|David Melding AM||Yn dirprwyo ar ran Mark Isherwood|
|Substitute for Mark Isherwood|
|Gareth Bennett AM|
|Jenny Rathbone AM|
|John Griffiths AM||Cadeirydd y Pwyllgor|
|Siân Gwenllian AM|
|Emma Williams||Dirprwy Gyfarwyddwr, Adran Polisi Tai, Llywodraeth Cymru|
|Deputy Director, Housing Policy Division, Welsh Government|
|Helen Kellaway||Cyfreithiwr, Llywodraeth Cymru|
|Lawyer, Welsh Government|
|Huw Charles||Rheolwr y Bil, Llywodraeth Cymru|
|Bill Manager, Welsh Government|
|Jim McKirdle||Swyddog Polisi Tai, Cymdeithas Llywodraeth Leol Cymru|
|Housing Policy Officer, Welsh Local Government Association|
|Rebecca Evans AM||Y Gweinidog Tai ac Adfywio|
|Minister for Housing and Regeneration|
|Chloe Davies||Dirprwy Glerc|
|Stephen Davies||Cynghorydd Cyfreithiol|
|1. Cyflwyniad, Ymddiheuriadau, Dirprwyon a Datgan Buddiannau||1. Introductions, Apologies, Substitutions and Declarations of Interest|
|2. Y Bil Rhentu Cartrefi (Ffioedd etc.) (Cymru): Sesiwn Dystiolaeth 8||2. Renting Homes (Fees etc.) (Wales) Bill: Evidence Session 8|
|3. Y Bil Rhentu Cartrefi (Ffioedd etc.) (Cymru): Sesiwn Dystiolaeth 9||3. Renting Homes (Fees etc.) (Wales) Bill: Evidence Session 9|
|4. Papurau i'w Nodi||4. Papers to Note|
|5. Cynnig o dan Reol Sefydlog 17.42(vi) i Benderfynu Gwahardd y Cyhoedd o Weddill y Cyfarfod||5. Motion under Standing Order 17.42(vi) to Resolve to Exclude the Public from the Remainder of the Meeting|
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 09:00.
The meeting began at 09:00.
May I welcome everyone to this meeting of the Equality, Local Government and Communities Committee? Our first item today is introductions, apologies, substitutions and declarations of interest. We haven't received any apologies. We have a change in our committee membership. Mark Isherwood is replacing Janet Finch-Saunders, and I'd like to thank Janet for her work on this committee over this term of the Assembly up to the present time. Today, David Melding is substituting for Mark Isherwood. And I'd like to welcome everybody back after the summer recess—members of the committee and, indeed, the clerking team.
We will continue with our evidence taking on the Renting Homes (Fees etc.) (Wales) Bill, and we have before us representatives of local government in Wales. I'd like to welcome Gareth Williams, accommodation agency manager for Carmarthenshire County Council, and Jim McKirdle, housing policy officer for the Welsh Local Government Association. So, welcome to you both. This is our eighth evidence session of this scrutiny under Stage 1 with regard to this important legislation. Perhaps I might begin by asking a few questions about the general principles of the legislation. Firstly, then, do you consider that there is a need for this Bill, and how will it impact on the work of local authorities in terms of the work they do with the private rented sector, particularly with regard to homelessness services?
If I could open, Chair—thank you. Local authorities believe that there is a need for legislation in this area, and that the principal aim of that should be around removing barriers for access to the private rented sector. In particular, in relation to homelessness, that's about opening up access to the private rented sector for households. The private rented sector is growing in Wales, it looks as if it's going to continue to grow, and plays a very important role in terms of meeting housing need, and also allowing local authorities to discharge their duties in relation to homelessness and to access accommodation. So, the view of most local authorities is that legislation is required in order to support that.
I think the Bill is quite clear in its intention to improve the affordability and the accessibility to the private rented sector. I think changing the fee structure for letting agents goes some way to achieving equality for all members of the public and every tenant. When you consider agents' fees, they draw about one fifth of their income from raising fees against tenants. So, actually, rationalising that or making that clearer around their roles and responsibilities will go some way to helping those tenants gain access to the private rented sector. In terms of homelessness, one of the biggest problems facing options services across Wales at the moment is affordability. So, upfront costs for tenants is one of the biggest barriers to getting vulnerable tenants into decent, well-managed accommodation.
Yes, okay. So, you're not particularly concerned in terms of any potential adverse impact on local authorities from this legislation in terms of that relationship with the private rented sector and, indeed, homelessness services.
Quite the opposite—
I think it actually complements the provisions in the Housing (Wales) Act 2014 to discharge the duty to the private rented sector. But we mustn't forget that that's just one part of the sector; there are other groups of tenants out there who also need affordable, decent, well-managed accommodation: students, for example. We've got large student populations in Cardiff, Swansea, Ceredigion and in Gwynedd in north Wales, therefore we must make sure that they're considered in all of this. Why would they want to start off on the back foot when they're going into accommodation and first being away from home?
It's an interesting piece of evidence that—that about a fifth of letting agents' income is thought to be tenants' fees. I don't know where that comes from, but I think that's significant, so if we could follow that up—. My question is: there has only been reform so far in Scotland—obviously, England are doing it as well, but the system was reformed several years ago in Scotland, though they've not had an evaluation—have you had any contact with colleagues in Scotland, or have you come across any evidence to suggest that the market there just reaches another equilibrium, so that what was 20 per cent of income through tenants' fees then gets adjusted into cost to landlords or rents go up or whatever, and that the system settles down again? Because, obviously, if you lose 20 per cent of income and there's no recovery, then there aren't many businesses that are going to survive that, with alacrity anyway. So, do you have any further evidence in this area?
It's quite a competitive market and the introduction of the Bill may—they may sort it out amongst themselves. Agents may find that they're in competition with one another. Landlords will go to where they can get the best product from those agents, and in which case, that can only be a good thing for the tenants—creating a better, more competitive sector will only help tenants.
Drawing parallels with what the Scottish Parliament did, any changes in rent I believe were as a result of market influences, market forces, rather than a direct impact of the introduction of prohibited fees in the first place. It seems to balance itself out, and that would be the only evidence that I have to support that.
Okay. Perhaps you're not really here to give an analysis of what happened in Scotland, but I'm just wondering: if they're going to lose 20 per cent of their income, some of that at least will be recouped elsewhere. Is that likely to be from landlords, or—from what you've been able to see of the system in Scotland, for instance?
It may shift to landlords, but the school of thought is that those landlords will then look to other agencies that are more competitive in their fees.
Yes, and a competitive and efficient market.
Okay, thanks for that. What's your view in terms of the role that local authorities will play in terms of communicating with relevant stakeholders around this legislation and what it means for them?
I think local authorities have got a very important role in order to contact stakeholders. Through the existing functions that we've got coming into contact with landlords, agents and prospective tenants, I think that through those existing links, we've got a number of ready avenues to do that, as well as the more general information-giving role—you know, hosting on websites and posters around the place. Local authorities have an important role and are able to do that. I would draw some of the parallels around the introduction of Rent Smart Wales, in that you would be using many of the same channels to try and reach that same audience, with perhaps a greater emphasis on prospective tenants, I think, in relation to this particular issue.
Local authorities and Rent Smart Wales have a hugely important role in making sure that this is communicated well to agents, to landlords and to tenants alike. It's a tried and tested model. Rent Smart Wales have been pretty successful in their marketing campaign: 94 per cent for properties across Wales are now registered. So, that in itself proves that the communication with Rent Smart Wales and local landlords and agents has been well thought out. So, I would try to mimic that sort of model.
What we will have is a lot of client groups. If the tenants themselves are going to be difficult to communicate with as such a transient population—people fall in and fall out of the private rented market on a regular basis, so actually trying to communicate their rights to them will be extremely difficult. The local authorities will have a really important role in terms of their options service. So, where tenants come to the council for assistance for homelessness, for the prevention fund, then the first thing that those officers will do is look at what they need that assistance for, and if the barrier is prohibited—that agents are charging prohibitive fees—then that link then with the enforcement teams and with Rent Smart Wales will be quite important.
What we have to remember is that there'll be a lot of students out there that don't need the council's services—they won't be eligible for those council services. So, how do we communicate with those students I've already alluded to? We may need to draw in the national union, the national students' union, for assistance in communicating with them.
Okay. Thanks for that. Obviously, preparation is being made for that necessary effort, I would hope, in terms of the NUS and any other preparatory steps that need to be taken.
Okay. You've mentioned Rent Smart Wales. How important is it, then, that local authorities in Wales co-operate effectively with Rent Smart Wales and vice versa if this legislation is to have the effect that it has aimed to produce? What would you say about that relationship and its importance?
At the very least, Rent Smart Wales holds a lot of information now about the private rented sector: the landlords that are out there, where these properties are, and how they're being managed. So, at the very least we should make good use of that information to communicate with landlords.
It's within local authorities' gift to allow a primary authority to take forward enforcement activity on behalf of the local councils. That's how Rent Smart Wales came to be—Cardiff city council were allowed to go and act as a primary authority for all local authorities across Wales. That's a tried-and-tested relationship. It works well in terms of enforcement, in terms of communication with landlords and agents alike, and they do devolve some of the responsibility then back to local authorities for serving fixed-penalty notices. So, the balance with Rent Smart Wales at the moment is right for the enforcement and for the development of private rented sector relations.
Just to add to that, we're building on foundations of success here, I believe, in terms of the relationship and the partnership and the flexibility that's demonstrated between local authorities and Rent Smart Wales, and I think we need to build on those positive factors in order to achieve the most appropriate operational effectiveness. So, whatever fits with a particular scenario in terms of that relationship I think we should be using.
What we can't do is depend on councils' weights and measures teams—trading standards, traditionally—to deliver this service. I think it will have to come down to either the local housing authorities or Rent Smart Wales. Take the energy performance certificates, for example. When that came into force it was poorly enforced by trading standards—probably because, in terms of the demands on their service and the priorities that they set, they can't see the link between extortionate fees and homelessness. When you haven't got that appreciation, then it's not going to be at the top end of your priorities.
The other thing with Rent Smart Wales is that they do have a code of practice for all letting agents and landlords, and every landlord and agent needs to have either a proportion of their staff or the landlord themselves trained before they can manage a property. It will be a criminal offence to not comply or to charge prohibited fees. Therefore, that has serious consequences for a landlord with their licences and agents with their licences, and it could, in fact, scupper their business. They could have their licence revoked, be prosecuted, and in terms of fit-and-proper persons, they would no longer be able to manage that property.
Okay. Well, we'll come on to many of the enforcement issues a little later, but at this stage we'll move on to Jenny Rathbone.
Good morning. Thank you for coming in. I wondered if you could tell us what evidence there is that local authorities provide vulnerable tenants with the money to cover the fees charged by letting agents.
Local authorities get allocated a prevention fund annually, and the majority of that prevention fund—and I'm confident in saying this—most local authorities use it to cover rent in advance, or upfront costs to move people into the private rented sector so that they can discharge their homelessness duty. That prevention pot is a finite pot, so, actually, rationalising the fees that agents can charge will help preserve that for longer, and will allow local authorities to use it more creatively, and to allocate that in a more effective and sustainable way. For example, they could look at setting up nomination agreements with landlords, look at setting up a social lettings agency within the council itself. Those then are tools to provide options for vulnerable groups of tenants so that they then have access to decent, well managed, affordable accommodation.
