Clause 5 - Statutory procedure for increases of rent

Renters (Reform) Bill – in a Public Bill Committee am ar 23 Tachwedd 2023.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Amendment proposed (this day): 200, in clause 5, page 5, line 17, at end insert—

“(4F) It shall be an implied term of every assured tenancy to which this section applies that percentage increase between the existing rent and any new rent specified in a notice given under subsection (2) shall not exceed whichever is the lesser of—

(a) the percentage increase in the rate of inflation (calculated by reference to the Consumer Prices Index) since the date on which the existing rent took effect; or

(b) the percentage increase in median wages in the local authority area in which the dwelling-house is situated, calculated over a three-year period ending on the date on which the notice was served.”—(Lloyd Russell-Moyle.)

This amendment specifies that the annual increase in rent requested by a landlord may not exceed the lesser of either the Consumer Prices Index or wage growth in the relevant local authority area.

Photo of Yvonne Fovargue Yvonne Fovargue Llafur, Makerfield 2:00, 23 Tachwedd 2023

I remind the Committee that with this it will be convenient to discuss the following:

Amendment 159, in clause 5, page 6, line 23, at end insert—

(1) Any increased rent which is paid otherwise than in accordance with section 13 or section 13A is recoverable from the landlord by the tenant as a debt claim in the courts.

(2) The Secretary of State may, by regulations, provide for such claims to be recoverable by proceedings in the First-Tier Tribunal, rather than the courts.”

This amendment would ensure that in instances where a private landlord increases the rent without issuing a section 13 or section 13A notice the tenant can seek to recover costs through a debt claim in the court. It also provides the government with the power by regulation for such claims to be recoverable by tribunal.

Clause stand part.

Amendment 201, in clause 6, page 7, line 3, leave out paragraphs (b), (c) and (d) and insert—

“(b) leave out from ‘shall determine the rent’ to end of subsection and insert ‘in accordance with subsection 13(4F)’.”

This amendment would require a tribunal to determine an appropriate rent in accordance with proposed subsection 13(4F).

Amendment 197, in clause 6, page 7, line 13, at end insert—

“(3A) After subsection (1) insert—

‘(1A) In making a determination under this section, the appropriate tribunal must have regard to the original rent agreed with the tenant and subsequent changes in—

(a) Local Housing Allowance;

(b) the average rent within the broad rental market area as assessed by the Valuation Office Agency or as listed in the Property Portal;

(c) the consumer price index; and

(d) median income growth.’”

This amendment would allow the tribunal to take into account not only new rents in the market but current rents in existing tenancies, changes in wages, inflation, and local housing allowance when making a determination.

Amendment 198, in clause 6, page 7, line 25, at end insert—

“(5A) After subsection (5) insert—

‘(5A) Where a notice under section 13(2) has been referred to the appropriate tribunal, then, unless the landlord and the tenant otherwise agree, the rent determined by the appropriate tribunal (subject, in a case where subsection (5) applies, to the addition of the appropriate amount in respect of rates) shall be the same or below the original rent and the increase in consumer price index or medium income growth, whichever is lower over the period since the tenancy started.’”

This amendment would limit tribunals to an upper cap of CPI or medium income growth, whichever is lower, for rent increases.

Amendment 199, in clause 6, page 7, line 25, at end insert—

“(5A) After subsection (5) insert—

‘(5A) Where a notice under section 13(2) has been referred to the appropriate tribunal, then, unless the landlord and the tenant otherwise agree, the rent determined by the appropriate tribunal (subject, in a case where subsection (5) applies, to the addition of the appropriate amount in respect of rates) shall be set using the statutory guidance on in-tenancy rent increases laid before Parliament by the Secretary of State.’”

Amendment 199 and NC66 would require the Secretary of State to issue guidance to tribunals on the determination of in-tenancy rent increases, and require tribunals to take such guidance into account when making determinations.

Amendment 160, in clause 6, page 7, line 27, at end insert—

“(7A) After subsection (8) insert—

‘(8A) Where a notice under section 13(2) has been referred to the appropriate tribunal then, unless the landlord and the tenant otherwise agree, the rent determined by the appropriate tribunal (subject, in a case where subsection (5) above applies, to the addition of the appropriate amount in respect of rates) shall be the same or below the rent specified in the section 13 notice and the rent as determined by the tribunal shall only become payable once the decision of the tribunal has become final.

