've had registration for a long time, they don't have licensing, so it's very different to what we have in Wales. We're now looking to introduce licensing for letting agents, not for all private sector landlords. So, arguably, we're in a slightly stronger position. 

I just wanted to ask about default payments. We've heard quite a lot of evidence from stakeholders working in the sector saying that it could be used as a way to pass on the fees that are not going to be charged to the tenant. Shelter were saying that there needed to be clarity on the face of the Bill that it would only be four late payments of rent or four lost keys, whereas we heard something different from Citizens Advice, saying that they don't believe that default payments are acceptable. I'm just wondering what you feel. Is there enough clarity in the Bill on this? Should there be more on the front of the Bill?    

I suppose our position doesn't really differ much from what Shelter have expressed in the previous session. It's kind of like security deposits et cetera. It's about clarity of what is being charged for and ensuring that it's proportionate to the actions being carried out, because it is about protecting the rights of the landlord as much as it is about protecting the rights of tenants, because, as I said in my opening gambit, it's not about punitive measures against the PRS, it's about bringing them in to work with us. 

So, you'd like to see something on the face of the Bill because at the moment we don't have the model contracts because obviously they're from another Bill. I find it difficult myself to know what an ideal situation would look like without having those model contracts, but would putting something clearer on the face of the Bill help in that regard? 

In principle, we wouldn't be opposed to that, but in essence it's probably a difficult thing to prescribe, and markets change and we need to be a bit fluid about this in terms of our duty to protecting the rights of the PRS as well as the tenants. So, I think, certainly, more detail in the guidance about what this should look like, and an ongoing monitoring and evaluation process of the impact of the Bill, if it goes through, needs to be a fundamental part of the work that the Assembly and the Welsh Government carry out. But we're not in principle against it being on the face of the Bill, but we need fluidity and to be allowed to variance it to react to what's happening in the market. 

Just with regard to security deposits, obviously, Ministers will be able to have the power to set a cap for security deposits. What's your view on this? Is this appropriate, and do you feel that there should be? And also, could you give us an idea as to whether you would potentially support passporting of the deposit from one tenancy to another? I know that it's not being considered from the Welsh Government's point of view, but I would see this as something that would enable tenants, as opposed to—. 

First of all, we would seek clarity from the Welsh Government on whether that's being considered or not, because our understanding—

Well, we would suggest that it's something that needs to be considered, and we would fully support passporting because it certainly is a barrier if you've got money tied up in an initial deposit. You have an independent organisation dealing with the security deposits, so I don't see why—. It's something as easy as giving a reference number so that money can be transferred along as you change your account or your landlord. 

You wouldn't necessarily need an insurance-based system that the RLA are saying potentially would be needed because, obviously, that may restrict this Bill. It could be done in other ways, you believe. 

Yes, I think so. We're not particularly, you know, in principle again, opposed to an insurance system, but we think it's a difficult system to create a uniform approach for. People have different views on insurance and what that delivers. Again, it's the cost that's added that may be a financial addition that some people can't afford. 

I think the power in the Bill is appropriate. I think it's something that should be monitored closely. Our view is that there are no massive variations across different areas of Wales at the moment, so on whether there need to be a specific cap, and where that power should be placed, we have no specific view. Again, it's about the flexibility for the landlord as much as the tenant. What does that security deposit cover? Should it be more if there are different circumstances? Well, maybe there's an argument to be made for that. So, a definitive cap doesn't allow that flexibility. 

10:45

And just with regard to whether you have any concerns on the fines incurred for requiring prohibited payments. They're not subject to an upper limit. Is that something that you have a view on?

This is the £500—

No, this is the fine incurred for requiring prohibited payments. It's not the £500— or it is?

No, it's not the £500. That's separate. That's the enforcement. 

That isn't something we had any particular concern about. 

Rydych chi'n dweud yn eich tystiolaeth ysgrifenedig nad oes problem gyda chi efo cynnwys cap efo blaendaliadau cadw o rent wythnos. A ydych chi hefyd yn cytuno y dylid cyfyngu mai dim ond un blaendal cadw ar y tro y gall landlord ofyn amdano fo? Mae yna rai tystion wedi dweud y byddai o'n fuddiol i gynnwys hynny hefyd yn y Bil, ac rydw i jest eisiau'ch barn chi ar hynny.