So, it's reasonably common that vulnerablee tenants do get the letting agency fees—
I would say it's very common. In fact, I can't think of an authority that doesn't use that approach.
Okay. Thank you for that clarification. Now, Shelter Cymru is arguing that if the letting agencies can't charge fees for doing checks on vulnerable tenants, tenants will be expected to undertake tasks themselves. So, I wondered if you'd thought about how that might impact on vulnerable tenants, who may not be very good on the computer, who may not have their paperwork in order, or whatever. So, how do you envisage that as a possible additional burden on local authorities who are endeavouring to prevent people becoming homeless?
The fact that they come to the local authority in the first place as vulnerable tenants suggests that they're not able to manage, or their previous tenancies have failed because they haven't been able to negotiate their way around those particular issues. So, yes, they probably will have. Where tenants are expected to take on some responsibility themselves, that will have an impact on options services in providing that support and assistance that they need to make sure that they're able to go on and maintain successful tenancies in future.
So, is this something that you're already doing for vulnerable tenants, or is it something that you envisage where there might be additional demands on local authority staff?
This will cause additional demands, but authorities have put steps in place, with their ability to discharge to the private rented sector, and the pressures that are coming on from universal credit. It's making sure that tenants have pre-tenancy support, that they've got all the information that they require before going into a tenancy that is set up, and then they move on to be able to maintain long-term tenancies. And for a landlord and an agent, that can only be a good thing, because what they don't want is a turnover in tenants in their properties. That incurs costs for them—more void costs. If they go into properties and there are rent arrears problems, that has a negative effect or an impact on them. So, making sure that the right support is there for these vulnerable tenants in the first place is absolutely vital in making sure that they go on to more sustainable tenancies in the future.
Okay. Just turning to the rent costs, some of the witnesses argued that if landlords aren't able to get the letting agents to charge the tenants for doing all the necessary checks, and that landlords are going to have to meet that cost, that might lead to an increase in rents. There are other people who argue that that hasn't happened in Scotland, so it's unlikely to happen here. Do you think that discretionary housing payments could be used to meet any shortfall between local housing allowances—you know, housing benefits—and any rent increase that might be attributed to the Bill? I don't know whether that would be an issue in Carmarthenshire, but it might be in a place like Cardiff.
I think it's an issue across all local authorities. The first point to make is that DHP in general isn't used wisely in any local authority, and DHP funds have been handed back in the past, for surplus amounts that haven't been spent in that year. When you consider the number of vulnerable tenants that local authorities actually deal with, why should—? In fact, we should be asking for more DHP, rather than handing it back. Should it go to cover rent? What we have to be mindful of is that DHP is only a short-term solution, and can't be—. Again, it's a finite pot; it can't be used to bridge the gap between the local housing allowance rates and the market rates.
So, you think that, at the end of the day, the market will have to find its own level.
Yes. I think it will have to find its own level. It may not be a decision or a process that we have to go through now, but the difference between local housing allowance rates and the market values—there's a considerable difference between what the market rent is in certain local authority areas, and what the local housing allowance level is set at. So, already, local authorities are trying to work out ways of how to bridge that gap. Actually taking away the fees and that passing on to the tenants, which some people may think will happen, it won't change the fact that there's already a considerable gap between what vulnerable tenants can afford and what the market rent is, in certain areas.
Just to echo some of those points. I think the issue about DHP use is its temporary nature; we've no certainty in terms of how long DHP is going to last. There seems to be an ever-increasing list of issues that DHP is expected to address, and as Gareth says, it's a finite pot. Now, authorities are working creatively in many circumstances to try and assist people and to flex and to use that, but there comes a point where it can't permanently bridge the gap between local housing allowance and the market rent, and I think that's the fundamental problem that we've got to face up to.
Okay. So, it can be used in the moments of crisis where there's a hiccup in the arrangements.
It's not a long-term plan.
No. Fine. Thank you. That's very clear.
One of the other anxieties that's been expressed by witnesses is that if letting agency fees can no longer be charged, landlords will be finding other ways of trying to lever more money from their tenants. It might not be the actual rent, but it could be a more ruthless application of default charges for late payments or all manner of things that are not at the moment specified in the Bill. One can understand that the landlord will want to charge for the replacement of keys that are lost, obviously. And then there's a discussion about at what point would landlords be justified in charging for late payment of rent. So, I just wondered what local authorities think might happen in this area, around default payments—whether we're going to see suddenly a lot of creative ideas about things we can charge tenants for.
I think default payments levied against tenants drive them further into debt, and it almost seems like this is almost a compound interest that agents charge. So, if a tenant goes into debt in month one, then their debt becomes accumulative, and they find it extremely difficult to get them back on an even keel. So, yes, default payments for late payment of rent, or interest being charged at 3 per cent above base rate, in some circumstances, will only drive that person further into debt and, in which case, that person is threatened with homelessness, they end up being served a notice, and then it becomes a local authority problem for homelessness.
So, how do local authorities manage this at the moment, because the tenant has entered into a contract to pay the rent?
Again, it's through the prevention fund, and it's making sure that—. If the rent is affordable, then that tenant may have gone into rent arrears at the start of their tenancy because of a delay in their universal credit application. We know already that universal credit is taking eight to 12 weeks to process, so that puts the tenant on the back foot already. That's where DHP may help—to bridge that gap right at the start. But, for me, what happens is that the tenant goes further and further—. They find it hard. They have very little disposable income if they're on those means-tested benefits, then they go further and further into the debt. And that's where the prevention fund, then, ends up bailing tenants out, to sustain tenancies.
Okay. But, focusing on the detail of what should be in the Bill, do you think there should be more clarification about what is a justified default charge, or do you think it can just be left open to—?
No, I don't think it can be left open. I actually read through the Shelter Cymru consultation response, and the proposals that they suggest—there were about five or six proposals on how you would manage default payments, and clarity around those. I think that does give a good balance for the local letting agent in the ability to charge fees for default, but it's more proportional to what the tenant can afford and pay, and that's more equitable for both agent and tenant.
Okay. Thank you for that. The fines that could be incurred for requiring prohibited letting agency fees are not subject to any upper limit at the moment in the Bill. Do you think that it is appropriate to keep it wide open?
I've got to say that's not an area that local authorities have raised any concerns with me about in my interaction with them, and that's maybe because we haven't directly asked them that question. But it's not an area of concern that authorities have expressed.
Okay. I think one of my colleagues will be asking you about enforcement.
If I could just make a couple of comments on that, the penalty should fit the crime. So, considering the amount of fees that are levied against tenants, then the fine should be proportional to the offence. Under the Housing (Wales) Act 2014 for non-compliance with Rent Smart Wales licensing, it's set at category 4, so that's £2,500. So, maybe, to be consistent with that piece of legislation, then—you know, an unlicensed agent is quite a serious, serious offence, considering that they've taken a lot of fees from landlords and tenants to deliver a service.
The other option is that it's in local authorities' gift to use the Proceeds of Crime Act 2002. So, upon a successful prosecution, where the agent would benefit from the non-compliance, therefore, you would use the Proceeds of Crime Act to establish how much they actually benefited from that non-compliance.
So, there are provisions in place already. As an example, Carmarthenshire County Council has a financial investigator that acts on behalf of several other local authorities, and his primary role is to look at proceeds of crime. So, if it was to be enforced by a primary enforcing authority or local authorities, then this is a model that could be used. And the proceeds of crime would be directly proportional to the amount that that agent or the landlord benefited from the non-compliance.
Okay, thanks very much, Jenny. And, again, we will be coming back to these enforcement issues very shortly. I turn now to Siân Gwenllian, who has some further questions.
Bore da. Rydw i eisiau gofyn cwestiynau ynglŷn â blaendaliadau cadw, yn gyntaf, efallai, i Jim. Pa mor eang ydy'r arfer o ofyn am flaendaliadau cadw erbyn hyn? Mae Llywodraeth Cymru wedi dweud wrth y pwyllgor nad ydyn nhw'n meddwl bod awdurdodau lleol yn wynebu galwadau am flaendaliadau cadw yn aml wrth roi pobl mewn llety â chymorth neu yn y sector preifat. Ai dyna'r darlun erbyn hyn ar draws Cymru?
Good morning. I want to ask a questions about holding deposits, first of all, perhaps, to Jim. How widespread is the practice of asking for holding deposits by now? The Welsh Government have told the committee that they don't believe that local authorities really encounter demands for holding deposits when placing people in supported accommodation or in the private sector. Is that the picture that you have across the sector in Wales?
Certainly in supported accommodation, I haven't been able to unearth any examples where authorities are saying that they've been asked for a holding deposit. That's not the same picture in the private rented sector, but it's a mixed picture. The local authority relationship tends to be a positive and an enduring one. So, there's quite a bit of doing business with trusted partners in terms of housing options teams and placing people in them. I'm not saying it's not unknown, but it's not common in my view.
O safbwynt cynghorau lleol, nid oes tystiolaeth gyda fi i brofi bod unrhyw flaendaliadau yn cael eu codi ar brosiectau y tu mewn i'r awdurdod. Fyddai e ddim yn fforddiadwy a fyddai dim ffordd gyda ni o reoli hynny yn y dyfodol.
From the point of view of local authorities, I don't have any evidence that shows that deposits are being required for projects within the authority. It wouldn't be affordable and there'd be no way for us to manage that in the future.
Felly, os nad ydy'r arfer yn gyffredin, heblaw, efallai, am ambell enghraifft yn y sector pan fyddwch chi'n gosod pobl yn y sector preifat, nid yw'r adran yma—Atodlen 2—ddim rili'n berthnasol i sector llywodraeth leol.
So, if that practice isn't common, except for, perhaps, a few examples in the sector when you're placing people in the private sector, this section—Schedule 2—isn't really relevant for the local government sector.
Nid wyf i'n credu ei fod e'n berthnasol. Ar y llaw arall, rydym ni'n croesawu bod yna gap yn cael ei ddodi ar flaendaliadau yn gyffredinol a'r ffaith bod y gallu gyda'r tenantiaid wedyn i gael y blaendaliadau hynny'n ôl os ydynt nhw'n parhau gyda'r denantiaeth.
I don't think it is relevant, no. On the other hand, we do welcome the fact that there is a cap on deposits in general and the fact that the tenants would than have the ability to have those deposits back if they continue with their tenancy.
Iawn. Yn eich profiad chi, felly, a fyddai gwahardd blaendaliadau cadw yn llwyr ddim yn newid y sefyllfa ryw lawer?
Okay. In your experience, therefore, would banning holding deposits completely not change the situation much?