(8B) A decision becomes final only on the latest of—

(a) the determination of any appeal;

(b) if earlier, on the expiry of the time for bringing a subsequent appeal (if any); or

(c) by its being abandoned or otherwise ceasing to have effect.’”

This amendment would ensure that where a rent assessment is carried out by a tribunal, the rent subsequently determined by that tribunal cannot be higher than that originally requested by a landlord in a section 13 notice.

Amendment 190, in clause 6, page 7, line 38, at end insert—

“(c) no more than the rent proposed by the landlord in the notice served on the tenant under section 13 of the 1988 Act.”

This amendment would mean that the rent payable after a tribunal determination can be no higher than the rent initially proposed by the landlord in the notice served on the tenant.

Amendment 161, in clause 6, page 8, line 20, at end insert—

“which must be no earlier than two months following the date of determination”.

This amendment would ensure that in cases of undue hardship tenants would have a minimum of two months from the date of determination before a new rent became payable.

Amendment 162, in clause 6, page 8, line 21, leave out subsection (4) and insert—

“(4) A date specified under subsection (3)(b) must be no earlier than the date on which the determination becomes final, with a decision only becoming final on the latest of—

(a) the determination of any appeal;

(b) if earlier, on the expiry of the time for bringing a subsequent appeal (if any); or

(c) by its being abandoned or otherwise ceasing to have effect.”

This amendment would remove the requirement for a date determined by a court for rent to become payable in cases of undue hardship to not be later than the date of the determination.

Clause 6 stand part.

New clause 58—Requirement to state the amount of rent when advertising residential premises—

“(1) A landlord must not advertise or otherwise offer a tenancy of residential premises unless the amount of rent is stated in the advertisement or offer.

(2) A letting agent acting on behalf of a landlord must not advertise or otherwise offer a tenancy of residential premises unless the amount of rent is stated in the advertisement or offer.”

This new clause would require landlords or persons acting on their behalf to state the proposed rent payable in the advertisement for the premises.

New clause 59—Not inviting or encouraging bids for rent—

“(1) A landlord must not invite or encourage a prospective tenant or any other person to offer to pay an amount of rent for residential premises that exceeds the amount of rent stated as part of the advertisement or offer of the premises as required by section [

(2) A letting agent acting on behalf of a landlord must not invite or encourage a prospective tenant or any other person to offer to pay an amount of rent for residential premises that exceeds the amount of rent stated as part of the advertisement or offer of the premises as required by section [

(3) Subsection (1) does not prohibit a prospective tenant or other person from offering to pay an amount that exceeds the stated amount of rent.”

This new clause would prevent landlords or persons acting on their behalf from inviting or encouraging bids that exceed the amount stated as part of the advertisement or offer of the premises.

New clause 62—Limit on amount of rent that a residential landlord can request in advance—

“In Schedule 1 to the Tenant Fees Act 2019, after paragraph 1(8) insert—

‘(9) Where rent is payable in advance, the maximum that may be charged is equivalent to the amount specified in paragraph 2(3).’”

This new clause would ensure that the maximum amount of rent that could be lawfully requested by a residential landlord in advance of a tenancy commencing would be 5 weeks’ rent for tenancies of less than £50,000 per annum and to 6 weeks’ rent for tenancies over £50,000 per annum.

New clause 66—Rent increase regulations—

“The Secretary of State must lay before Parliament, from time to time, guidance for tribunals on the determination of in-tenancy rent increases under a section 13(2) notice, such guidance shall include reference to Local Housing Allowance,

Amendment 199 and NC66 would require the Secretary of State to issue guidance to tribunals on the determination of in-tenancy rent increases, and require tribunals to take such guidance into account when making determinations.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

I rise to speak to amendment 159 and others tabled in my name and the names of my hon. Friends. I thank my hon. Friend the Member for Brighton, Kemptown for tabling the six amendments that he moved and spoke to this morning. They raise a number of important issues and it is right that the Committee and the Government carefully consider them.

As we have heard, clauses 5 and 6 set out the process for rent increases under the new tenancy system and how any such increase can be challenged by tenants. Under the existing assured tenancy regime, a landlord can only increase the rent during a fixed-term assured shorthold tenancy by including a rent review clause in the tenancy agreement. Rent review clauses of this kind are used by landlords to increase rent levels during fixed-term tenancies, but it is far more common for landlords to offer a new fixed-term tenancy at a higher rent when the old one is coming to an end, or to seek to increase the amount of rent payable once a tenant has fallen into a periodic tenancy with no specific end date.