You state in your written evidence that you don't have a problem with including a cap with holding deposits of a week's rent. Do you also agree that we should limit it to only one holding deposit at a time that a landlord can be requesting? Some witnesses have said that it wold be beneficial to include that also in the Bill, so I wanted to know what you thought. 

I think Shelter's view before this seemed reasonable and it's something we'd agree with. 

Iawn. Ac nid ydych chi'n gweld unrhyw broblem, felly, efo'r capio ar wythnos o rent chwaith.  

Fine. And you see no problem, therefore ,with the cap of one week's rent either.

Jest i droi felly at—. Mae'ch pryder chi yn cael ei fynegi fan hyn yn y dystiolaeth ynglŷn â'r cynllun Hawl i Rentu, petai hwnnw'n cychwyn yng Nghymru. A fedrwch chi ymhelaethu, yn enwedig ynghylch y blaendaliadau cadw, beth ydy'r broblem rydych chi'n ei rhagweld petai Hawl i Rentu yn dod yma i Gymru?

If I could turn therefore—. Your concern is expressed in your evidence about the Right to Rent scheme, if that were commenced in Wales. Could you expand, particularly in terms of the holding deposit, on what the problem is that you anticipate happening if Right to Rent comes here to Wales?

The Right to Rent scheme has been in operation in England for some time, but some research conducted by the Joint Council for the Welfare of Immigrants has suggested that, as a result, there might have been some discriminatory practices arising. Over 50 per cent of landlords surveyed by them suggested that they'd be less likely to rent to a non-EU national, and around 40 per cent said that they were more likely to require or to seek a British passport from those they were renting to.

We don't feel like there's been enough evaluation of the Right to Rent scheme. There's no longer an ongoing data collection on this scheme; the evaluation period is very, very short. In terms of rolling it out across the UK, we wouldn't want to see this happen, and across the UK, CIH have called for this policy to be abandoned. 

Just very quickly to come back on the one-week cap on the holding deposit, there is an element that needs to be looked at here. It's equally about protection for both sides, for the landlord and the potential tenant. So, it's equally about protecting the tenant against getting their deposit back if, for health reasons, they've had to pull out of the tenancy, but it's equally about protecting the landlords against people who are going around looking at 10, 12 properties with no real intention to get involved in a tenancy agreement et cetera. So, it's finding that balance. One week seems appropriate, but I think this is again about the communication side of things and the advice and the ongoing monitoring of what's happening just to allow that flexibility, and, again, to respond to those market changes. 

Mae'r Bil yn cynnig hefyd, wrth gwrs, y gall y landlord gadw blaendal cadw o dan nifer o amgylchiadau. A ydych chi'n cytuno y dylid cael yr hawl yna i gadw yr arian yna mewn rhai amgylchiadau, a pha amgylchiadau ydych chi'n meddwl a fyddai'n briodol ar gyfer cadw'r blaendal?

The Bill also proposes, of course, that the landlord can retain a holding deposit in a number of circumstances. Do you agree that that right to retain that money under certain circumstances is right, and what circumstances do you believe would be appropriate for retaining a deposit?

Well, it kind of goes to the previous answer I've just given. There are clearly circumstances where it's no fault of the tenant or the prospective tenant that they've had to pull out of the possible tenancy agreement or not to take up the tenancy agreement. But, equally, there are situations where—

Well, just people, you know, taking up landlords' time. If a landlord's got to see someone who is going around at a random level looking at tenancies just to see what's on the market, then that takes up valuable time and there is a cost. So, I think, equally—

10:50

There's anecdotal evidence to suggest it happens. It happens as much in the rental market as it does in open-market sales. So, I think there needs to be a level of recognition and there needs to be some protection around that.

And do you think that the Bill is clear enough about those circumstances where the landlord can keep a hold on the holding deposit?

Probably not, and this is where the guidance needs to come in. We don't know of sufficient examples of that taking place to write that guidance, so it's over to the civil servants who are writing the guidance to work on that and be a bit more prescriptive about what is good practice and what is bad practice. But, as I said at the outset, this is not about being punitive against the PRS; they have to be part of the solution to this housing crisis, so we have to recognise their needs just as much as the needs of the tenants.

