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

With this it will be convenient to consider clause 56 stand part.

It is an absolute pleasure—I genuinely mean that—to continue our proceedings with you in the Chair, Mrs Harris.

The clause will end the unfair practice of pitting renters against each other in bidding wars. Many members of the Committee will have come across that as councillors and as Members, and they do not need me to tell them about the severe impact on renters. Those of us who represent constituencies with particularly hot rental markets are all too familiar with the common story: a prospective tenant arranges a viewing and turns up in person, only to find themselves being asked to compete with other tenants on the spot. Their experience is not that of a viewing, but of a kerbside auction. The impact on renters of the practice is clear.

In other cases, the growth of social media and other platforms allows this practice to occur without prospective tenants even being in the same place. Renters who have applied for a property may find themselves being added to a WhatsApp group and asked to submit offers in front of each other. Again, the detrimental impact of that practice on renters cannot be overstated.

Rental bidding restricts tenants’ ability to make an informed choice about one of the most financially significant decisions they face. It is clearly an unfair practice, and one that, thankfully, only a minority of landlords make use of. The clause will end the practice for good. It will require landlords and letting agents to state a proposed rent in any written advertisement or offer. Landlords and letting agents will then be prohibited from asking for, encouraging or accepting bids above that price. That will improve the experience of prospective tenants across England and provide clarity to all involved in the lettings process.

I turn to clause 56, which sets the enforcement framework for breaches of the rental bidding measures set out in the previous clause. Once enacted, clause 56 will give local housing authorities the power to impose a financial penalty of up to £7,000 on persons who are in breach of the prohibitions. In addition, local authorities will be able to issue multiple civil penalties to any landlord or letting agent who repeatedly breaches the requirements set out in clause 55. In line with the new burdens doctrine, we will fully fund the cost of all additional duties on local government from enforcing the rental bidding prohibition. With that, I commend the clauses to the Committee.

I echo the Minister’s comments about it being a pleasure to serve with you in the Chair, Mrs Harris.

I will not take too long on this point. The measure has been the subject of some controversy. Clearly, there is a philosophical question about the ability of the owner of an asset to gain the best possible market return, but the Government are determined on the matter. I will, however, make some practical points.

The first is about how to address the situation where the property in question is the asset of an organisation whose directors have a fiduciary duty to maximise the return on it, as is common in the case of pension funds, investment trusts or other bodies that may invest in property. Clearly, there is an obligation in law on the directors to seek the maximum possible return, but this legislation will prohibit them from undertaking any form of bidding process.

The second is about a situation where an intermediary sits between the tenant and the owner of the property. Clauses 55 and 56 set out what is meant by a prospective landlord but, in pursuit of their fiduciary duty, the ultimate owners of an asset might seek bids from a prospective managing agent or other intermediary party. They might bid to secure the maximum possible rent on that group of properties, in turn letting them out individually to tenants at a higher level of rent. Both those situations potentially create a degree of conflict.

I agree entirely with the point about the egregious practices of some landlords. It seems to me, however, that we must consider the situations that I have highlighted so that the legislation does not inadvertently lead to trustees and directors of pension funds that invest in property being in breach of their duties, or to the establishment of a get-out by means of a managing agent who sits between the property owner and the tenant.

I thank the shadow Minister for those well-made questions. This is a specific problem that we are trying to target, and the majority of landlords do not engage in rental bidding. We are trying to stamp out the egregious practice of a minority of landlords who exploit the fact that, particularly in hot rental markets, there is a lack of supply vis-à-vis demand. Tenants can be pitted against each other in ways that ensure the rent of a tenancy escalates to a point beyond which many of them can afford, or which, if they can afford it, puts incredible financial strain on them.

Once these provisions are in force, we think landlords will—in much the same way as the tribunal might—determine what the market rent is in a given area and what they can expect to receive from their property, and then advertise the rent at that price. I have been asked how that would work. Will landlords not advertise a price below what they could otherwise expect? We cannot have it both ways. If a landlord can expect a certain price through a competition, that suggests that tenants can pay a slightly higher price and bid up. We expect landlords to look at the market price in a given area and advertise the property at that rent, and these provisions will ensure that they cannot encourage or invite bids over that amount.

On the specific cases that the shadow Minister raises, I would not expect organisations of the type he lists to be in breach of their fiduciary duties as a result of these provisions. I understand his point about intermediary agents, particularly in groups of property where they might look to get the best deal on any of those things. I will come back to him on that specific point in writing, because I understand the need to work through those hard edge cases, but we think that only a very small minority of landlords will be affected. This is not the usual practice across every part of the country. His points were well made, and I will come back to them.

Question put and agreed to.

Clause 55 accordingly ordered to stand part of the Bill.

Clause 56 ordered to stand part of the Bill.