I fi, mae'n rhaid cael cydbwysedd i wneud yn siŵr bod yr asiantau yn cael eu hamddiffyn, nad ydyn nhw ar eu colled. Mae hyn yn mynd bach o'r ffordd i atal hynny, lle byddai llawer o denantiaid, efallai, yn gwastraffu amser asiantau ac asiantaethau. Felly, mae hyn yn gwneud iddyn nhw ystyried, os ydyn nhw o ddifrif am rentu tŷ, fod yn rhaid iddyn nhw fod mewn sefyllfa lle maen nhw'n gallu cael y blaendaliadau, lle maen nhw'n gallu rheoli eu tenantiaeth a lle maen nhw'n gallu sicrhau eu bod nhw'n mynd i barhau gyda'r rhent. So, mewn un ffordd, mae'n sicrhau bod asiantau yn gallu tynnu nôl bach o'r arian yna a fyddai yn golled iddyn nhw ar gychwyn unrhyw broses, ond eto i gyd mae'n gwneud i denantiaid ystyried a ydyn nhw o ddifrif o ran parhau gyda'r broses. Hefyd, mae'n rhoi amser i awdurdodau lleol, os bydd angen cymorth arnyn hwy, efallai gyda thaliadau neu rent o flaen llaw, neu unrhyw gymorth arall, mae'n rhoi amser wedyn i'r awdurdodau ddodi'r gwasanaethau yna yn eu lle.
For me, we do need to have a balance between ensuring that the agents are safeguarded, that they do not lose out. This goes some way towards preventing that from happening, where many tenants would, perhaps, waste the time of agents and agencies. So, this makes them realise that, if they are serious about renting a house or a home, they have to be in a situation then where they can get that deposit together, that they can manage their tenancy and that they can ensure that they will to continue to pay the rent. So, in one way, it does ensure that agents can claw back some of that funding that would be a loss to them at the beginning of the process, but it also makes tenants consider whether they're serious about continuing with that process as well. It also gives local authorities time, if they do need support, perhaps with payments or with rent in advance, or any other kind of support, it does give the local authorities time to put those services in place.
Felly, rydych chi'n eithaf hapus efo beth sydd yn Atodlen 2.
So, you're quite content with what's in Schedule 2.
Ydych. Jim, a ydy hynny'n gyffredin? Mae Gareth wedi siarad ar ran Caerfyrddin. Ai dyna farn y WLGA—mewn ffordd, o ran Atodlen 2, fod angen cadw rhywfaint o reolaeth a chadw rhywfaint o reolau o gwmpas y blaendaliadau cadw yma? Mae yna rai tystion wedi dweud wrthym ni y byddai modd cael gwared arnyn nhw'n llwyr, ond beth ydy'ch barn chi?
You are. Jim, is that common? Gareth has been speaking on behalf of Carmarthenshire. Is that the opinion of the WLGA—that Schedule 2 needs to be kept, that we need to keep some kind of control and to keep some rules around these holding deposits? Some witnesses have told us that it would be possible to get rid of them completely, but what's your opinion?
I think Gareth used the word balance there, and that's a view that's commonly held in local authorities in terms of protecting the interests of agents and landlords and prospective tenants. I think authorities take the view that the proposals as they are do broadly reach that balance.
A oes gennych chi farn ynglŷn â chadw'r blaendal cadw os nad yw tenantiaid yn pasio profion gwirio hawl i rentu? Er nad yw'r rheini wedi dod i rym eto yng Nghymru, beth yw'ch barn chi am y ddarpariaeth honno?
Do you have an opinion about keeping holding deposits if tenants don't pass checks for right to rent? Those checks haven't come into force yet in Wales, but what's your opinion about that provision?
My feeling about that is more about the issue of right to rent than its application in relation to this particular legislation, and the issue about right to rent would be based on the premise that we opened with—about this legislation removing barriers to access to the private rented sector. It's my view—sorry, that is my view, rather that the WLGA's view, and I heard CIH Cymru express the same view in earlier evidence—that there's a lack of evaluation in terms of some of the impacts of right to rent. So, that's where a question mark, for me, would lie.
I agree entirely.
We will now then move on to enforcement issues, which we've touched on to some extent already. David Melding.
Thank you, Chair. A number of witnesses have raised concerns about the current resources in local authorities to enforce this proposed legislation and similar legislation that's already there—I think the legislation requiring clear description and publication of fees, for instance. You've said that you don't believe that local authorities currently have the resources necessarily to enforce this legislation from your current allocations and that trading standards, I think is what you said, just couldn't be relied on to do it; it would have to be some other mechanism—a lead authority or RSW. So, can you just clarify the situation that enforcement at the moment in the legislation is just your duty? That seems to be profoundly unsatisfactory to you.
Shall I start, Gareth? The assumptions are fairly well set out in the explanatory memorandum and evidenced fairly well, I think, within there. That's been done in conjunction, in discussion, with local authority practitioners, to arrive at a level of anticipated enforcement. I think the experience with Rent Smart Wales, for example, where there has been a reasonably high level of compliance, leads us to believe that there will be a similarly high level of compliance in terms of this legislation as it's set out. So, that's informed the discussion about the anticipated level of resources required for enforcement. I think that this is particularly focused on housing enforcement, rather than some of that wider trading standards comparison that we made before, and I think that's deliberately structured to look at the relationships that already exist, as we mentioned with Rent Smart Wales and elsewhere, and particularly focused on the capacity for housing enforcement to take it forward.
It's something that—. Practitioners and local authorities feel as if they have been involved in the development of the resource calculation and are comfortable with that.
So, to be frank, and, I hope, as polite as possible, we heard evidence earlier from Mr Williams that it wasn't robust and that it certainly wouldn't be robust if trading standards were assumed to be the body that would carry this out.
And I think that I was making that separation in terms of the focus within trading standards and housing enforcement, and this is clearly a housing enforcement function.
Yes. So, you're assuming that this legislation will be naturally applied by the agents and that very little enforcement is going to be required, and what enforcement will be required could be done via the housing route at the moment. So, the assumption is that there isn't much bad practice at the moment and, if there is, that you can rely on the agents to reform their systems very quickly and therefore not require much enforcement. I mean, this is quite profound. Why are we having a law? If it's, you know, that this type of approach is necessary, that they really need it to spell out what your obligations are, and there are criminal sanctions potentially if you don't meet them—. Sorry, Mr Williams, you wanted to come in.
The Bill needs to be clear on where the roles and responsibilities lie with local authorities and, if there was a primary authority allocated to take this forward, what the relationship would be. I think if you look back at before Rent Smart Wales was adopted, we couldn't rely on the agents themselves, without the Bill, to resolve this. Yes, the majority of agents out there are compliant agents. It would be wrong to categorise them all as unscrupulous. There are the few.
But, going back to Rent Smart Wales, Landlord Accreditation Wales was a voluntary scheme; we had 2,000 landlords apply for that and it was supposed to be seen as a self-regulatory kind of process. It didn't achieve what it was supposed to achieve. The implementation of the Housing (Wales) Act 2014 and the powers to license and register landlords imposed that on them then. Yes, the compliant landlords came forward and the compliant agents came forward. We were able to enforce against the poorer agents and poorer landlords. We're able to audit those agents now as part of the Rent Smart Wales process and this can form part of the code of practice and the guidance that we pass on to them. What we couldn't do is expect those poorer landlords and poorer agents to voluntarily comply and allow the market to sort itself out without the Bill. So, I think the Bill has to come first and then the market will follow suit.
I think we're moving on to secondary issues here and the assumption that, you know, most are compliant at the moment, presumably, and will continue to be compliant. But, in your opening remarks, you talked about that consideration could be given to a lead authority and possibly, and/or, Rent Smart Wales having a role. It could be the lead authority, I guess. So, where do you lie with—? At the minute, the duty is with you. There's no mention of a lead authority and there isn't a role at the moment for Rent Smart Wales. Though they want a complementary role, I don't think they're arguing for a lead sort of role. This is really important. Are you happy with the proposal at the moment or do you think it is fundamentally weak?
We're happy with the proposal.
Okay. So, this whole issue about resources, you're content at the moment and you base that on the assumption that there'd be such a high level of compliance there won't be much enforcement action required.
I think, if I refer to the impact assessment that was carried out on this, what the estimate is is that 8 per cent of an officer's time within the local authority would be taken up dealing with enforcement activities around this particular matter. That would equate to about £97,000 country wide—I think grossly that. If you look at Rent Smart Wales being appointed the lead authority on this, they would require two full-time equivalent environmental health officers to manage and enforce this part of the sector and it costs them about £95,000. Now, yes, there will be fixed-penalty fees that will recoup some of that cost, but, when you consider the cost between a local authority delivering the service and Rent Smart Wales delivering the service, there's not much of a difference between those costs. Therefore, it comes down to who's best placed to deliver that service in the most effective way.
When I informed you of trading standards earlier, they do have that power under the Consumer Rights Act 2015, but it doesn't seem to be enforced, and I think this Bill goes to make the link between unfair, unjustified fees and homelessness and the impact that it has on homelessness services across Wales and the access to the private rented sector.
Okay. Let's move on, then. I'm grateful for that clarification, because I did think it was a fundamental point and I was quite surprised by your initial statement. We're here to draw out clarity, so that's helpful that you've now stated that on the record.
How comfortable are local authorities about the issuing of fixed-penalty notices in this area? Because, obviously, as the enforcement authority, you're going to have to make that judgment— whether a fixed penalty is appropriate and the robustness of that. And then I think you've already answered this second bit, but, just for clarity, you feel a fixed-penalty notice should be set much higher, perhaps, at £2,500. Or did I misunderstand that?
And, presumably, that would mean that local authorities might be warning before they were issuing fixed-penalty notices. But, if the fixed penalty was higher, then at some point you'd say, 'Look, you've not co-operated; here's the fixed penalty', whereas, if it's set at £500, it might be more of an initial response than one that would follow a warning and information. Can you just explain where you are there?
I think the category 4 fine that I alluded to earlier was for prosecution, not for the fixed-penalty notices. So, the level of the fixed-penalty notices—I'm satisfied, and the housing technical panel are satisfied, that it's set at the right level. It should be set at a level where local authorities could recover the cost of the enforcement action.
This is a well-rehearsed process between local authorities and Rent Smart Wales, but, if I can draw your attention to the number of fixed-penalty notices that had been served for licensing and registration, there had been 162 fixed-penalty notices served across Wales. So, that suggests to me that there's general compliance. When you consider 90,000 landlords and 800 agents, that suggests to me general compliance across the sector. Five of those had been served by local authorities and 157 had been served by Rent Smart Wales. But there is communication between Rent Smart Wales and the local authorities on who should take the lead on that enforcement activity.
The fees then go back into the local authority's coffers and that covers their costs for enforcement. So, I'm satisfied that the fees set are proportional. In some documentation that I've read, there is some call for justification around why that fixed-penalty notice has been served. But, if you think— there will have been a lot of communication beforehand before a local authority serves that fixed-penalty notice, so the agent will be familiar with the reasons why. And if they have justified reasons for not paying that fixed-penalty notice, then they've obviously got the right of appeal and the prosecution proceedings for non-payment. They can justify themselves in that forum. I don't think it's necessary for local authorities to justify the reason for serving FPNs at that point.
Some have suggested, instead of a fixed penalty, say £500, that there should be a banded approach. A very interesting range of people are suggesting this; it's not just tenants, but I think some of the organisations that represent landlords and agents, as well, have been open to this idea, so that the fine that's imposed, or the penalty that's imposed, reflects the size of the portfolio. You hinted at this in an earlier answer, actually, but I suspect now that I misunderstood what you were referring to at the time. But do you think that principle might be worth considering here?
No. I think a flat rate is more appropriate for local authorities. Like I alluded to earlier, the penalty should fit the crime. Well, the crime is the crime; the crime is that they're charging prohibited fees, so it's the amount of enforcement activity it takes for the local authority to pursue that enforcement action. So, that doesn't change whether the agent has got a portfolio of 1,000 properties or 10 properties. So, that's—. The fine should be set at a flat rate. The prosecution, however, and the punishment under the prosecution, for each offence, may need to reflect the size of that agent's portfolio.