The problem is that is seems that the evidence is anecdotal on both sides, so it's difficult then to get clarity, isn't it, and to expect civil servants to be able to—

Yes, but ultimately, most right-minded letting agents or landlords would perfectly understand that, if someone's got to move back home to be closer to their elderly parents, because they've suddenly become ill—a legitimate reason for pulling out of an agreement to take up a tenancy—they would pay that back. Equally, most of us would think that it's not right for people to randomly go around looking at properties with no intention at all of entering into an agreement. So, it's about finding a balance. Am I the person to prescribe that? No, because like I say, the evidence is anecdotal at best, but it's something that needs to be addressed, because we don't want to create barriers to the PRS helping us to address the housing crisis.

On this point, in the market, it is a fairly unusual situation to provide a pre-contract payment, isn't it? We heard from Shelter: 'Why don't you just dispose of this flim-flam of charging people just to maintain an interest in a property because potentially there are lots of other people waiting to dive in?' I do note that you say that there should just be one holding deposit for a property, which gets the system as rational as you could get it, I think. But isn't all this just the costs for offering the service that landlords face and they should be absorbed in the general business model of the rent that's eventually charged? If you couldn't have a holding deposit, or it would have to be automatically returned in nearly all circumstances—. The situation in Scotland, Shelter told us, is that it actually speeds up the process of the check and then signing the contract—that's what you want is a contract signed, isn't it, and not this sort of pre-agreement you have before the contract. It's a very peculiar, irregular system in a free market, it seems to me, speaking as a Tory capitalist.

So, the argument going is 'Let's ban them altogether'. 

Well, in how many other areas of economic acitvity do you have that sort of process? I'm slightly sceptical that there are legions of people who spend their weekends going around properties they don't want to ever live in.

Yes, but again, we've received anecdotal evidence that that is happening. And if it's about engaging with the PRS, as I say, they need to be a huge part of the solution to the housing crisis, so it's about dealing with their perceptions and their worries as much as it is with the tenants. But I perfectly accept your point.

Okay. Let's talk about enforcement, then. I just wonder what you feel in terms of—. The proposed scheme will rely on, it seems to me, the issuing of fixed-penalty notices. That's at the discretion of the local authority, but presumably, it is going to be their first response to anything other than a very serious breach. Obviously, that wouldn't quite have the evidence base that you'd have in a  court, presumably. How do you feel about that type of discretion given to local authorities and a fixed-penalty regime in general in terms of the sector you've been talking about and their need to be protected in this system as well?

We would support that in principle. The level of that fixed penalty is perhaps one to discuss. As others have said, there's a split within the private sector itself where you have single landlords operating—a £500 fixed penalty fine is probably a pretty hefty deterrent. Whether that's a hefty deterrent for a lettings agency with tens and hundreds of properties, probably not. So, there probably needs to be a discussion about a scale on that. Does it need to be up to the £30,000 mark, as in England? I think one big difference between England and Wales is Rent Smart Wales and the ability of Rent Smart Wales to implement the ultimate sanction of withdrawing a licence to operate, which would cover the bigger lettings agencies. So, I think, on the face of it, the Bill addresses that. Like I say, I think there's a discussion about the level and tier of what that fixed penalty is.

10:55

Some have suggested that the fixed penalty—I think the Residential Landlords Association said this—needs to be larger than £500, certainly for letting agents, but also I think for landlords, as the larger part of the market is with landlords at a fairly small portfolio, and even there it should be perhaps nearer £5,000 than £500. Is that scale about right, do you think?

Again, we wouldn't offer a specific scale of what that needs to be. I think there needs to be a further discussion about that and a prescription in law, but that wouldn't seem unhelpful. I'm not sure getting up to the £30,000 barrier is—

That's a slightly different issue, because I think in England that's permitted when there's a repeat offence, and that £30,000 is a way of discharging criminal liability. But I take your point in terms of scale—that perhaps £5,000 would be the upper limit of what should be a fixed penalty and you wouldn't want to—

And you also, as I said, have the ultimate sanction of the licence being withdrawn.