The rents on periodic assured shorthold tenancies can be increased by the landlord serving notice under section 13 of the Housing Act 1988. However, although formal section 13 increases can take place only once a year, under the current system assured shorthold tenants can still be asked by their landlords either to agree informally or to formally sign a new agreement accepting a higher rent level, and there is no limit whatsoever on how high rents can rise by either method.

In theory, the tenant does not have to agree to a rent increase proposed informally or formally via a new agreement, and they can refer increases to a first-tier tribunal on grounds of reasonableness, yet all the available evidence suggests that only an incredibly small proportion of privately renting households do so. An analysis by Generation Rent of market rent assessments undertaken by the first-tier tribunal indicated that only 341 such cases were heard between January 2019 and August 2021. Bearing in mind that there are approximately 4.4 million privately renting households in England alone, it is a miniscule proportion.

The reason why so few tenants determine to make use of the tribunal process under the existing tenancy regime is obvious. If a tenant refuses a rent increase either informally or formally via a new agreement, or successfully challenges a rent increase at tribunal, a landlord can take immediate steps to end their tenancy, most obviously by issuing a no-fault section 21 notice.

With the introduction of the new tenancy system, the ability of landlords to compel tenants to accept rent rises by means of the latent threat of a section 21 notice will obviously be removed. Although there will remain the threat of spurious eviction by means of the remaining de facto no-fault grounds for possession that we discussed at length in previous debates, the new system will be an improvement on the current situation faced by private tenants when it comes to rent increases.

By amending section 13 of the 1988 Act, clause 5 will ensure that issuing a section 13 notice will henceforth be the only valid way that a private landlord—except those of a relevant low-cost tenancy, as specified in the Bill—can increase the rent, and landlords will therefore be able to increase the amount of rent charged only once per year. Supplemented by the provisions in subsection (4), which will increase the notice period for a rent rise from one month to two months, the changes will create more predictability and give tenants more certainty about future rent increases. On that basis, we welcome them.

However, we remain seriously concerned that the provisions in the clauses are not robust enough to prevent unaffordable rent increases from being used as default eviction notices for the purpose of retaliation against complaints, or simply because a landlord wants to try to secure a rent level that is far in excess of what they can reasonably expect from a sitting tenant.

We have consistently raised concerns about this issue since the White Paper was published in the summer of 2022. As I argued in response to a statement accompanying the release of the White Paper that was made by the then Under-Secretary of State at the Department, the hon. Member for Walsall North—he may remember—it is problematic that the Government did not include in the reform package any robust means of redress for tenants facing unreasonable rent rises. Our view remains as set out in that exchange last year—namely, that a one-year rent increase limit, the removal of rent review clauses, and vague assurances about giving tenants the confidence to challenge unjustified increases at tribunal are not enough.

With the scrapping of section 21, the risk of economic evictions by means of extortionate within-tenancy rent hikes will increase markedly. The Government acknowledge that tenants need protection against what they term “back-door eviction” by such means. However, we believe that the Bill as it stands does not protect tenants sufficiently from such economic evictions, and that it needs to be strengthened accordingly in several ways.

In the White Paper, the Government committed to preventing

“the Tribunal increasing rent beyond the amount landlords initially asked for when they proposed a rent increase.”

We believe that that was an entirely sensible proposal. An obvious need under the new tenancy system is to ensure that all tenants are fully aware that they can submit an application to the first-tier tribunal to challenge a rent amount in the first six months of a tenancy or following the issuing of a section 13 notice. Equally as important is that the tribunal process operates in a way that gives them the confidence to do so.

The Bill allows for a situation in which tenants who are handed section 13 notices with what they consider to be completely unreasonable rent increases might apply to the tribunal to challenge the increase, only to see the rent level rise higher. That will act as a powerful deterrent to tenants making such applications. As a consequence, the Bill risks emboldening landlords to press for unaffordable rent increases in the knowledge that tribunal challenges will remain vanishingly rare, as they are now.

The Government’s explicit intent might well be to deter a proportion of tenants from challenging section 13 rent increases. After all, with 4.4 million households now renting privately in England, even a minor uptick in applications to the tribunal will place it under enormous pressure. Without additional resourcing and support, that could lead to extensive delays. Ultimately, however, it is for the Government to ensure that the first-tier tribunal can cope with the implications of the new tenancy regime that they are introducing, not for tenants to have to stomach unreasonable rent rises because there is a chance that they will not do so.

