Power of court to postpone giving of possession

Question proposed, That the clause stand part of the Bill.

It is a great pleasure to be in Committee for the first time under your chairmanship, Dr. McCrea, especially as the Bill applies only to England and Wales, rather than to your part of the country.

I thank all hon. Members for attending the proceedings this morning and for their support. I hope that we can deal fairly quickly with the Bill, especially given that there are no amendments. If anything is not clear, I shall try to explain it as we go.

On Second Reading, the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Dewsbury (Mr. Malik), said that this issue is a no-brainer and that there is a problem out there that the Bill is intended to fix. I hope that we can all agree to allow it to proceed back to the House and then down to the House of Lords. Everyone realises that we are time-constrained.

I thank the various external bodies that have sponsored the Bill, such as the housing advice organisations. We have also met several trade bodies representing both the lender and the borrower. I thank hon. Members on both sides of the House for supporting the Bill. There was cross-party support during our Second Reading debate, and I am optimistic and confident that we shall continue in a similar vein today. I am sure that members of the Committee who were not present on Second Reading will have had a chance to read the report of those proceedings, which I sent to them. I do not intend to repeat what I said at that time, but I shall give a brief summary of the issues covered by the Bill.

Due to a gap in legal protection, unauthorised tenants of repossessed landlords can suffer distressing short-notice evictions. The issue is about a legal anomaly that we need to fix. When much of the legislation on mortgages was brought on to the statute book in the 1970s, the market for rented properties was different from how it is  today. For example, the term “buy to let” was almost never used in the 1970s, but it was part of common parlance at the turn of this century.

However, given how the economic situation was then and how it is now, there is some commonality with the mid-1970s; both situations led to some interesting developments in the tenanted property market. In the 1970s, the private rented sector was heavily regulated. That was followed by a period of deregulation in the 1980s, which, in part, has led to the current problems.

Most buy-to-let landlords are professionals who take their responsibilities seriously; I emphasise that the Bill is not aimed at responsible buy-to-let landlords. Indeed, it will not affect them. However, the rising property market in the 1990s led to landlords who were keen to make financial gain with minimal input. In those instances, individuals failed to gain consent from their lender to let before renting out a property.

Conversely, the stagnation in the current property and employment market has led to a rise in reluctant landlords—people who, for one reason or another, have rented out property to a tenant without permission from the lender, which makes the tenant unauthorised. They are people who, for example, have moved to another town to work. They have tried to sell their own property in the town they have moved from, but have failed to do so because of the economic climate. They have been servicing two mortgages, so they have put a tenant into the first property and that tenant has become unauthorised. Those tenants are covered by the Bill, too.

There are other reasons why people become reluctant landlords. Perhaps a relative has died and there is still a mortgage on the property in which they lived. If a tenant is put into that property, that tenant will become unauthorised if the permission of the lender has not been sought.

Typical owner-occupier mortgages do not allow a property to be rented out. If a landlord has not received consent to let from the lender and subsequently falls into arrears, and the lender commences possession action, the tenant is unauthorised by the lender as the landlord has not received the relevant permission. That means that the tenant has no right to request a delay of the lender, although they could, and that the lender has no obligation to give them one, although they might.

In any possession case, the tenant can turn up in court, but under current legislation the judge has no discretion to take any notice of the tenant or their circumstances. The result for any tenant is that they can often suffer extremely short-notice eviction, involving only a matter of days, with no time whatever to find alternative accommodation.

During the progress of the Bill, I have had correspondence from, and talked on radio programmes with, people who have found themselves in very difficult circumstances. Landlords have fled to Spain and left the tenant to cope for themselves. In other words, the landlord has abandoned financial responsibility. In another case, a gentleman who appeared with me on “You and Yours” came home to find the bailiffs changing the locks, and he asked what would happen to his furniture. The bailiffs were intending to put it on the pavement as they left the property, because he had not been in when they had arrived. Fortunately, he had come home and  was able to deal with the situation. Some people have come back from holiday and found that they cannot enter their property because, while they have been away, court proceedings have gone on without their knowledge. They have found themselves locked out of their property after a long journey from a long-haul destination.

Everyone on the Committee believes that what happens in such cases is wrong, whatever their political opinions. The purpose of the Bill is to ensure that tenants of landlords who are repossessed by their lenders do not suffer short-notice eviction. The objective is to give the tenant the right to request that the possession be delayed by up to two months; the period does not have to be a complete two months, but up to two months, to give the tenant time to find alternative accommodation. The Bill will not prevent the lender’s right to possession, but simply delay it for a short period. I stress that it applies only in the case of unauthorised tenants.