Indeed. I think that is a relevant issue as well, given the regulatory strength that we have at the moment in Wales with Rent Smart Wales and what they can do. So, I accept that. If a fixed penalty notice is issued and paid, do you think the prohibited payment at that stage should also be repaid? Because at the minute that is not required in the Bill.

That sounds fairly reasonable to us. We don't see any reason why that shouldn't be done. 

A fundamental principle of our legal system is you shouldn't benefit from naughty behaviour.

That's fine. We can move swiftly on. That's very clear. On enforcement, the approach that's proposed is for local authorities to be responsible rather than a lead authority, perhaps in partnership with local authorities. Will local authorities have the capacity to do this, do you think—all of them?

In the current financial geography, it will probably be difficult. Rent Smart Wales is an example of where a lead enforcement authority has worked, but that's come with additional resources, although that has taken time to bed in and work at an operational level. So, it is about sufficient resource and how you direct that sufficient resource. I'd suggest that Rent Smart Wales gives us an example that perhaps a lead authority may be the way to go. But, again, we need to hear the WLGA's views on that, really.

Just to add to that, in England, we've got the situation where it would be a mix of trading standards and environmental health to do a lot of the enforcement work—trading standards for their respective Bill, but by and large environmental health are the ones that carry out the large proportion of enforcement action against private landlords. Definitely, in our evidence to this Bill in England, we raised concerns about where things would sit, would there be confusion and does there need to be some sort of rationalisation of the enforcement process. It would make some sort of sense to have that centralised, one-stop-shop-type approach.

Again, I'm not probing, because I think you're giving clear answers and they do chime with a lot of evidence we've already heard. You've talked a little bit about the sister Bill that's going through in Westminster, and Matt talked about the ability for a penalty payment of up to £30,000. In terms of enforcement and the level of fine, is there anything in the English legislation you think might be useful for us?

I don't think there are necessarily any advantages that we can draw from. Just to revisit the previous point—that split in local authorities in England in trading standards and environmental health—compared to what we have in Wales, it seems that we're in an advantageous position.

11:00

And given that tenants are often in a financially stressed state, and then they may be subject to a prohibited payment, do you think, as well as that payment being returned, that there should be a compensation element? We've heard, for instance, that, perhaps, up to three times the illegal or prohibited payment might be an added enforcement tool and also an assistance to the tenant who, of course, would have had the distress and loss of some income for that period.

I suppose, again, it's a fundamental tenet of our legal system—compensation if wrongdoing is done to you. But, it's about, I suppose, measuring the impact and the level of that impact and, accordingly, deciding on that compensation and how much that should be. But, as a principle, yes.

Thanks. We've got the Consumer Rights Act 2015 already, which requires letting agents to publicise details of any fees that they charge. It seems to be that there is widespread non-compliance with that consumer rights Act. So, given that, do you think that this Bill takes the correct approach to addressing the lack of transparency on fees?

Yes. It's about ensuring that the information on fees is available clearly online. A lot of that work is being done or can be done through Rent Smart Wales, which is a good example of sharing that information. But, as an organisation within the housing sector, it will be incumbent on us to ensure that our members are fully versed with this and fully versed with what it means for tenants as well as landlords and letting agencies, so that everyone in the housing sector plays a role in cascading that information.

I think some of this is also learning from the Rent Smart Wales enforcement results. When people start to be prosecuted, all of a sudden, people do start to act, and you can prove that that enforcement regime has teeth. That's the aspect, really, to push. We'd hope that, even if there was enforcement at the start—which, obviously, isn't desirable—but if there was, it would have a positive impact on the longevity and impact of this legislation.

And communications. We had a similar situation with the abolition of the right to buy, and written into the Act, as an important part of that, was discussing the communication aspect of that and how you cascaded the information down. Because it needs to be an informative process that all sides are equally aware of in order to understand their rights.

Okay. Thanks very much. Thank you both for coming in to give evidence to committee this morning. You will be sent a transcript to check for factual accuracy in the usual way. Diolch yn fawr.

4. Bil Rhentu Cartrefi (Ffioedd etc.) (Cymru): Sesiwn Dystiolaeth 7
4. Renting Homes (Fees etc.) (Wales) Bill: Evidence Session 7

We move on to evidence session 7. I'm very pleased to welcome Bethan Jones, who is operational manager for Rent Smart Wales. Welcome, Bethan. We will begin with some questions from Jenny Rathbone.