As I recall, I think some of the agents argued that—. You've hinted at this as well, I think—or some of the evidence. The justified inference would be that we have a relatively small number of miscreants; there's general compliance. But, of course, it's the bad practitioners that undermine a fair market, so, if you're a letting agent that is properly run, you're undercut by people that are taking risks. So, if you have an agent that's actually playing the system fast and loose and is, in effect, breaking the law, then a fine of £500 is not much of a deterrent, is it, if they've been doing that to potentially dozens and dozens of tenants. I have some sympathy—. Why have this legislation if we don't have much of a problem? I think that's kind of what we're getting at.
I think we need to remember, at the back of this, that we've got Rent Smart Wales and we've got the potential for that licence to be revoked.
I've read the evidence. I've got some sympathy with some of the views that are there, but I think, fundamentally, we're trying to create a system here that is uncomplicated and that is easy for people to understand, so I think there's an elegance in its simplicity.
Okay. It kind of brings me on, then, to the issue of whether Rent Smart Wales should have a role, and I think we've clarified your position on whether it should be the lead authority, but should it have some enforcement powers—a complementary enforcement power—and then should you have a requirement to inform Rent Smart Wales when you're issuing fixed-penalty notices? It's particularly relevant given what Mr McKirdle has just said. At the minute, obviously, the law does not allow that—well, it's not in the Bill at the moment. Would those adjustments or amendments be helpful in strengthening the law?
I think that those adjustments or amendments would reflect the working practice and partnership and flexibility that I referred to earlier on. That reflects the reality of working on the ground.
I agree, and a lot of the enforcement powers around licence revocation, around the codes of practice, lie with Rent Smart Wales already. But there's no harm in the Bill actually referring to that.
Thank you; that's very clear and helpful. At the moment, if you look at section 1 notices, they, I believe, are not permitted in England in their Bill or—I don't know if it's an Act now, but anyway—
Yes. So, if there's an outstanding unlawful payment, then you cannot throw people out of their property or end a tenancy. Do you think that type of restriction that they have in England would be appropriate in our legislation as well?
Well, it's consistent with Part 1 of the Housing (Wales) Act 2014, in the fact that, if a landlord or an agent isn't licensed or registered with Rent Smart Wales, then they can't serve a valid notice to end that tenancy. So, yes, it's consistent with other pieces of the legislation. Is it necessary? It's been a really handy tool for options teams across the country in—not preventing homelessness, because there will inevitably be reasons for landlords to regain possession, whether it's because their own individual circumstances have changed or whether they just want the property back. But what it does do is allow local authorities the time to put the right support in place to help that tenant move on to other accommodation or make other provisions for that tenant, whether it's temporary accommodation or going on to another tenancy in the private rented sector. So, a really, really handy tool.
Thank you. Another clear and helpful answer in terms of our scrutiny. Finally, the legislation in England allows for civil penalties of up to £30,000 as an alternative to prosecution. Obviously, this is beyond the initial stages but with repeat or serious offenders. Do you think that that type of approach would strengthen the Bill here in Wales?
I haven't got any particular view on that.
So, you could discharge a criminal liability with a fine of up to £30,000.
It gives a lot of clout to the Bill, that level of civil penalty. Whether it's proportionate or not, I haven't got a view on that, I'm afraid.
Okay. We have very little time left, I'm afraid, so we will need short questions and short answers. We've got four minutes approximately. Jenny.
I just wanted to clarify what—. At the moment, the Bill puts the onus on the contract holder or the tenant to get back the illegally charged letting agency fee, if that were to occur, which incurs for them civil costs in the courts. So, I just wondered whether you thought that that should be stated in the Bill, that the letting agent or landlord should be fined, but also that they are required to return the deposit that they were not entitled to in the first place.
I think there probably need to be two provisions in the Bill for this, because it entirely depends on the type of tenant in question. You will have vulnerable tenants who, entering into a court forum, will feel intimidated and will not be able to proceed with that sort of action. And you've got other tenants, professionals, who may feel confident. So, it's useful that local authorities could support tenants or to have a third-party organisation such as Shelter Cymru to take that forward. Again it comes down to legal aid issues with vulnerable tenants, but there is a role there for local authorities to support them, but giving them the option that they could pursue it themselves through the courts.
But you don't think it's necessary to put in the Bill that the illegally levied fee should be returned as part of the fine process. You know, why complicate things? Surely, if somebody's charged a fee that they're not entitled to charge, should it not be specified that as well as paying a fixed penalty to the local authority they must also return the money—
I suppose it's implied in the Bill, isn't it?
Okay, but that's the point: it's implied, it's not actually made clear.
No. So, my feeling on that would be that it needs to be specified whether it's a local authority function to support those tenants or for them to take it forward themselves, but the ability to do so.
Can I just clarify—? So, you don't think it's your duty to pursue an agent that still has what would then be an illegal fee outstanding—they've paid the penalty in terms of the fixed notice and that, from the local authority's point of view, ends the matter; it's a civil matter for the tenant to pursue. So, the offence is still there; it seems to me that it has not been resolved. It's kind of, all right, you've fined the agent, but the primary offence of imposing an illegal fee is still outstanding. That does seem odd.
But that's comparable with the tenancy deposit protection schemes. It's the tenant's responsibility to recover the amount owed.
So, life is tough and it's difficult to do these things in an effective way that doesn't burden a local authority, and they've got to live with it, is it? I mean that may be the answer. I realise—
No, no. I suppose you look at the demand on the service, and what the service would require is that agents act in a fit and proper way and charge the appropriate fees as set out in the Bill. What the local authority can't do is support every tenant in their recovery of the moneys that they've lost through those fees, but the Bill needs to have a mechanism in place to recover them.
Why can't the fixed penalty then just be in addition to what the fee was—that was illegally applied? So, if, say, an illegal fee of £300 was applied to a tenant, why couldn't that just be added to the £500? This may be hideously complicated, so I'm genuinely asking why, because I think a member of the public might ask that. So, why is that not practical?
Because the fixed-penalty fees are set on full recovery costs of the enforcement activity, not the extent of the crime itself.
Okay. We live in a strange world, Chair, but I fear that's true of many areas of life.
Yes, we'll leave it there, at that stage. Thank you both very much, Gareth and Jim, for coming along to give evidence to the committee today. We'll take a very short comfort break.
Gohiriwyd y cyfarfod rhwng 10:01 a 10:06.
The meeting adjourned between 10:01 and 10:06.
We move on to our ninth and indeed final evidence session to inform our scrutiny of the Renting Homes (Fees etc.) (Wales) Bill. I'd like to welcome the Minister for Housing and Regeneration, Rebecca Evans, here today, together with her officials: Emma Williams, deputy director, housing policy division; we have Huw Charles, Bill manager for Welsh Government; and Helen Kellaway. Helen, I'm not sure of your responsibilities. Are you dealing with the legal aspects?
You are. Okay, thanks very much. Thanks to you all for coming along.
Perhaps I might begin then with some general principles questions. Firstly, how would you respond, Minister, to comments from the Residential Landlords Association that this Bill is a missed opportunity to address professionalisation of the sector? They consider it a rushed, knee-jerk reaction to the Tenant Fees Bill in England. How do you respond to those criticisms?
Good morning, Chair and committee. Thank you very much for that question. I would say, just to remind committee, that the purpose of this Bill is to ensure that it is easier for people to enter the private rented sector and then easier for people to move within that sector, because we've had a large amount of evidence suggesting that fees do prove to be a barrier for both of those things to take place. So, that's the purpose of this Bill. But, I would say that we are ahead of the game in terms of the professionalisation of the private rented sector, particularly regarding the roles of landlords and agents, because of course we have our existing legislation and the creation of Rent Smart Wales.
So, Rent Smart Wales is there to license and register landlords and agents as appropriate, and they also have a code of practice, which they must obviously be familiar with, which I think is also very important, and also a minimum standard of training as well. So, we have been making some serious steps in terms of efforts to professionalise the sector. But, I would say that we do work very well with the Residential Landlords Association and I'm very keen to continue to work with them to further the professionalisation of the sector, because the more professional the sector is, the more transparent it is for tenants and the fairer it is for tenants, and I think that's something that we should all be very keen to work together to achieve.
In terms of the relationship between agents and landlords, in devising this Bill, did you give consideration to that relationship? Because there have been suggestions, for example, that the services an agent should be providing to a landlord might be specified. Did you consider those sorts of issues?
Again, the purpose of the Bill is really to address the kind of power imbalance, if you like, that there is between the agents and landlords and the tenants. I don't think that that kind of imbalance exists necessarily between the agents and the landlords, because of course it is the landlords who instruct the agents. Landlords are able to shop around and find an agent who can best meet their needs and so on. So, I'm not sure that there are problems in the relationship between the agents and the landlords that require Government intervention. However, if committee has heard evidence to the contrary, I'd be very keen to hear your views on that.
Okay. Well, thanks for that. Moving on to evaluation, it's always extremely important that there's effective evaluation of policy and strategy to demonstrate whether or not it's achieving the desired objectives and whether it's effective or not. So, what steps will you take to monitor and evaluate the provisions of this Bill and, indeed, the impact that it has on the private rented sector?
Well, the first thing that we'll be keen to do is monitor any impact that there is on the payment of rent, in terms of the level of rent. We know that committee has heard some concerns that it could potentially lead to an increase in rent, and we've acknowledged that that potentially could be one of the impacts of the Bill. So, that will certainly be one of the first things that we're keen to explore in terms of monitoring the impact.
We'll obviously be keen to look at the issuing of fixed-penalty notices, looking at the numbers of those and the scenarios behind the need to issue those fixed-penalty notices and also enforcement action then that is taken against landlords and agents—monitoring, again, that activity. If that monitoring does suggest that a deeper level of evaluation is necessary, then, obviously, we would be exploring what that should look like.
Okay. We'll be coming on to enforcement issues in some detail later on, but at this stage I wonder if you could address some of the concerns we've heard as to the possibility that enforcement will not be effective. A range of stakeholders have expressed these concerns, and some of it is on the back of previous housing legislation being commenced but a perception that enforcement isn't effective. One example is the provisions of the Consumer Rights Act 2015 in relation to letting agents' fees. How would you respond to those sorts of concerns? And, of course, underlying much of this is the fact that no additional resources will be made available to local authorities for enforcement of this Bill.
Thank you very much for that. I do think, in Wales, we have a good record in terms of the application and implementation of our legislation, particularly, I think, where we're talking about Rent Smart Wales. Much of what we've learned through the establishment and operation of Rent Smart Wales has informed our position and the way in which we've tried to approach the issue of letting agents' fees. I think one of the reasons it has been a success is because it has been a very simple system that we set up with regard to Rent Smart Wales, and also we worked hard to communicate the existence of Rent Smart Wales and the responsibilities that there are on landlords and agents but also what that means for the tenants as well. So, I think that combination of a simple system and good communications has meant that we have been able to effectively work in that particular area. I think things do have to be very clear and straightforward.