Let us have a quick look at what the Bill contains. It will give tenants the right to be heard at possession hearings, which they are not allowed to take part in at the moment. It will give courts and judges authority to take tenants’ needs into account, and it will give powers to postpone possession by up to two months so that the tenant can find an alternative home.

The Bill will also require lenders to serve notice to a tenant or occupier of their intention to enforce a possession order. It will cover tenants of landlords in respect of whom the courts have previously made a suspended possession order. The new notice will apply to all properties subject to an outright possession order or when the suspended possession order is breached. In addition, the Bill will enable tenants to apply to delay the enforcement. Lenders will be able to dispute the claim for tenancy and apply for a warrant of execution. Tenants will be able to appeal to the court.

There are only two substantive clauses in the Bill. Clause 1 enables unauthorised tenants to apply to court to postpone the date for delivery of possession when a lender seeks to repossess the property. The clause enables the court to postpone the date by which the tenant must leave, by up to two months.

Subsection (4) allows the tenant a second, but not an additional, opportunity to apply for a postponement of possession when the lender applies for a warrant of possession. The tenant may apply directly to the lender for the delay of possession. If that application is refused by the lender, the tenant can pursue the application through the courts.

Subsection (5) enables the judge to have regard to the circumstances of the tenant. The provision is designed primarily to take into account situations in which tenants may have breached the tenancy through no fault of their own, such as the non-payment of rent when that is caused by a delay in the payment of housing benefit by a local housing authority.

Subsection (6) recognises the concerns raised by lenders, who say that they should be able to receive rent from any tenant within the two-month notice period. Subsection (7) makes it clear—again, in response to lenders’ concerns—that receipt of such rent does not create any tenancy obligations between lender and tenant. Subsection (8) defines an unauthorised tenant.

With that introduction to the Bill, I look forward to comments from the Committee. My hon. Friend the Minister might have something additional to say.

Dr. McCrea, it is a pleasure to serve under your benign chairmanship for the first time; I say that hopefully.

We had a good Second Reading debate on 29 January; it was one of those rare debates during which new information comes out. The experience of hon. Members was useful in informing a better discussion—not many of us were there, so it was a question of quality rather than quantity.

The hon. Member for Bolton, South-East will not be getting so much valedictory praise in Committee as he did on Second Reading, but we are delighted to be in a position to support the Bill, which is extremely important. I pay tribute not only to the organisations that he mentioned, such as Shelter, Crisis and the Chartered Institute of Housing, but to him for the dogged and determined way in which he has pursued the Bill, which is very much for the public good. We are delighted and pleased to support it today. We hope that the Bill gets a speedy passage to the other place and is enacted into law expeditiously.

The Bill is needed because this year we could be looking at 53,000 repossessions. The issue affects at least 2,000, but possibly 3,000 or more. One of the key factors to emerge from the debate is that we have qualitative data about the impact of the problem on families, via organisations, such as the citizens advice bureaux, that do a superb job, but we do not have quantitative data on how many people are affected, on the cumulative impact on housing allocation policies or—this is the issue of most concern—on the impact of repossession on young children. The thought of very young children literally being made homeless, through no fault of their own or of their family, is intolerable.

It would be remiss of me not to make a slightly party political point, because my party was urging the Government to look at such issues as far back as March last year. Notwithstanding the sincere undertakings from the Minister for Housing and others that they were concerned and that the issues needed to be examined, we were disappointed not to see substantive commitments in last year’s Queen’s Speech or legislative programme.

It is self-evident that we do not have a problem with the Bill, because we have not tabled any amendments; nor have any other hon. Members. However, I would like the hon. Member for Bolton, South-East to consider and answer some questions on a few issues. The Minister, too, might want to touch on those issues.

One of the issues is the word “a”. It reminds me a bit of Bill Clinton’s problem with Monica Lewinsky—what the meaning of “is” is. The meaning of “a” is important. What is its meaning under clause 1(4)? The issue was raised by my hon. Friend the Member for Shipley (Philip Davies), regarding how many opportunities within the two months a tenant will have to make an application under the clause. Perhaps the hon. Member for Bolton, South-East will give some attention to that matter in his remarks.