Good morning. Very nice to meet you. Given your central role as the holder of all the registered landlords, to what extent have Rent Smart Wales been involved in the development of this Bill?

11:05

We've been involved in two stakeholder meetings: one that took place in December, and a more recent one, which was about detailing the outcome of the consultation, if you like. That was in June. But during the intervening period, we were asked to get involved in the survey side of things, so we sent out the questionnaires that the research company wanted us to, to a range of landlords and agents. We've also provided information that informed the options appraisal that is now part of the explanatory memorandum attached to the Bill.

Okay. And so, you've felt you've had some influence over shaping the way the options appraisal was—.

Yes, we've provided information to inform that. Yes.

Okay. At the moment, this Bill doesn't designate a lead enforcement authority, so individual local authorities would be responsible for enforcement, and I just wondered what you think the benefits are of Rent Smart Wales having the role of the national licensing authority and working in collaboration with local authorities, and whether there's any merit in following the same methodology for enforcing this.

I think the duty to enforce the legislation should lie with the local authorities. That said, I do think there would be benefit in Rent Smart Wales having the power to enforce, where that was appropriate. The reason I say that is that, at the moment, what works well about Rent Smart Wales is that we have this partnership arrangement in place and a memorandum of understanding, and in the majority of cases in terms of enforcement for Rent Smart Wales, we take that enforcement forward through fixed-penalty notices and through prosecution cases. However, where it makes sense for the local authority to be involved with those activities, because they're involved in that case anyway—they're actively involved and they've got significant concerns about standards, that kind of thing—they have the power to also take that enforcement activity, and actually the results from enforcement that they take through the courts tend to be better than the results that we get, because we're focusing on the administrative offences more than, you know, the poor conditions. The conditions that the tenants are suffering can be demonstrated to be really bad when they're involved. So, they've got a really critical role to play in the current piece of legislation that we have in place.

With the proposed Bill, what we're looking at are activities very closely aligned with the trading standards activities that are currently undertaken by the local authority. The same kind of thing will occur, where a trading standards officer will be involved in that, maybe visiting that agent as part of a proactive exercise or on the back of another complaint about that letting agent, and could come across complaints in relation to the prohibited fees. It makes sense for them to be able to roll up those offences and take one court action to resolve those matters.

Okay, but in the case where you're informed of an unregistered landlord, would it then make sense for you to also be pursuing them, enforcing both them being unregistered and also requiring a fee off the tenant?

Yes, and specifically where I think it would be very beneficial for us is where we're involved in auditing agents. Now, as part of a licence that we award to a letting agent, we undertake audits—at least one within the five-year period of their licence—and during that process, we ask for evidence of a whole range of things, including things like: what are their fees and what are they advertising? Are they advertising? Stuff like that. We will act on whatever we find. At that point, it makes sense for us to have the power to take the required action for these prohibited fees, because otherwise we're making a referral to a local authority, and that would be less efficient.

Yes, just one question from me, in relation to capacity. Do you believe that you would have the capacity to take on extra responsibilities emanating from this Bill? We've heard, of course, about the pressures that could be put on the councils or the trading standards if they were given responsibility, so I'm just wondering in terms of your thoughts on if it came to you, in particular.

Well, the resources that we have in place are purely, at the moment, for dealing with the responsibilities that we have under the Housing (Wales) Act 2014, and we're completely self-funded. So, the fees that we generate, that's the income that we use to pay for the service. We're not able to use those fees to pay for anything else because there's case law to indicate that that fee income has to be used for the specific purpose it was collected. So, on that basis, either the fixed penalties associated with this legislation need to be able to resource that programme properly or additional funding would be required.

11:10

But you would see it as something that you could do. So, for example, if the fees were higher, or if they were designated currently, then that would be giving you enough capacity to carry on with this work.