With regard to the Consumer Rights Act, I think that, when we look at what we're proposing within our own legislation in terms of ensuring that letting agents provide good information to landlords, I think that we are in a different area because landlords will very much be searching out the information that they require in terms of the fees that letting agents might be charging them because it's clearly very much in their interests to do so and, again, they have that power to shop around looking at the various different agents—trying to find the agent whose services meet their needs at a price they're willing to pay.
We've looked at the enforcement regime for Rent Smart Wales, and so we've put that fixed-penalty notice at £500. Our understanding from the experience of Rent Smart Wales is that that £500 has been adequate to cover the costs of enforcement in that area, and we understand that things won't be dissimilar in this case. And, again, we are seeking, really, full compliance with the legislation. We hope that having to take enforcement action will be a rare occurrence, but when it does occur, we think that the level of the fine—or fixed-penalty notice, I should say—is sufficient for that. I don't know if officials have any other reflections at this point.
The only thing that I'd add—thank you, Minister—would be that, of course, the Bill focuses on the local housing authority that has the local knowledge, knows the local landscape, and will know the letting agents as being the lead for enforcement of this, rather than drawing on the already stretched trading standards teams within local authorities who are incredibly effective in terms of food standards and fraudulent goods et cetera, and that's where their focus of attention is. So, the Consumer Rights Act enforcement sits with trading standards teams. This enforcement will sit rightly, we think, with the local housing authority who are engaged in those housing issues and have a more pertinent, direct relationship and interest in enforcing in this matter.
As well, Minister, it is possible to amend the amount of the fixed-penalty notice as well by regulations if necessary, if the evidence is pointing to that.
I see. Okay, thanks. The final question from me, then, is in terms of whether this Bill might be used to address issues around equality and discrimination. We heard from Shelter Cymru, for example, that sometimes there are adverts that specify no children in accommodation. So, have you thought, Minister, about some of those issues in terms of lettings, and whether this Bill might seek to remedy some of the bad practice that takes place?
Discrimination within the sector is obviously something that I am extremely concerned about. It's not acceptable in any sector, and certainly not when we're trying to ensure that people have good-quality housing, especially people who are vulnerable or who have protected characteristics.
We have to remember that issues relating to housing benefit and equalities legislation are reserved to the UK Government, but I am aware that Shelter was supporting a woman with a court case. She was a single mother denied housing by a letting agency due to the fact that she was in receipt of welfare benefits. They were making the case that women are more likely to be in receipt of welfare benefits and hence it was a discriminatory action when she was denied the opportunity to rent. That case, I understand, was settled out of court, so it doesn't create a precedent. However, we're very keen to engage with Shelter and others in this sector to ensure that when a precedent does become established, then we're able to communicate that to our landlords and agents, through Rent Smart Wales, for example.
There are things that we can do within this legislation, and within our powers. However, addressing things related to the Equality Act 2010 will be outside of those powers. There are things that we can do, and this is in response to concerns that Dawn Bowden has raised, for example, about sex for rent. So, we've agreed to update our next version of the code of practice, for example, to be very specific that any landlord who advertises or asks for sex in return for rent, for example, would be outside of the law—they would be risking their ability to operate and have a licence in Wales. So, we need to use the levers that we do have, and the relationships that we've been building up through Rent Smart Wales, to make it very clear as to what is acceptable and what isn't.
Again, we've been working very closely to try and ensure that landlords and agents have good information in terms of breaking down some of the stigma that does exist in terms of renting to certain groups of people. The Open Doors project worked with the Residential Landlords Association to produce an A to Z of discrimination so that landlords have an understanding of what discrimination is, and how they can avoid it, but also looking at the benefits of renting to various different groups of people, and, again, breaking down some of those false views that people have about renting to certain groups of people. That's been a really useful piece of work, as has the 'Working with Vulnerable Private Tenants' piece of information, which has been produced, again, by Shelter Cymru. So, there's good information out there, and I think that's the sphere in which we are able to operate, and, again, whilst also keeping a very close eye on the UK system in terms of any cases that are brought to court.
Some stakeholders have expressed concern that if landlords are no longer able to get tenants to pay the cost of the set-up fees through letting agency fees, there is scope for other ways of extracting more money from tenants, for example through default fees. So, at the moment, in the way that the Bill is drafted, there doesn't seem to be a great deal of clarity on what is an appropriate default fee. Clearly, things like failing to pay your rent on time or losing your keys and requiring an additional set to be cut are appropriate. But the Bill at the moment is silent on what is or isn't an appropriate default fee, and I just wondered whether you'd considered being a bit more specific on what is reasonable and fair.
All of the default fees will be set out in the contract that's agreed between the landlord or the agent on their behalf and the contract holder. So, there should be no confusion as to what a default fee is, however we do think that there is certainly some merit in issuing some guidance for landlords and agents and also the tenants themselves in terms of what is an appropriate default payment and also to help tenants understand default payments as well. Because, although it should be clear there in the contract, we know that actually having things in very clear, plain English—a special piece of information relating to default payments—will be useful. So, we're happy to issue and prepare some guidance on that, and also I think make sure that we have an appropriate communications plan for that in terms of getting that information out to both landlord or agent and the contract holder themselves. But there should be no confusion about what the default payment is because it will be clear on the face of the contract.
Okay. At what point do you expect to issue this guidance? Is this going to be part of the explanatory memorandum?
Our thinking was that this could be issued perhaps via Rent Smart Wales, or alongside or ahead of the coming into force of the legislation, but it's something we'll need to work on with key stakeholders and experts out there in the field in order to make sure that it's accessible to those who most need it, but that it fairly reflects the different views that need to be reflected here. So, we'll be working on that, subject to the Minister's views, over the coming months so that it can be available ahead.
Would it also be worth saying something about the move to the standard contracts and the supplementary provisions within them, so that tenants are better aware of what's expected of them?
Absolutely. When 'renting homes' comes into force, then the standard contracts will have a greater level of standardisation and a greater level of guidance in terms of what terms are required to be in there and what supplementary terms can be added in there. I'll hand over to Helen at that point.
The supplementary terms will be applied to all occupation contracts and there'll be some that apply to fixed-term contracts. So, all those will be set out in regulations, as will model contracts, and they will set out default fees of what fees will be permitted. So, all of that will be standardised.
Okay. I think 'when?' is the key question here, because I think there's some concern that the renting homes Act hasn't been implemented in this regard already.
What we should say there is that the guidance that the Minister made reference to there and a commitment to produce guidance about what is fair and reasonable around a default payment is something that we would look to do in relation to this Bill and it's not tied to the implementation of the Renting Homes (Wales) Act 2016, where you're quite right, the exact date of implementation is yet to be agreed because of ongoing discussions, primarily with the courts and the Ministry of Justice about changes needed there. But guidance in relation to default payments to help people to understand what they might want to challenge or query on a draft contract, when they're looking at it, could be produced in relation to this Bill and potentially even actually ahead of it being in force.
Could I ask: would you be prepared to do a note before our Stage 2 on the draft guidance, at least, so that we could have some indication here?
I think in terms of developing the guidance we should seek to work closely with Shelter Cymru, the NUS, for example, Citizens Advice and others who I know the committee have heard from in terms of developing the guidance. How long that will take I'm not sure, but we can certainly set out at least—what's the word I'm looking for—the contents kind of approach to the guidance.
Moving on to security deposits and some concern about—. The security deposit is quite a barrier for some people, to get that security deposit together, for people who want to have the option of renting privately. I just wondered what consideration has been given to making an alternative to security deposits available, such as deposit replacement insurance schemes or a cap on the level of security deposit. I wonder if you could just talk about what framework you think the whole issue of security deposit needs to be put into.
Well, I know that getting together the money for a security deposit can be a real issue for a number of people, and it's something that we've taken very seriously in terms of our approach to tackling homelessness. So, Welsh Government has bond schemes, for example, so we can ensure that through the third sector we can provide the bond for the individual—so, the security deposit, essentially—to be able to access and rent that home. So, I think that's a really important provision that we do have in place, but I think that some of the ideas about looking at alternatives to security deposits are very attractive. Currently, the tenancy deposit schemes are organised on an England-and-Wales basis. Although we do have now power in that area, those things haven't yet been disentangled. The UK Government has set up a working group that Welsh Government is very much engaged with to consider the kind of alternative proposals that you've described and that the committee has heard more about. So, I think some of those are very attractive, but it's very complicated and those ideas I don't think are at a mature enough stage at the moment to bring forward through this legislation. Also, I know Welsh Government officials have been tasked with looking to engage with the sector here in Wales as well to find out about ideas that could potentially work for a Welsh housing market as well. So, whilst the ideas of alternatives for security deposits are attractive and we are working with the UK Government and doing our own work on that, I don't think that we're at a stage at the moment to bring forward a specific scheme.
Okay. Both landlord and tenant witnesses have supported the principle of being able to passport a deposit from one tenancy to another, because obviously this is probably the most difficult stage, when you've got a security deposit with your outgoing landlord and you need to find the money for the new landlord. I appreciate that you may not be at this stage ready to introduce a statutory scheme, but if a voluntary scheme was developed, for example, by a particular local authority, would such payments be permitted by this Bill?
I don't think there's anything in the Bill that would not allow that scheme to take place, as long as there weren't payments attached to it, for example a payment to join the contract for the scheme, and that kind of thing. So, there's nothing in the Bill that would prohibit a voluntary scheme, but equally, if local authorities are considering looking in this area, I'd very much encourage them to engage with us so that we can learn from their ideas. But again, I'm very interested in this area, and I think that it is an area ripe for activity in future. But as I say, ideas at the moment aren't at a mature enough stage.
Okay, thank you for that. As the Bill is currently drafted, would a landlord be able to require a contract holder to enter into a contract with a utility company, require them to pay for council tax, television licences, a Green Deal payment or communication services? Would they in effect become the agent of other organisations?
As it stands at the moment, the Bill doesn't allow for that. However, I do think that this is an area where Welsh Government should reconsider our approach, and I'd certainly be interested in bringing forward an amendment to the legislation to allow payments for tv, council tax, utilities and communication services, because, again, this is about making things as simple and straightforward as we possibly can for tenants, and those contracts that do charge fairly for these things are very useful for tenants. So, it is an area where I would intend bringing forward an amendment.
Okay. Thank you for that. We'll look forward to that.
And then lastly, exit fees. Some concern has been expressed that exit fees might be used inappropriately to leverage money from tenants. Clearly, if somebody is terminating a contract before the end of the contract, that is likely to include some sort of fee. But if the contract is coming to an end or it has reached it's 12-month period, do you think that there needs to be some control on exit fees being used as a proxy for levering more money out of tenants inappropriately?
I can confirm that exit fees aren't permitted under the Bill. The only permitted payments are the default payments—the security deposit, the holding deposit and rent. So, exit fees categorically cannot be charged under this legislation. Actually, it's one of the areas that did prompt this legislation, in the sense that it is completely nonsensical and unfair to charge a tenant an exit fee when they've been paying their rent and there's nothing to charge for. So, this is one of those kinds of fees that did prompt the legislation.
In situations, however, where a tenant wants to leave the contract early, the landlord or agent is fully within their rights to expect to be paid for the entirety of the contract. However, we are aware that there are situations where the landlord or the agent will come to an agreement with the tenant to allow them to leave early, and there's nothing in the Bill that prevents that kind of arrangement, because that is a positive—
Okay, so just to be categorical, the Bill prevents any exit fee being charged simply because at the end of the contract somebody is moving on.