Another concern, which the Building Societies Association had, was about the need for the court to consider the specific circumstances not only of the tenant, but of the borrower and the lender. The association was concerned about whether the discretion of those  parties would be fettered by the clause as it relates to the Financial Services Authority’s ruling in reference code 13.6.1 of “Mortgages and Home Finance: Conduct of Business Sourcebook”, or MCOB, in respect of treating borrowers in arrears fairly. The hon. Gentleman might wish to consider that matter too. I will not get on to clause 2 in respect of the suggestion that notice be sent to the property by the Courts Service rather than the lenders; perhaps we can discuss that later in the proceedings.

The issues that I have raised are only minor, but they are nevertheless important to tease out; the fact that we have not tabled any amendments does not suggest that they are not pertinent issues. I commend the Council of Mortgage Lenders and the Building Societies Association for generally supporting the proposals in the Bill. However, they are right to say that there is a trilateral relationship between the landlord, the tenant and the lender. All the interests need to be properly protected when difficult situations arise.

With those minor caveats, I should say that clause 1 seems eminently sensible, and we support it. I would be grateful if the hon. Gentleman and the Minister addressed the issues that I have raised.

I should like to echo the words of my hon. Friend the Member for Bolton, South-East and the hon. Member for Peterborough in saying that it is a pleasure to serve under your chairmanship today, Dr. McCrea. It is the first time that I have done so. It is also a pleasure to serve on a Committee that is doing what I believe Parliament does best—discussing points of legislation without making party political points that obscure the intention of the legislation.

I congratulate my hon. Friend the Member for Bolton, South-East. I do not know whether I can congratulate someone on their luck in coming first in the private Member’s Bill ballot—I entered that faithfully, but never came anywhere higher than about 300th. [Interruption.] I realise that many other hon. Members are in the same position.

I also congratulate my hon. Friend on getting the Bill debated in Committee. It will be a great legacy for him. Although I was unable to attend the debate on Second Reading, the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Dewsbury (Mr. Malik), told me about the unprecedented cross-party support for the Bill and the remedy that it offers to unauthorised tenants.

The Government welcome the Bill unreservedly, and I understand that it is broadly welcomed by all members of the Committee. That is important because I am sure that, as the hon. Member for Peterborough mentioned, the problem of short-notice eviction, particularly in today’s difficult economic times, exists in most of the constituencies represented in the room today. I have certainly had to deal with the problem in my constituency surgeries.

It is recognised that the problem of short-notice eviction often arises from a landlord’s failure to gain consent to let from their lender, whether intentionally or not. The effect on tenants is not acceptable. The Government’s support for the Bill is based on the consultation document that we issued over the summer,  entitled “Lender repossession of residential property: Protection of tenants”, in which we outlined our preferred course of action in addressing the problem through legislation.

The Bill that we are scrutinising today is that piece of legislation. It fully supports the Government’s preferred course of action. I realise that it has come before we have published our response to the consultation, and I apologise for that. The response will be coming out shortly, and will take into account the deliberations on the Bill.

The Government worked with stakeholders last year, and more recently, in developing the policy response to the problem. I know that my hon. Friend the Member for Bolton, South-East has continued that engagement with a range of stakeholders—he mentioned them in his speech—since he introduced the Bill to the House. I would like to thank all the stakeholders involved for their work in improving the position of tenants within the current legislative framework.

I turn to the points raised by the hon. Member for Peterborough. On the mortgage conduct business, I was wondering whether the hon. Gentleman had received the letter from my hon. Friend the Member for Bolton, South-East following Second Reading. [Interruption.] Excuse me, I am getting information as I speak.

Inspiration.

Inspiration—exactly.

And perspiration.

And perspiration. The matter depends on the facts of the case, but the Financial Services Authority has confirmed that lenders’ giving reasonable notice to tenants does not conflict with the MCOB. On the point made by the hon. Member for Peterborough regarding “a”, not “one”, I suggest that my hon. Friend the Member for Bolton, South-East should reply to that, because I know that he has dealt with it on previous occasions.

Regarding the Building Societies Association’s concern, judges have discretion in such cases. They do not have to take only delay into account; they can also take into account lender and borrower circumstances. The lender would expect a court hearing to state the lender’s case. A judge can refuse to grant possession if necessary. I hope that those rather garbled pieces of inspiration were sufficiently clear for the hon. Member for Peterborough. If they were not, I will attempt to address them in more detail in writing.