Yes. So, the main impact would be in terms of additional complaints coming from tenants about the behaviour of a landlord. We already deal with complaints from tenants. In the main, we initially refer those to local authorities for them to investigate, and then we consider what the outcome is. The other element or aspect where we might get involved is where we are already undertaking the agent audits. Now, if we get to complaints about an agent, the impact of that will be—in relation to this type of complaint—that we would make that particular letting agent a higher priority for our inspection programme. So, it might inform the progress of those audits, if you like, through the five-year period. So, there are resources there anyway to deal with this, and it's an added factor within that process for consideration; but, yes, inevitably it will cause an additional workload that would need to be resourced in one way or another.

I don't know if I can ask this question now—it's not directly associated with this—but I'm just wondering whether you know if tenants have enough information about you to empower them to make complaints to you, because I asked this question of the Welsh Government in terms of tenants' rights, and they seemed to suggest that it was for the landlord and for the tenants to be able to access you. Do you think that's something that is well-known, or can more be done so that you have a higher profile?

Yes, well, the Welsh Government undertook an evaluation of Rent Smart Wales recently. The report was issued at the beginning of June, and that highlights that there's more work that should be done in relation to promotion with tenants. Tenants are a notoriously difficult group of people to communicate with, because they're so transient and their interest in the private rented sector changes over time. So, it's going to be an ongoing challenge to make sure that the message is out there. We work closely with other stakeholders like Shelter and citizens advice bureaux, and we use them in our communication, and I would see them being critical in making sure that the messages in relation to this Bill are out there.

O dan y Bil yma, rŵan, petai landlord neu asiant yn eu cael yn euog mewn llys o fod wedi tramgwyddo elfennau o'r Bil, beth a fyddai'n digwydd wedyn? A fyddech chi yn cael gwybod ynglŷn â hynny, a beth fyddai'r broses ynglŷn â hynny?

Under this Bill, now, if a landlord or an agent were to be found guilty in a court of having breached elements of the Bill, what would happen then? Would you get to know about that? What would be the process regarding that?

Okay. Well, once a landlord or an agent is convicted of an offence, the legislation makes it clear that Rent Smart Wales would be notified anyway. We do have notification arrangements in place with local authorities. It's part of the memorandum of understanding that we have in place. The system that we share with the housing enforcement teams within the local authority allows them to update our information; so, it's there instantly, if you like. We would need to broaden those arrangements to include trading standards more inclusively within this arrangement than we have done so far; so, there would be a little bit of work that would need to be done there. But in terms of the impact of a conviction for the landlord or agent on their fitness and propriety, then one isolated conviction is unlikely to mean that we would refuse a licence. The process that we have in place is that we look at triggers, if you like. So, we would look at the complaint history, we'd make referrals to a local authority, we'd ask them for the history about that landlord or agent, and once we'd gathered all of that information, we'd make a fair and proportionate decision. There isn't a blanket ban because of a conviction, so, yes, we take account of all the factors and then an appropriate decision is made, taking account of the Welsh Government guidance that is already in place.

11:15

Mi allai achos godi, wrth gwrs, fod landlord sydd ddim wedi'i gofrestru efo chi'n cael ei ffeindio'n euog mewn llys barn. Beth fyddai'r sefyllfa, wedyn, achos ni fyddai trwydded yna i'w thynnu i ffwrdd beth bynnag? Ond, beth fyddai'n digwydd? A fyddai'r person yna ddim yn gymwys i gael trwydded i'r dyfodol, efallai?

A case could arise, of course, that a landlord who wasn't registered with you was found guilty in a court. What would then be the situation, because there'd be no licence there to take away anyway? But, what would happen? Would that person not be allowed a licence in the future, perhaps?

Where a landlord is not registered either, I think that's why the approach that we take is quite good, because we look at triggers. So, if somebody is failing to comply in one area, often they're also failing to comply in other areas. And when you bring all those things together, it might lead to a different conclusion about whether or not that person would get a licence. But, again, I would say that each case would be taken on its merits, and all of the factors would be taken into account. And obviously, if they're not registered, then that's another offence that would be taken into account.

Can I just ask a general question? At this point in time, do you know how many landlords and how many letting agents are not registered?