On a point of principle, we believe that the tribunal should only ever be able to increase the rent increase requested in the section 13 notice issued, or to award a rent amount lower than it. Amendment 160 would ensure that that would be the case by specifying that where a rent assessment is carried out by a tribunal, the rent subsequently determined by the tribunal cannot be higher than that originally requested by a landlord in the section 13 notice. We believe that that change, which would ensure that the tribunal process was in line with the commitments made by the Government in their White Paper, and reasonable and proportionate. I urge the Minister to accept it.

We also take the view that the Bill needs to include greater protection for tenants who would suffer undue hardship as a result of a section 13 rent increase. Once the provisions in the Bill are finally enacted, a considerable number of tenants—in particular those in hot rental markets where rent levels increase rapidly—will without doubt be unable to afford an increase in rent as set out in a section 13 notice. Many will simply give notice and leave the property without taking the matter any further.

A significant proportion of those who attempt by means of the tribunal a challenge of a rent increase perceived to be unreasonable, in an effort to secure a rent lower than proposed in the section 13 notice, but fail, will ultimately leave the property. That would even be the case if the Government accept amendment 160 and the tribunal cannot increase the amount further. We believe that those who would experience undue hardship as a result, such as tenants at risk of becoming homeless, because they have to leave what has become an unaffordable, should be afforded a little more time—it is only a little more time—to try to secure a property that they can afford.

Taken together, amendments 161 and 162 would achieve that aim by changing the point at which the rent increase becomes payable from the date at which the tribunal makes a determination to two months after that date. The effect of that pair of amendments would simply be to give vulnerable tenants a reasonable period of time in which to make new arrangements as a result of a rent rise that was unaffordable for them. We hope that the Government can see the merit of accepting the amendments and will give them serious consideration.

We also believe that three other important changes to the Bill are required in relation to rent. The first concerns section 13 notices. As I remarked earlier, the clause amends this section of the 1988 Act so that from the date of commencement it will be the only valid way in which a private landlord, except those of a relevant low-cost tenancy, can increase the rent, once per year. In practice, however, we know that, particularly at the lower end of the private rented market and in the unregulated shadow rental market, a great many landlords will inevitably increase rent levels without issuing a formal section 13 or 13A notice. Amendment 159 would ensure that in instances where they might, a tenant would have the right to seek to recover costs through a debt claim in the court. It would also provide the Government with the power by regulation to have such claims recoverable by tribunal, if Ministers felt that was a more appropriate body to determine such claims.

The second issue concerns rent requested in advance of a tenancy’s commencement. In the White Paper, the Government committed to introducing a power to prohibit the amount of rent that landlords can ask for in advance, and we supported that proposal. We will come to discuss measures aimed at discriminatory practices in relation to the granting of tenancies when we debate the various Government amendments that are to form new chapter 2A of part 1 of the Bill. However, irrespective of how effective those groups of amendments might ultimately be—we have our doubts, which we will set out in due course—blanket prohibitions are not a silver bullet for discriminatory practices in the private rented sector.

A number of informal barriers to renting privately are regularly faced by large numbers of tenants. They include requests that renters appoint a high-earning guarantor—an issue to which I hope we can return in a future sitting—and asking renters for multiple months of rent in advance. According to research carried out by Shelter, a staggering 59% of tenants reported being asked to pay rent in advance when attempting to secure a property the last time they moved; some were even asked to pay in excess of six months’ rent up front. Tenants reported taking out unsecured loans, using their credit cards or going significantly into their overdrafts to make the advance payments. One in 10 of those surveyed reported being denied a property for which they could afford the monthly rent simply because they were unable to pool together the sizeable advance rent payment that the landlord requested.

It is true that clause 1 defines a rental period as one month—a change from the current situation in which periods of a periodic tenancy can be of any length. One reading of the Bill might suggest that a single rental period is all that a landlord will be able to request under the new tenancy regime. If that is the case, I would be grateful if the Minister confirmed as much and detailed precisely how clause 1 would prevent landlords from requesting multiple rent payments in advance. Nothing that we can see in the Bill would prevent a landlord from requesting several rent payments at one time before a tenancy was signed.