Can I just add something there? If there is a fixed-term contract and there's a break clause in that contract, it can be ended early, but there would need to be that provision in a fixed-term contract to entitle that to be done.
Bore da. Hoffwn i drafod blaendaliadau cadw. A ydych chi wedi ystyried o gwbl gwahardd blaendaliadau cadw yn gyfan gwbl?
Good morning. I'd like to discuss holding deposits. Have you considered at all prohibiting holding deposits entirely?
Rwy'n trafod blaendaliadau cadw, ac a ydych chi wedi ystyried o gwbl gwahardd blaendaliadau cadw yn gyfan gwbl.
I'm discussing holding deposits, and I asked if you'd given any consideration to prohibiting holding deposits entirely.
Thank you very much. I think that holding deposits do serve an important purpose in terms of allowing people to access the rental market. The reason for that is that it prevents people from taking lots of properties off the market while they decide which property is the right one for them. And obviously, if people do take more than one property off the market or several at one time, then they're preventing other people who are trying to find a property from accessing those homes as well. I think anyone who's tried to rent a property in an area where there's high pressure—for example, just here in Cardiff bay—will know that properties are on the market often just for a few days before they are let to people. So, I think that it would have a detrimental impact on the market were we to get rid of holding deposits; I think they are legitimate. They're relatively small amounts of money, and it is for a relatively small amount of time. And equally, very often the individual will use that holding deposit towards their first month's rent.
Y dystiolaeth rydym ni wedi'i chael yw nad oes llawer o ddefnydd o flaendaliadau cadw erbyn hyn beth bynnag, felly oni fyddai'n symleiddio yr holl broses a gwneud mynediad yn haws, mewn ffordd, pe na bai'r blaendal cadw yma yn gorfod cael ei dalu? Mae Shelter Cymru wedi dweud bod y profiad yn yr Alban yn dangos bod y tenantiaethau yn gallu digwydd yn gynt oherwydd bod y tenantiaid eu hunain yn gyfrifol am wneud y gwiriadau credyd eu hunain. Ac os mai holl bwrpas y ddeddfwriaeth ydy ei gwneud hi'n gyflymach ac yn haws i denantiaid gael gafael ar denantiaethau, mi fyddai hon yn un ffordd o helpu'r sefyllfa yna. Ond nid ydych chi ddim yn cytuno â hynny.
The evidence that we've received is that there isn't much use made of holding deposits by now anyway, so would it not simplify the entire process and make access easier, in a way, if holding deposits didn't have to be paid? Shelter Cymru have said that their experience in Scotland was that tenancies could happen sooner because the tenants themselves were responsible for credit checks. And if the entire point of the legislation is to make it easier and to facilitate it for tenants to get tenancies, then this would be one way of helping that situation. But you don't agree with that.
No. Our position is that holding deposits are a legitimate and useful tool in terms of ensuring that more than one property isn't taken off the market by an individual at any one time, and that makes it fairer for other people who are also looking at properties. I know that we did look closely at the experience of Scotland as we were developing the Bill, so I'm not sure—maybe Emma will have some further reflections on that.
I think you're absolutely right that holding deposits aren't required, and they're not used in large parts of the sector. Where they are used, as the Minister says, it tends to be high-demand areas or high-demand properties, so it doesn't tend to be for more vulnerable tenants who may find it more difficult to find a holding deposit. And it's one week of rent that can only be held for 15 days, just to allow that short breathing space. So, while I think you're absolutely right—the experience in Scotland seems to be that it then reduced further—I think we'd be very happy to see them pretty much disappear, but it seems inappropriate, perhaps, to ban them, if you like, when they do have a valid purpose in a small number of cases still.
Ocê. O gymryd, felly, bod y blaendal cadw yn mynd i aros, mae yna nifer o dystion wedi awgrymu y dylai'r blaendal fod yn amodol ar gyfnod ailystyried byr, lle byddai'n rhaid dychwelyd y blaendal cadw, ac mae Shelter Cymru wedi awgrymu cyfnod o 48 awr. A fyddai Llywodraeth Cymru yn cefnogi hynny?
Okay. Taking, then, that the holding deposits will stay, a number of witnesses have suggested that the deposit should be subject to a short cooling-off period, where the holding deposit would have to be returned, and Shelter Cymru have suggested a period of 48 hours. Would the Welsh Government support that?
Again, that almost defeats the purpose of holding deposits in these high-pressure areas, in the sense that an individual could take five properties off the market, on the understanding that they would be getting their money back if they decide to change their mind within those 48 hours. So, it would, I think, encourage more speculative, if you like, approaches to agreeing to rent properties. I think it just—
But bringing it down to a shorter period, surely, wouldn't do that.
But if an individual knew that, within two days, they could get their money back—'Well, I'll get this one, and I'll get an appointment tomorrow or the day after to see another flat'—it could encourage that kind of behaviour, which, again, adds pressure to the market.
Yn olaf, y profion gwirio hawl i rentu. Er nad ydynt wedi cael eu cyflwyno yng Nghymru rŵan, mi fyddai'r Bil yn caniatáu i flaendal cadw gael ei gadw mewn achos lle mae darpar ddeiliad y contract yn methu prawf gwirio hawl i rentu. Mae yna dipyn o bryder ynghylch hyn. Pam fod angen i chi gynnwys y ddarpariaeth yma yn y Bil o gwbl?
Finally, the right to rent checks. Although they haven't been introduced in Wales, the Bill would allow holding deposits to be retained where a prospective contract holder fails a right to rent check. There's some concern about this. Why do you need to include this provision in the Bill at all?
Thank you. I'm happy to clarify there that, as you say, Welsh Government has objected to this, and has resisted it throughout, and it hasn't been implemented in Wales, and there's no timetable for the implementation of the Immigration Act 2014 provisions there in Wales as well. Reference in our Act—it's in paragraph 7 of schedule 2—it doesn't commence the provision, and it doesn't sanction the right to rent, but it does simply reflect what is already on the statute book, which is why we've taken that approach.
The Immigration Act 2014 applies in England and Wales, and the rest of the UK. It's not commenced in Wales at the moment, but we're putting this provision in to ensure parity between what is an England-and-Wales statute, so putting this in there would not disadvantage contract holders in the future in Wales compared to those tenants in England. So, we feel that this provision is needed in there.
Is it something that's not devolved, then, is it? Is that the problem? Why do we have to have this in the Welsh legislation?
This really is a case of ensuring that the tenants in England and Wales, if you like, who are subject to the same legislation, are not disadvantaged with us not having this in the Welsh Bill and it being in the Tenant Fees Bill.
But, under devolution, could we leave it out, if we so desired, in Wales? Maybe you could give us a note on that, because if it's just to get parity with England, surely the whole point of devolution is that we can do something different in Wales? If we can not have the provisions of the right to rent in Wales, surely that would—.
I think it's reflecting what's on the statute book that applies to England and Wales but has not yet been implemented in Wales.
It's advisable that it is included for those reasons, for access to legislation and ensuring parity of treatment between tenants in England and Wales.
I think that would be useful, just to have greater clarity on that, Minister. Jenny, you wanted to come back on this.
I just wanted to come back on this very highly competitive market that certainly applies in Cardiff. Do you think it's not appropriate to include in the Bill the specification that landlords can only take a holding deposit from one tenant at a time? You know, that they can't be taking multiple holding—
I would imagine that that would be the case naturally, because they're taking a holding deposit in order to allow them to prepare the paperwork to enter into a contract. So, if they have taken multiple holding deposits, they're going to find themselves in a very difficult position.
They are indeed, but it has been known. So, would it not be just easier to say that the landlord can only take one holding deposit at a time on a particular property?
It's an important point that I do think we need to pursue, whether it's through the Bill itself or through the guidance and information that sits alongside that for landlords. I'll certainly give some more consideration to it.
Mae jest un cwestiwn arall ynglŷn â'r defnydd o'r gair 'rhesymol' yn Atodlen 2 pan fyddwn ni'n sôn am y blaendaliadau cadw. Mae 'rhesymol' yn gallu cael ei ddehongli mewn gwahanol ffyrdd gan wahanol bobl. A oes angen bod yn fwy manwl ac egluro yn Atodlen 2 beth yn union mae hwn yn ei olygu?
There is just one more question about the use of the word 'reasonably' in Schedule 2 as we are talking about the holding deposits. 'Reasonably' can be subjective and can be interpreted differently by different people. Is there a need to be more detailed and to explain in Schedule 2 what exactly that means?
Reasonableness is ultimately for the court to decide on, but perhaps I'll ask Helen, a lawyer, to provide a little bit more background to that.
Ultimately, as the Minister said, that would be a matter for the court to determine, depending on the circumstances of the individual case, but this wording also appears in other legislation to give a bit of leeway, and is also featured in the Tenant Fees Bill. So, ultimately, it's a matter, as I say, for the court to determine.
A oes yna le i'r tribiwnlys eiddo preswyl neu gorff arall heblaw'r llysoedd i chwarae rôl wrth ddatrys unrhyw anghydfod?
Is there room for the residential property tribunal or a body other than the courts to play a role in resolving any dispute?
We have considered that, but, ultimately, these kind of disputes are best resolved in court, because that's where the expertise is. Also, I don't want tenants to be unclear as to where they need to go in terms of retrieving the fees that have been charged to them improperly. I think that clarity for tenants has to be the most important thing here. They shouldn't have to decide, 'Do I go to an RPT? Do I take it to court?' It should be very clear as to what the procedure is and also who can provide them with information, advice and support in terms of taking those steps as well. So, wherever possible, I think keeping things as simple and as clear for people as possible is to be desired.
Can I add something as well? That's the position under the Renting Homes (Wales) Act 2016 as well. So, this builds on that in terms of where the contract holder would go if there is a dispute.
Thank you, Chair. Can I just start with a point on evaluation. We heard some interesting evidence from the WLGA this morning that tenant fees could account for something like a fifth of letting agents' income. I've just had another flick through the explanatory memorandum and I couldn't see anything there in terms of any assessment of the current level—well, there is an assessment from tenants of the level of the fees they're facing. I'm particularly interested in this, in just how the market may respond. If it is up to a fifth of their income, then there may be a bigger effect on rent than we are currently anticipating. Now, you've said the need for evaluation is going to be important when this Bill gets enacted and that you'll be examining how it is operating, but do you have any assessment at the moment or has one been produced, perhaps, elsewhere? I don't know if the Scottish Government did anything.
We did look very closely at the experience in Scotland and also then at the piece of work that was undertaken by the UK Government's scrutiny committee, which looked at the Scottish case as well. There wasn't clear evidence there that the legislation had led to the increase that they did see in rents, because there were so many other factors at play it would have been very difficult to pin things down specifically to one. Again, it's about creating fairness for tenants and it's the landlords, obviously, who are receiving the service by the agents. So, potentially there could be an increase in fees—sorry, in rent—we've always been upfront about that. In terms of the regulatory impact assessment, we've said that the costs to letting agents are up to £6.6 million, but they could be offset in terms of increasing their fees to landlords by around £5 million. So, a cost to them of £1.6 million is what we've identified in the regulatory impact assessment.