At the moment, we have over 90,000 landlords registered. Part of the reason for Rent Smart Wales in the first place was because we didn't know the size of the private rented sector and the issues and challenges facing it. All we have to go on is the Welsh Government dwelling stock estimate. At the moment, that shows that there are 202,000 properties, broadly speaking, in the private rented sector, and our information tells us that, on average, landlords have 2.05 properties. So, there will be a certain number within that 202,000 that fall outside the requirements of the Act, because they're being let on a different type of tenancy. My assessment, at the moment, is that there are around 3,000 landlords who still need to comply with the legislation.

Thank you, Chair. The explanatory memo notes that the existing online system used for generating fixed-penalty notices will be adapted to issue fixed-penalty notices under this Bill. You said that there should be a formal mechanism so that you find out about these notices. So, how big a weakness is it in the Bill at the moment? As I understand it, there isn't a requirement for you to be informed. What are the practical challenges, should that change, to you being informed?

I haven't had a conversation with anybody about the Rent Smart Wales database being used to generate these fixed-penalty notices. Maybe I missed something. There's no reason why it couldn't be and obviously, if it was, then that is a notification system about the FPN being issued and that would be fine. But as it stands, as I understand it, within the Bill at the moment the local authorities have the power to take this enforcement action, but there's no power to notify of an FPN, so an arrangement would need to be put in place.

Okay. I think you've partly answered this in terms of more serious breaches. If you are informed of fixed-penalty notices, what's going to be your attitude to the landlord or agent, presumably, for lots of relatively small infractions that accumulate? When do you get above a bar to say, 'Well, this is more than irritating, now'? How would you approach that data and use it?

We do have a process and the process goes something like, if it's a significant issue, that would be a trigger for us to do an investigation straight away. Otherwise, the trigger is after we've had five complaints that are less significant. Then we would undertake a fitness and propriety investigation. So, that's kind of the standard that we apply at the moment.

11:20

You say in your evidence that the fixed-penalty notice—and I know this is at the discretion of the local authority, but I suspect that it's going to be the backbone of the enforcement procedure—of £500 is probably not going to be a sufficient deterrent for, in particular, commercial agents. So, would you expand on that point? And would you see a system that—you know, many of the landlords, you said, have—. Well, on average, landlords have 2.05 properties, so do we need a slightly different approach to fixed penalties or does this now get awfully complicated if we have two levels of penalty that could be applied depending on if you're a commercial agent or not?

I was pleased that the fixed-penalty notice associated with this Bill was £500, and I think it was as a result of the consultation process. What we've found from the Rent Smart Wales experience is that, occasionally, when you take a case to court, where the landlord or the agent hasn't paid the fixed-penalty notice, if they plead difficult circumstances and poverty then the magistrate will apply a penalty at that point that is equivalent to the fixed-penalty amount. So, that's despite the fact that it's an unlimited fine associated with the offence. So, the low level of fixed-penalty notice within the Rent Smart Wales legislation, I think, is a bit of an issue. So, this is pleasing, that it's higher. But, obviously, as you rightly say, this is in the main going to be used in relation to commercial letting agents.

I said earlier that, on average, landlords have 2.05 properties, but most landlords have one property, so that's a significant deterrent for those landlords but presumably not a significant deterrent for commercial businesses for which, if they are applying these prohibited payments consistently across many offices, it might be worth taking a chance.

We have a fee system for agents that is based on portfolio size. Something like that could work—two or three bands. 

So, we could have a banded approach to fixed penalties. 

That's helpful. The Bill allows the contract holders to recover prohibited payments through the courts if necessary. Now, there's this whole issue about if that's a sufficient redress for the contract holders, but if that is going to be the basis of recovering the payments in terms of the contract holder and that's a civil claim, should there be a process where you can be informed of that, and how might that be achieved?

Yes. I think that the more intelligence we get the more robust our system becomes over time. So, yes, a process of notifying us would be good. I'd also suggest that, where possible, if the fixed-penalty notice could also include provision for repayment, that might be a quicker and easier way of achieving the results for the tenant.

Well, thank you for that, and we've heard a lot of evidence that that should actually happen as well. That concludes the questions I have, Chair, thank you.

Thanks. We've got the Consumer Rights Act 2015 already, which requires landlords and letting agents to display their fees, and this is a licence condition under the Rent Smart Wales code of practice. How do you ensure that letting agents are familiar with the code of practice and that they adhere to it?