We believe that the solution is new clause 62, which would ensure that the maximum amount that could be lawfully requested by a residential landlord in advance of a tenancy would be five weeks’ rent for tenancies of less than £50,000 per annum and six weeks’ rent for tenancies of over £50,000 per annum.

The third and final change that we believe is required relates to rental bidding wars—the product of soaring demand and inefficient supply which is, I admit, to a large extent concentrated in our cities and larger towns. The phenomenon involves multiple tenants competing fiercely for individual private lets. Landlords and the agents acting on their behalf, overwhelmed by applicants, now regularly play prospective renters off against each other, with some offering to pay months of rent up front as a lump sum, to sign longer tenancy agreements or to agree to rent levels far in excess of the advertised monthly rate.

Under the new tenancy system, long-term fixed-term tenancy agreements will not exist. We hope the Government will accept our new clause 62 or introduce an amendment of their own, as they promised in the White Paper, to prohibit landlords from asking for rent in advance. That leaves competitive bidding wars in respect of monthly rental periods as the only means by which this inherently inflationary phenomenon could continue—a phenomenon that the unscrupulous can undoubtedly use to discriminate against certain types of tenants and, even where no such discrimination occurs, pushes many to the limit of what they can afford financially.

Taken together, new clauses 58 and 59 would effectively prohibit bidding wars for private rented properties by requiring landlords or persons acting on their behalf to state the proposed rent, based on an estimate of the property’s market rate, in the advertisement for the premises. That should prevent landlords from inviting or encouraging bids that exceed the amount stated.

The new clauses are based on legislation introduced in New Zealand and Australia, the former having banned the practice entirely in February 2021 and the latter having seen it prohibited in most states—including, most recently, New South Wales in December last year and South Australia in June this year. We hope the Minister will give the new clauses due consideration. I look forward to his thoughts about them and about other five amendments in this group.

Photo of Nickie Aiken Nickie Aiken Ceidwadwyr, Cities of London and Westminster

I thank the shadow Minister, who had some very reasonable thoughts about this issue, for his speech.

Currently, I am dealing with an example of what I believe to be the worst behaviour by a corporate landlord that I have ever come across in 18 years as a councillor or Member of Parliament. I am talking about rent increases. AXA Insurance, which now owns Dolphin Square in Pimlico in my constituency, is carrying out a major refurbishment of that estate; that is understandable. However, it is now asking tenants, some who have been there for many years, to move out of flats that it wants to refurbish and into others. But, if they do move out and into another flat, their tenancy breaks, and they have to take out a new tenancy, which includes a 40% increase in rent.

I have really pushed AXA on this issue, because I honestly think that such behaviour—when somebody has lived in a flat for maybe five, six, seven or eight years, and then is asked, because of a refurbishment project, to move into a similar flat, not a refurbished flat, necessarily, but another flat that is awaiting refurbishment, only to be given a 40% rent increase and also to have to start a tenancy again—is outrageous.

I hope that the Minister can give his thoughts on this experience, which many of my constituents are facing, and on how this Bill, and particularly this clause, may be able to protect them in future. I do think that this is perhaps one of the most morally disgusting behaviours I have ever seen from a corporate body in my 18 years as a public official in in Westminster.

Photo of Jacob Young Jacob Young Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities) 2:15, 23 Tachwedd 2023

I thank Members for their amendments. Let me start by being clear that the Government do not support the introduction of rent controls at any point in the tenancy, no matter what they are linked to. The Bill protects tenants from very large rent increases being used as a back-door method of eviction while protecting the ability of landlords to increase rent in line with market levels.

That said, I am concerned by the practices that my hon. Friend the Member for Cities of London and Westminster mentioned in relation to Dolphin Square and would be happy to meet her to discuss the matter further. Although I appreciate that the Bill will not be passed in time for her constituents, hopefully we can prevent some of those types of practice in the future.

Clause 5 amends section 13 of the Housing Act 1988 to ensure that in future all rent increases for private landlords will take place via the specified mechanism. If a landlord tries to make a tenant pay an increased rent outside of the process, it will be unenforceable.

Clause 6 amends section 14 of the Housing Act 1988. It sets out the conditions by which a tenant can submit an application to the first-tier tribunal to challenge the rent amount in the first six months of a tenancy, or following a section 13 rent increase notice.