Can I turn to issues of enforcement then? Rent Smart Wales told us that it would be beneficial for them to have supplementary enforcement powers alongside local authorities and they could then take enforcement action where appropriate. The WLGA indicated that they thought this was a very good idea also. Now, I don't think the current Bill permits Rent Smart Wales to take enforcement action, so can we have that confirmed, or would the Act that established Rent Smart Wales allow them to operate in this way under the legislation? Could they have a supplementary role or would we need an amendment to achieve that, and do you think it's useful for them to have a supplementary role in enforcement?
The Bill as it stands doesn't give Rent Smart Wales any enforcement powers; those are reserved to the local housing authorities. Having listened to the evidence that you've heard, I do think there is potentially a supporting role that Rent Smart Wales could certainly play, and how we go about making sure that they can do that, I think, does need a bit more detailed consideration in terms of the kind of role that they would need to play. I think that we need to be having some further discussions. I know officials have had discussions just this week with Rent Smart Wales about the evidence that they provided and exploring what other kind of—I think you called it 'supporting'—role that they could play. Certainly, they could provide, again, information, advice and so on in terms of enforcement. There is a role, I think, for Rent Smart Wales, but how we reflect that in legislation we have to give some further thought to.
So, you seem to be flexible but you're drawing the line at whether they would—. Assuming that we'll retain this fixed penalty of £500, you'd stop short of them having the ability to impose that fine.
I would consider them being able to impose that fine. What I want to really avoid is a situation where we think of Rent Smart Wales or any other local authority or any other body as a lead enforcement agency. For me, it's really important that this enforcement is locally led.
Okay, so you sound quite flexible, because it would require an amendment if they were to have the power to impose a fine, though the distinction that you made that you do not want to see them as the lead authority is an important one and that's very clear. The other issue—I'll just deal with this whilst we're on Rent Smart Wales—is whether they should be notified when a local authority imposes a fixed penalty. We have heard that a fixed penalty, even at £500, tends to be some way into a process. There's usually been a discussion, or there would have been a discussion with the letting agent that seems to have imposed an illegal charge. So, the fact we've got to having to impose a penalty is itself a reflection of very poor practice, obviously, and unlawful practice, if this Bill goes through. So, if that happens, should Rent Smart Wales be informed of that? Because it does seem to reflect on the fitness for purpose of those agents and, therefore, any landlords that are relying on those agents.
This is another area where officials have had some discussions with Rent Smart Wales, in terms of whether, and if so, how, we could ensure that Rent Smart Wales are informed of the fixed-penalty notices. I think Emma's itching to come in.
If I could just add there—thank you, Minister—that I think one of the issues that would need to be considered quite carefully is, of course, the issue of a fixed-penalty notice in its own right perhaps shouldn't trigger, at that point, any form of notification, because there would be the option for somebody in receipt of that fixed-penalty notice to decide whether they wish to pay it, or whether they wish to seek a hearing through the courts, rather than pay it. So, that's the start of a process, which is one of the difficulties in terms of any automatic referral and information to Rent Smart Wales.
You could do the referral at the point of the penalty being paid, though, couldn't you?
Those are considerations that we would need to think through. Of course, there is a very good relationship between Rent Smart Wales and the authorities that it operates on behalf of, which does involve formal dialogue where issues regarding landlords in an area will be discussed. So, it's highly likely that this kind of information would be being fed through regardless, even though it's not an automatic referral duty, if you like, and, of course, Rent Smart Wales is obliged to take into account all of the information it knows about a landlord in considering that landlord's licence, rather than there being an automatic strike-off process, or anything like that.
Just to build on what Emma has said, the purpose of an FPN is that when it's paid, that's the end of the matter. So, it's an alternative to commencing proceedings for a breach of the prohibitions, and that is aligned with what is in the Housing (Wales) Act, to ensure that the legislation ties in with that. It's sort of, 'If you pay, that's the end of the matter.' So, where would a notification go, as well, if you tell Rent Smart Wales? You can understand them notifying them of a conviction, because that would have a bearing on whether they're a fit and proper person to be licensed under Part 1 of the Housing (Wales) Act, but just to notify Rent Smart Wales of a fixed-penalty notice being issued, if it's paid, that would really be the end of the matter.
I think that an important addition to that is that a local authority who is aware that a landlord is of concern to them, or an agent is of concern to them, has the option not to offer the fixed-penalty notice and go straight to prosecution. So, there is that flexibility in the enforcement system, which allows them to take stronger action where they think that there is more than just a slip-up or a one-off offence, if you like. So, there are some safeguards there to make sure that there are ways to pick up any landlord or agent who is flouting the regulations.
Okay, but the fixed-penalty system is the heart of how this will operate. You don't envisage things going beyond that very much if—. It leads to self-enforcement almost, doesn't it, by the letting agents? So, it's in no way a let-off or a trivial part of the regulatory system. I mean, I could see why you would say that you would notify at the point of the payment, rather than a notification that a fixed-penalty option has been given. I can understand that, because there's a categorical difference. If someone said, 'Yes, I'll pay the fixed penalty,' then, obviously, given that it's the end of a process as well, in all likelihood, where they've been warned of behaviour, that's different. This is probably work in progress, but it seems to me a robust part of the system that information is then passed to Rent Smart Wales, who, in all likelihood, are going to keep more of an historic account of the issuance of these fixed penalties. And if it's the same agent—and they may change their name and practice and where they're operating—they're possibly going to be in a better position, in terms of their intelligence gathering, to keep an account of that. So, it does seem to me that this should be considered more deeply as a possible way of strengthening the system.
This is, as I say, very much on the radar and those discussions are already happening with Rent Smart Wales, but I'd be keen to know what the committee comes to in its report.
I think it's generally helpful in these scrutiny sessions to get an idea of where you think there's possible improvement in the draft Bill and that, with representations being made to you directly as well, you're looking at areas. This does seem quite an important area, and I just wonder, by Stage 2, are we likely to have any indication of your thinking, especially if some amendment is going to be required, for instance, to allow Rent Smart Wales to issue fixed penalties?
I would hope that, in my response to the Stage 1 debate, I would be able to indicate the areas where I would be hoping to bring forward amendments at Stage 2.
That's helpful, thank you. One of the areas where I think we're now proposing a different procedure to the one in England—. I think, in England, the Bill has been amended there, which basically means, I think, that section 21 notices and the termination of contracts cannot be made when there is a prohibited payment that is being investigated. I just wonder what consideration you are giving to that restriction—whether, if that matter is being investigated by the local authority, the landlord or the agent cannot terminate or bring the contract to an end. I think the WLGA—and, again, I think I've been fair in relaying to you what they said, but you obviously listened to that evidence anyway—did seem to think that this would be quite a useful power.
The misuse of section 21 notices is of real concern to me. Although, you know, to kind of manage expectations about what's possible within this Bill—. There is certainly some room in which to take action along the lines that you suggest. So, again, this is an area where we have been doing some thinking. Did you want to add something on this particular point on section 21 notices?
Only just to say that it would be like a small dent—there's no scope really to do anything other than what the Minister's just said, by doing a similar provision to what was on the Tenant Fees Bill in that regard.
But it certainly—. I think it would send a strong message in terms of our approach to bad landlords, if you like, and also send a message about the inappropriate, often, use of section 21 notices.
Okay. And, again, I think, you know, this has been an important area. I have to say that I haven't looked at the English legislation and the way it's been amended and I'm not sure what the response of the UK Government in relation to England was about that amendment, but I think it's useful for us to look at that as a committee and possibly for you to do so as well.
A number of witnesses, and they're on both sides of the fence, interestingly—. Sorry, did you want to come back on that?
That's fine. Witnesses on both sides, I think—between tenants and organisations that represent agents or landlords—have said that perhaps the fixed-penalty notice is not set at a level that will be an effective deterrent. Now, you've not spoken in terms of a deterrent, it seems to me—it's much more recovering the costs of enforcement. I just wonder: is that tough enough? Should we be looking—? Rent Smart Wales suggested a banded system, rather than a flat fee. And, to be fair to—. As I've quoted the WLGA, they're not so sympathetic about this proposal that perhaps the fixed penalty should be higher or we should move to a banded system. But I'd be interested in any reflections you've had on that, because £500 for what is serious irregularity, really, or would be unlawful behaviour, after a process where they're probably warned a couple of times—. It sounds at the lighter end and it's not going to put off the rogue practitioners, possibly, and that undermines the market for those companies that are following the law, and going beyond it to best practice as well, perhaps.
Well, the best enforcement regimes are simple and transparent, so we've tried to take that approach. But it's also important to recognise that, in terms of a deterrent, we have a huge deterrent, ultimately, in terms of the role of Rent Smart Wales and their willingness or otherwise to issue licences to landlords and agents. So, the fixed-penalty notices are only one part of it and they should be seen as a deterrent, but, equally, there is a much bigger deterrent along the line as well. And, of course, the enforcement authorities can choose appropriately how they can use the powers that they have within the Bill. That said, I know that the level of the fixed-penalty notice has been raised by a number of witnesses. I'm not completely wedded to £500; £500 has, I think, served us well in terms of the Rent Smart Wales legislation. Equally, I'm very keen to hear what the committee says, and it is an area where I would be prepared to be flexible, should the evidence suggest that a change needed to be made. Equally, creating a banded system—it would make things more complicated, and our approach has been to try and keep things simple. But, again, if the evidence suggests that a banded system is something that would do the job better, then it's certainly something I would be prepared to consider.
Okay, well, thank you again. That's quite an open and helpful answer and gives us something to follow up in the future stages of scrutiny of this Bill. You talked about, of course, this is part of a general suite of powers, which I completely recognise, and, again, I am not going to get fixated on England, but they do have an approach there that would allow local authorities to discharge a criminal prosecution for a fee of up to £30,000, and I just wonder if that—. Obviously we're dealing with quite serious wrongdoing if a criminal prosecution is being pursued. Would that flexibility be useful? The WLGA seemed open to this consideration. It's quite a big difference between our Bill and the English one. So, have you given further thought to that?
I think the context in Wales is different from in England, of course, because we do have Rent Smart Wales and that ultimate sanction, if you like, of not being able to let properties. Were a fee to be as large—sorry, a fine to be as large as £30,000, as it is in England, then, obviously, you're in the territory, then, of having to ensure that the person on the receiving end of that has a right to reply, a right to appeal and so on, potentially making things more complex, more drawn out—potentially, again, putting off enforcement authorities from taking enforcement action in the first place. So, I certainly think there is a balance to be struck and some very key differences between the approach in England and Wales.
And then, if I can just finish, in terms of evaluation, as far as I know, the Scottish legislation has not yet been thoroughly evaluated. We're making lots of assumptions about the response that letting agents will make and effect—you know, self-administer the law, as, of course, they should; I don't doubt that is their duty, the law is the law—but, in practice, obviously, we want to ensure the system is robust and the law is being properly enforced and obeyed. But we don't quite know the level of fees in terms of the income, possibly, that letting agents need to operate and the effect it might have on the rest of the market, particularly the level of rents and charges that might be made to landlords, and that may affect the viability of smaller landlords, in particular, who often are reliant on agents because of their limited capacity if they don't have a large property portfolio. Anyway, to come to a conclusion, do you think, should this Bill become an Act, that it's an appropriate area for post-legislative scrutiny at some point?