Okay, well I suppose that the first point to note is that it is a mandatory licence condition attached to every licence that licensees comply with the code of practice, so that's the first thing. It also features quite heavily in the mandatory training that all licence applicants have to undertake before they're awarded their licence. So, those would be the two main areas, I guess. The code of practice itself is on our website. We have a Facebook and Twitter feed and we're constantly reminding people of the need to comply with the code of practice there. In terms of changes to the code of practice—and there are, I believe, some changes due to be made in the autumn—we are planning to write out to all of our landlords and letting agents at the time to advise them of the changes, and we'll take the opportunity to remind them anyway of the fact that it's a mandatory condition.

11:25

Okay. So, that's covering the communication with the landlords and the letting agents. What about the liaison between Rent Smart Wales and trading standards in relation to these requirements?

Well, about a year ago we did an audit of the agents that we were aware of at the time, and had a look at all of their websites to see whether or not they were displaying their fees. A significant number of them were not, and so what we did was we wrote to every one of those non-compliant agents, told them that they weren't compliant, to fix it, and told them that we were making a referral to trading standards in relation to that activity. I've been told by the shared regulatory service, for example, that, on the back of that information, they undertook a proactive exercise within their area and subsequently I received feedback from the stakeholder group that we have for Rent Smart Wales saying that that in itself, that exercise where the local trading standards team went out and assessed those matters, and other things at the time, was very helpful.

Can I just ask a question as devil's advocate? It could be argued that, potentially, if there was more enforcement by yourselves and others, there wouldn't be necessarily a need for this Bill, because we've heard that the reason why we're sitting here is because enforcement hasn't been as high as what would have been expected. Is that your view, or do you believe that it is coming through at a sufficient pace, and that that wouldn't be a fair judgment of yourselves and the councils involved, or do you think that this Bill would be necessary because of the fact that the current system doesn't go far enough?

Yes, the latter.

It doesn't matter how much enforcement we do of the existing provisions, it's not going to prevent those prohibitive fees from being made, in my view.

So, can I just understand, though? You feel—on the first part of my question, you still feel, therefore, you are seeing enough complaints or prosecutions coming through the system regardless of—. If you park this Bill, you believe you are still seeing a sufficient amount coming through that would make you feel comfortable that the system as is is working, then, or—.

This set aside, have we in Wales got the powers that we need to regulate the private rented sector? Is that the question? Well, I definitely think that we're making a difference. I believe that the compliance so far with Rent Smart Wales has been really good, and the conditions that we're attaching, the enforcement activity that we're taking, it's all leading to a good result at the end.

So, how many landlords have actually had their licences taken off them entirely from this system?

We have undertaken about 300 fit-and-proper-person investigations, but they have not led—. So, this is the more in-depth investigation. I'd say about 30 of them are in the process of being refused, revoked, or have been. But I think just purely looking at that doesn't reflect the benefit of the scheme, because where we're seeing the differences are where we're applying bespoke conditions, where we're training people in their responsibilities as a landlord. The feedback that we get from training is really good, and people do say that it will make a difference in the way that they're managing their properties and their tenancies, so there's a wider impact. In a sense, looking at just the enforcement element of it is almost looking at the failures rather than the benefits and the achievements. 

11:30

But, again, to be devil's advocate, if it's only 30, if you potentially revoked more than that, it might be more of a stick approach to those who are currently not complying and think, 'Well, I've got all these other standards that I need to get to before they revoke it, so I might as well just be a bit laid back about it.' 

We're on a journey in Rent Smart Wales. The first few years have been about processing the applications that we've had in. There's a shift now happening and it can be seen in the figures, actually, where we're focusing much more on the in-depth investigations on fitness and propriety and the prosecutions for non-compliance, and we'll see that increase over the next couple of years. We see really good positive feedback from our social media, where we're advertising our prosecutions, and we've done about 35 prosecutions for non-compliance so far. So, that's having a positive impact as well. We're still seeing significant registrations being completed every month. 

Okay. We're in danger of straying slightly from our scrutiny of this legislation that we're concerned with, but thank you much for that. Okay, Bethan, thank you very much for coming in to give evidence to committee this morning. You will be sent a transcript to check for factual accuracy. Diolch yn fawr.