Let me turn to the amendments. When a tenant challenges a rent increase, it is for the first-tier tribunal to then determine the rent. Although market data can indicate the general trends in an area, it can be challenging to use when calculating the value of a specific property. The tribunal is made up of experts who are experienced in understanding the different factors—including the rent for comparable properties in the area, the quality of fixings and the proximity to amenities—that result in a market rate. The tribunal members are best placed to determine the rent using the data that they feel is most appropriate, rather than having to use whichever indicator is the flavour of the month. The tenant must pay the rent from the date that the tribunal directs, or from the beginning of the rent period specified in the notice. In cases of undue hardship, that will be the date that the tribunal directs, but must not be later than the date of determination.

On new clauses 58 and 59, landlords and agents are already prohibited from engaging in pricing practices that are false or misleading, under the Consumer Protection from Unfair Trading Regulations 2008. If a prospective tenant believes that a landlord has acted dishonestly during the lettings process, they will be able to raise the matter via the new private rented sector ombudsman. Complaints about letting agents can be referred to the existing agent redress schemes.

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown

Will the Minister confirm that he thinks that bidding wars that are not advertised beforehand constitute dishonesty?

Photo of Jacob Young Jacob Young Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

Yes, I do.

New clause 62 seeks to align the maximum amount of rent in advance that landlords can charge tenants with the limits set on security deposits by the Tenant Fees Act 2019. Although I understand the reasoning behind the new clause, to link the two on an arbitrary basis would not be an efficient means to achieve its intended effect. It would mean that any changes to one would directly affect the other.

As the Committee will be aware, and as the hon. Member for Greenwich and Woolwich mentioned, the Government committed to introduce a similar power to limit rent in advance as part of our White Paper. We have concluded, however, that no such additional power is needed, as it is already possible to limit rent in advance using the power in section 3 of the Tenant Fees Act 2019. Before deciding to use that power, which would significantly infringe on the business interests and financial freedoms of private landlords, it is vital that we gather strong evidence of need and undertake a thorough impact assessment.

Furthermore, rent in advance can be beneficial in a variety of situations. For example, it can be employed to balance a financial risk when a prospective tenant could not otherwise pass a reference or affordability check. Above all, it is vital that landlords retain the ability to ensure a sustainable tenancy for both parties. We have made it clear that asking for a large amount of rent in advance should not be the norm.

On new clause 66, we will update the guidance to ensure that tribunal users have the confidence and information they need to engage with it effectively. This includes helping parties to understand how they can provide evidence of comparable rent. Our reforms strike a balance between the landlord’s ability to increase rent in line with the market and protecting tenants from back-door evictions through excessive rent hikes.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

Forgive me if I missed it, but I do not think the Minister addressed the argument that underpins amendment 160. Why did the Government commit in their White Paper to limit the tribunal to determining a rent increase in line with or below the section 13 notice, instead of giving the tribunal the power to increase notice? If a landlord asks for a certain amount of rent and the tribunal determines that that is the amount to be paid, surely a tenant should not suffer by seeing the rate increased. Does the Minister not worry, as we do, that the Government’s approach will have a chilling effect on the confidence that tenants have in taking such cases to the tribunal?

Photo of Jacob Young Jacob Young Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

I understand the argument that the hon. Gentleman is trying to make, but we have listened to concerns and think it is fair that the tribunal is not limited when determining the market rent. This will mean that the tribunal has the freedom to make full and fair decisions, and can continue to determine the market rent of property.

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown

The Minister has talked about the tribunal making free and fair determinations, but the tribunal is already limited by what it cannot take into account. For example, it cannot take into account alterations that the tenant has made to the property, at their own cost, to increase its value. The tribunal already indicates what it can take into account, so widening that scope or making it clear that the tribunal should not issue a higher rent is not about giving it more restrictions. Surely it is about giving it clearer guidelines on the face of the Bill, so that everyone entering the process knows where it is going.

Photo of Jacob Young Jacob Young Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

As I have already set out, we believe that the tribunal should be free to make whatever determination it thinks is the market rent for a property. I therefore ask hon. Members not to press their amendments.

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown

I think the Minister is missing a trick here, because we have tabled some reasonable amendments. I welcome the fact that he seemed to suggest that it is already possible, via regulation, to prevent rent from being paid in advance, but he needs to enact that and get on with it. He seemed to be a bit cautious about doing so. A regulatory framework that allows advance rent in some, but not all, circumstances would be a good compromise. Maybe that is where the Minister was going, but we need to have more flesh on that bone.