I suppose, to a large extent, that would be a choice for a future committee to make. We would obviously be keen to engage with any scrutiny that does take place of the Bill. The key areas, I suppose, I outlined at the very start in terms of how we will be evaluating and monitoring things will be crucial in terms of any decision for further scrutiny. Does rent increase? How many of the fixed-penalty notices are issued? What is the experience of the court? What are the kinds of reasons for undertaking action against landlords or letting agents in the first place? So, there are key questions that we need to be keeping an eye on and, obviously, should committees decide to undertake scrutiny, we would be very keen to engage with that.
Would it be helpful, at some stage—perhaps when you respond to our report—to set out the type of evaluation and when the Government would think it appropriate? I think evaluation and scrutiny after a Bill becomes an Act is not a very strong part of our system, but, when you think about it, it's ever so important, isn't it? Does the Act work and should it be improved or—you know, are we confident that we've done well here and we could operate along similar lines in other areas of legislation that we may want to propose in future? So, rather than us perhaps saying, 'There should be post-legislative scrutiny', might you not give a commitment either directly in the legislation, or in a statement you make when you are proposing the legislation in the Chamber, that a full evaluation will be conducted after three years or whatever?
This is bringing happy memories back of the Regulation of Registered Social Landlords (Wales) Bill and discussions that we had.
Well, I'm not suggesting like a sunset and, if you don't do it, it stops being a law; I'm being a bit softer on you.
I'll certainly provide more information in terms of our thinking when we respond formally to committee.
I don't know the situation in Scotland, so I'm saying this, and further information may satisfy me that their approach has been fine and is understandable in their context, but they've not, it seems to me, evaluated their legislation yet. Now, they may say it's because there are so few signs that it's not working, but, you know, they've not done it and it is something that could slip unless you make a commitment, possibly.
If I could perhaps just come in there, I think lots of the data that the Minister refers to will actually be available to us quite quickly, so we should be able to see if there are changes. But, obviously, one would be looking for three to five years in order to be able to assess whether there is a genuine trend and then consider whether that is a trend, perhaps, in rents that we need to unpick a little bit more, I think.
Going back to first principles of what the Bill is trying to achieve, actually, the data will give us a fairly clear picture of whether tenants are no longer facing large fees at the point of entry or moving around the private rented sector. In some ways, one could argue one doesn't need a deep analysis or evaluations there, but, in terms of reflecting what other impacts it may have on wider policy, then that will obviously be a matter for ongoing consideration, alongside the impact of any other policies that come into play here.
I accept that, but some things could happen, like rents go up quite a bit, the number of landlords in the sector decreases considerably, and there may be fewer letting agents. Now, that could be a rationalisation of the market, it then becomes more effective, or it could be a loss of capacity and that may impact particular groups of people badly. So, there is stuff that could be looked at, isn't there, that requires the rigour of a formal Government evaluation.
I think we'd be looking very closely at the data to see if there are indications of those kinds of changes in the market in order to be able to look at what underpins those changes. I guess that what we're saying is that's potentially subtly different from looking more narrowly at the implementation of this particular Bill, but looking more broadly at any change that reduces the availability of a good quality private rental sector would need to be investigated and investigated thoroughly.
Can I just come in on the evaluation of Scotland as well? The House of Commons committee did do an inquiry into the impact of the changes that were made in Scotland, so there is evidence out there. I think we referred to it in our response to the committee previously, but, obviously, that's available to share and to give an indicator of the impact of that piece of legislation, which may be relevant to your considerations.
I just wanted to look at the rights of contract holders to get their money back if they've been illegally charged letting agency fees. As the Bill is currently drafted, if there's not a successful prosecution in the courts, then the contract holder has to go to the civilian courts to get their money back if they've got a landlord who's evading paying this back. I'm somewhat surprised that our local authority witnesses earlier this morning seemed to be reluctant to attach the repayments to the contract holder to the fixed-penalty notice. I understand why they don't want to get involved in security deposits and whether or not the property's been damaged, et cetera, but this is black and white. There's been an illegal levying of a fee that needs to be returned to the tenant or the contract holder, and I would have thought it would have been just very simple to amend the legislation so that discharging a fixed-penalty notice also requires the repayment of the illegally levied fee, and I wondered if you'd given any consideration to that.
The approach has been, as you say, for the contract holder or the tenant to seek repayment of those moneys via the courts. The courts, obviously, are able to also apply any interest to those payments. I'll ask officials to let us know whether those discussions have been had in terms of the role of local authorities and even whether they have the power to do what you suggest.
I think that, fundamentally, to ask the local authority to get involved in that would take them into an area where they don't necessarily have the experience or the skill, whereas the county court has the experience and the skill and the powers to enforce appropriately. So, although, on the face of it, it may be very black and white, as you say, about whether or not a payment has been made and they've issued a fair fixed-penalty notice, the arguments that could follow about whether that prohibited payment had been refunded, had been refunded in part or had been utilised in another way could take them into an area that would be much more complicated to unpick. So, for that reason, we feel that the county court is the place that is best placed to arbitrate on that and to be able to enforce. I don't know if Huw wants to add anything—no.
That's not an equitable explanation, in my view, because it's easy enough for somebody who's got resources to go to the small claims court, but for vulnerable tenants, that is going to be not possible and they're simply going to lose their deposit. It seems to me that if the local authority has already had to investigate whether a breach of the Act has occurred and that an illegal levying of a fee requires the levying of a fixed-penalty notice, they've already established that this has occurred, that this is something that shouldn't have happened. Why is it not possible to simply say that the fixed-penalty notice must be in addition to repaying the fee that was not validly levied?
There's nothing in there, because we thought that the contract holder would go straight to court for the court to determine that matter, rather than the local authority having to gather evidence. We thought that would be—correct me if I'm wrong—rather labour-intensive for local authorities to take that up on behalf of the contract holder.
Well, I wonder if we can look into this further, because we are now rehousing vulnerable people in the private rented sector who are unlikely to be able to pursue this themselves, or will feel too daunted to pursue this themselves. They won't be able to get legal aid, and it just adds further to the burden of Citizens Advice, who are already dealing with all manner of other issues.
This is why the guidance that we were talking about earlier is so important, and the clarity for people, in terms of ensuring that tenants or contract holders understand their rights, understand where they can go to for information, advice and support and where there is a clear place where people can go to retrieve their money. Again, it was that question about, 'Well, why not go the RPT or something else?' Well, actually, there should only really be one place for tenants to be going, and I think that the courts are the appropriate place, given that this is very much within their remit and their expertise. I don't think it's something that local authorities—. I don't know whether there is a precedent for doing this kind of thing, but it would certainly be very labour-intensive for local authorities. Again, we don't want to get to a point where local authorities are being put off from taking enforcement action because the work would be disproportionately onerous on them despite the benefits for the tenants.
Something at the back of my mind says that, in England, they will give powers to local authorities to assist tenants to take matters to the county court. I'm sorry—I read a lot of material last night, but I think I read that. Is that true?
I thought that there may be powers outside of this that allow local authorities to give financial assistance—
Yes, I know. I was just going to have a quick look to see whether it is—I think it is in the Tenant Fees Bill, but I'd need to check.
Because if they've done all the work anyway towards getting the penalty done, they will know how much is owed to the tenant. So, adding that—I can't see that that's an onerous proposition.
Yes, it is quite an important area of consideration, I think, for the committee. I know that a number of Members are concerned, so that would be useful if you could do that, Minister.
Jenny, would you like to continue?
Okay. The—. I think you've already covered the concept of contract holders not just getting their money back but also compensation in the way of interest payments. So, at the moment, as the Bill's drafted, you would expect the courts to interpret it in that way—it doesn't require any further clarification.
The courts are able to attach interest payments to any moneys that have been incorrectly taken from the tenant.
Okay, so it doesn't require any further enforcement of that concept—that a delay in returning the illegally levied fee will incur interest. That will be made clear, will it, in the guidance that will go to both landlords and tenants?
In terms of the magistrates' court, a fine is separate from the prosecution costs, and the fines are paid to the Lord Chancellor and then into the consolidated fund, whereas the prosecution costs will be able to be recovered, and that's the position under the Courts Act 2003. In terms of the County Courts Act 1984, they are able to award interest on damages, so we don't need to do anything further about that in the Bill.
Yes, but, just for clarity, the question is that, in addition to having their moneys returned where they've made an illegal payment, will the contract holders to be able to get compensation for other loss that they've suffered related to that prohibited payment?
There is no provision within the legislation for compensation. Part of that is because, to receive compensation payments, you have to demonstrate to the court that harm has been caused, and because the court can award payments for interest and other damages, then it would be hard to demonstrate that harm had been caused.
Any additional harm—what could that be? They're getting the payment back; it's just adding an extra tier in terms of having to prove what further loss has been suffered, if any.
They could have been out of pocket for a long time. They could have handed money over to a landlord and then, because they've done that, it would severely affect their lifestyle for that period of time, so that are other effects rather than just—.
Over and above interest?
For instance, they may not have been able to send a child on a school trip or something. I mean, these are real things that could happen, aren't they? I think that was the weight of the evidence of some who were suggesting that a compensation element was appropriate.
Is that something again that perhaps you might give further thought to and provide a note to the committee on?
I'll certainly reflect further on the evidence that you've received, and, again, I'm keen to hear the committee's conclusions on what you've heard.
Just lastly, quite a lot of stakeholders raised the concern that the Consumer Rights Act 2015 hadn't been enforced effectively in ensuring that all letting agents were publicising in their windows what fees they were charging at the moment. So, in the explanatory memorandum, you've provided costs and the number of agencies that they're having to police, if you like. Obviously, this undermines the robustness that people may feel—with which we're going to be able to enforce this law, if we haven't properly enforced existing laws. So, I just wondered if you have any concerns about those letting agencies that are simply flouting the law at the moment, and that therefore may be prime candidates for flouting the law in relation to letting agency fees.
I think the criticisms, in my view, that you've had brought to your attention about the implementation of the Consumer Rights Act are fair. In terms of letting agents and landlords flouting this legislation, one of the really positive things is that it will be really, really easy to see when the law has been broken, because there are only four permitted payments. So, if there are any payments beyond those four, which are all very, very clear—and hopefully will be well understood—any payments beyond that will clearly be a breach of the legislation. So, I hope that, should landlords or letting agents be outside of the law, it will be very clear to people and we will be able to take that enforcement action.
Again, though, I think what I haven't said during this session is that we do expect very high compliance with the legislation because we'll be working really hard to ensure that tenants, contract holders, letting agents and landlords are fully aware of the legislation. We're able to do that now because we have individual relationships with each of those landlords and letting agents through Rent Smart Wales, which puts us, I think, streets ahead of other people who are trying to do similar things through legislation when they don't have that kind of contact and that kind of communication. So, we expect very high compliance with the legislation.
Okay, but that rather does reinforce the argument for a lead enforcement agency—probably Rent Smart Wales—to ensure that those who are flouting the law at the moment, and could be flouting the law when this becomes law—you know, they need to be pursued. They are likely to be the same organisations.
We're keen to avoid having a lead enforcement agency for this legislation because we're very clear that the best enforcement will be at very much a local level. So, local authorities know the landlords in their area, they know the letting agents in their area. They know the ones who are problems and are likely to not be compliant with the law. So, I think that kind of local knowledge on the ground is really crucial, which is why we've avoided a lead enforcement agency. Equally, there is that role for Rent Smart Wales, which we talked about earlier, in terms of a supportive kind of role for that.