Meanwhile, I congratulate my hon. Friend the Member for Bolton, South-East once more on the calm and competent way in which he has taken through this important legislation. I commend the Bill to the Committee.

Forgive me if I speak briefly, and also for being here for only a short time; I am supposed to be giving blood at 10 o’clock.

I congratulate the hon. Member for Bolton, South-East on promoting the Bill competently in the Second Reading debate and on presenting clause 1 informatively. The  comfort is that the Bill will do good; it will not do harm. It allows a judge the power to do something, but it does not require them to use it. The judge can take circumstances into account. For example, if the person who has granted the mortgage has allowed reasonable notice to a tenant of whom they become aware, that can be taken into account by the judge. The Bill does not involve an automatic two-month extension to the possession order.

The only question that has been floating around my mind may not be directly relevant to the Bill, but it is of interest. In respect of an unauthorised tenancy, what if the person who grants the mortgage has said to the person who has taken it, “You are not allowed to let or sub-let without our permission, and we are not going to give such permission. We require you to regularise the position without seeking a possession order”? Will the Bill apply in such circumstances? The issue is not vital to whether the clause is acceptable; it is just on my mind.

I shall try to respond to those points as well as I can. The word “a” and the use and meaning of it in the Bill was raised on Second Reading. We took the criticisms seriously and I consulted the legal people in the Department for Communities and Local Government. They are aware of the criticisms and I am assured that in a court of law the judge will interpret the word “a” as meaning “only one”. We do not think there is any doubt about that. We appreciate the concerns of the lenders, as represented by the Council for Mortgage Lenders, for example. I have met a representative of that organisation and people from the Department have met the organisation’s representatives several times and tried to reassure them on that point.

The Bill is the scaffold, and the regulations and guidance notes will fill in the rest of the building. The judge will have all the information in front of him, and anyone else who wants to consult the Bill will also have that information. The Department for Communities and Local Government assures me that it will ensure that, in the guidance notes and regulations that will have to go before a delegated legislation Committee, the word “a” will mean only once—the tenant will have only one shot at delaying the procedure, whether at the possession stage or application for warrant stage. I do not think that any judge in any court of law in Britain would allow tenants to abuse the law as people have suggested they might if the word “a” were not understood. I am confident that we are sound on that point.

The Minister has already referred to the MCOB, which requires the person selling the property to acquire the best possible price. The rules are from the Financial Services Authority and consultations have taken place. As the Minister has said, we do not believe that MCOB rules are infringed in any way by the Bill.

As for who delivers the envelopes, under the current rules either the lender or the Courts Service can do that. However, I and others believe that it is best if the lender delivers the envelopes. Envelopes from courts are likely to be branded, and we must consider the fact that the tenant might not want people who live in the same property or in the vicinity to know of their difficulty. Moreover, a branded envelope from a court might just raise curiosity, as a result of which someone else might open it. We consider that envelopes that are not branded in such a way are preferable, which is why it is best if the lenders send them out.

For the avoidance of doubt, I should say that I support that view. The indicated cost to the public purse of sending such correspondence via the Courts Service is prohibitive, and the existing system, which works, is not a substantial impediment to the information getting to the person.

While we are on the subject of guidelines, I wish to make a plea about the generic issue of data protection, which was mentioned on Second Reading. Would it be possible for the guidance given by the Information Commissioner on the sharing of information in respect of repossessions to be included in the regulations? If not, can the letter from the Information Commissioner be placed in the House of Commons Library?

We shall certainly bear in mind the second issue raised by the hon. Gentleman; I think that it can be accommodated. I thank him for his support in respect of his first point.

I want to respond to the hon. Member for Worthing, West on whether there is another way of maintaining the tenant in the same property, by regulating the situation legally. Curiously, just yesterday I received a letter about a person who became an unauthorised tenant, without knowing so until the procedure had started. The situation was worked around in such a way that the landlord became an accepted buy-to-let landlord.

In such cases, higher interest is payable on commercial buy-to-let mortgages; indeed, there will probably be a higher arrangement fee. That happened to the person who wrote to me. The two people in the property became authorised tenants instead of unauthorised tenants, so there are ways to unravel the situation. That is obviously the best outcome for the lender, who does not have to sell the property, and for the tenant, who does not have to leave the property.

I say to the hon. Member for Peterborough that I have been told that the letter from the Information Commissioner is already in the Library. The data protection issue raised on Second Reading will be dealt with under guidance to the Bill, but not under regulation.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.