I also worry that when the Minister talks about flexibility for the tribunal, he is actually saying that it can look only at market rent and not at other things. What I am trying to say is that it should be able to look at all the different indicators—not just the flavour of the month, as he put it, but the local housing allowance, the consumer prices index, and the rents via the property portal. At the moment, it is not clear that the tribunal would have access to use the rents via the property portal as an indicator, rather than new rents. That is what the amendments attempt to do. Some of these improvements could be made when the Bill comes back, and I hope the Minister will do that.

Finally, the Minister needs to reconsider the upper limit. A landlord could still re-issue another section 13 if, via the tribunal process, they realised that they wanted to increase it higher, but rather than involving the tribunal, they just set it at a higher rate themselves. That creates a disincentive to go to the tribunal.

Photo of Jacob Young Jacob Young Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

I should be clear that there is no requirement for the landlord to accept the tribunal’s final outcome. The landlord could still offer the initial rent to the tenant.

Photo of Lloyd Russell-Moyle Lloyd Russell-Moyle Labour/Co-operative, Brighton, Kemptown

They could, so why not? It would be expected if a property was marketed at a certain price for that to be the accepted price. If someone puts a section 13 down, it is a form of marketing what this property is now worth. The Minister is quite right that it is wrong to engage in unfair advertising practices. A section 13 is a form of advertising to a sitting tenant, to say, “I’m advertising that this is the rent that I now want.” To then change their mind via a tribunal is, in my view, unfair. I think the Minister probably gets that point, but I wonder whether it might be possible to change it through regulation, and advice to the courts and the tribunals. These things need to be considered, and the same goes for widening the scope of what the tribunals could push. I will not push my amendments now, but I hope the Minister will genuinely think about how we can increase the scope of what the courts can consider, so that rents are not always inflated up to the very highest level, but are fair for all our communities.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

There were some points of interest raised in this debate that we will certainly come back to—I will check the transcript in relation to a couple of them—but I do not think they satisfy us sufficiently not to press these amendments.

On new clauses 58 and 59, I took the Minister to imply that bidding wars could fall under the category of false, misleading or essentially unfair practices—I think he mentioned dishonesty. I do not think he has given us a cast-iron commitment that bidding wars of any kind constitute an unfair practice. If they do, and the Government know that, why are they not taking action to stamp them out? Lots of people in cities and towns across the country, and certainly in my constituency, are being impacted financially by bidding wars. In some areas, they are extremely intense, and people end up paying huge amounts more than were initially advertised.

I agree with the Minister that advance rent should not be the norm. It seems to be somewhat the norm in many parts of the country. I am interested that he says there is a potential means of addressing this via the Tenant Fees Act 2019. It sounded to me like it may take quite a long time for the Government to bring forward any proposals in that regard. We will certainly not see advance rent stamped out any time soon. The Minister did not address my point on undue hardship. I absolutely realise—it was part of my remarks—that under the Government’s proposals, when a tribunal determines the rent, it will kick in from the point of determination. We think that vulnerable residents need a little more time to adjust and move out if they simply cannot afford those rents.

Finally, on the tribunal awarding rent levels in excess of what is asked for, I think the Government have got it wrong. The Minister referenced unspecified interests that the Government had heard lobbying from—I think he said, “We’d heard concerns.” Who from? I do not know. We can all take a guess who from. There were proposals in the White Paper, this being one of them, that we thought extremely sensible. He is right that some landlords may, having been told by the tribunal that they can increase the rent level even further than asked for, be good-natured enough to charge only the initial rate, but I cannot think that many of them would. They are, after all, running businesses. We need a measure—we will no doubt return to this at a later stage—to ensure that the rent level that the landlord asked for via section 13 is the maximum. In many cases it may reduce, but it should be the maximum that a landlord can ask for. On that basis, I am afraid that we will press our amendments 160 and 161 to a vote.

Photo of Jacob Young Jacob Young Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

I want to be absolutely clear: the Government’s position is that bidding wars are not illegal.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

That was my understanding as well, so I am not sure what the Minister was saying about false, misleading or unfair practices. If that does not apply to bidding wars, it applies to something completely separate from what we are talking about, so he has convinced me that new clauses 58 and 59 are even more necessary than I thought. I thought there was a glimmer of hope there, but there clearly is not. We will press all our amendments to a vote.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.