My Lords, as this is my first contribution to today’s proceedings, I draw the attention of the Grand Committee to my registered interest as a vice-president of the Local Government Association. I thank the noble Lord, Lord Bourne of Aberystwyth, for the letter and the draft guidance, which we received on Friday afternoon. I very much appreciated that: it was good to get the papers and look at them over the weekend.
Amendment 1, moved by the noble Baroness, Lady Grender, and to which the noble Baroness, Lady Thornhill, and I have added our names, raises an important issue for prospective tenants. It seeks to include in the Bill more certainty, and to provide greater fairness and transparency for the person or persons looking for accommodation. They would be provided with more information about how their money is to be treated. I am not against the use of holding deposits in principle, but I want to see real clarity in their operation, and the amendments in this group are a positive step forward.
I am sure the Grand Committee will be repeatedly told today that guidance is sufficient and we do not need to go down the route of regulation. But I am also clear that this is guidance; it is not statutory and, as such, has no legal effect—it is just guidance. Amendment 1 rightly places a requirement on the Secretary of State to set out in regulations the procedure to be followed by a landlord or letting agent when they take a holding deposit, and how the deposit is to be treated in a prescribed way so that it is clear what the prospective tenants should be told. The amendment would also ensure that there is a clear procedure to be followed where it is decided to withhold a deposit, and that evidence must be provided to the person who paid the deposit, setting out the ground on which it is being withheld. The regulations are to be approved using the negative procedure, which is the minimum of burdens for the Government and is the right way forward in this case.
Amendment 17, in the names of the noble Baronesses, Lady Grender and Lady Thornhill, and Amendment 22 in my name, seek to stop the practice of taking multiple deposits from people. I accept that this is referenced in the guidance, and that, as it says, a holding deposit creates a binding conditional contract between tenants and landlord. But if, as a landlord or letting agent, you accept multiple deposits, surely you must be in breach of this binding conditional contract. It can be said in those circumstances that there is no conditional contract whatever.
3.45 pm
Amendment 18 from the noble Lord, Lord Shipley, and the noble Baroness, Lady Thornhill, addresses the same issue that I have sought to address. I very much agree with the noble Lord’s points. In principle I support the Bill. I want to make rents even fairer for tenants, as the Government and the noble Lord do. I want to protect tenants from bad landlords, but also landlords from bad tenants. There are some very good
landlords around and only a minority of rogues; also, most tenants are good tenants who pay their rent and act reasonably, but there are a minority of bad tenants as well. I do not support bad landlords or bad tenants in any circumstances.
My Amendments 19 and 20 state that a holding deposit of one week is just too much, as the noble Lord, Lord Shipley, mentioned. Three days is sufficient. When the Minister responds to the debate, I should like to know why the department has gone for one week, which seems too much. The guidance says that this is an upper limit and not a recommendation. I suppose that is progress. The risk is always that these quickly become the norm and the agreed figure. We run the risk of everyone being asked to provide a week’s deposit. In many cases that is a significant amount of money.
The London Borough of Newham is not the most expensive part of London to live in, but it is a borough with a huge private rented sector. Well over 25,000 private landlords operate there. The average monthly rent is £1,400, leading to a holding deposit of £350 in the borough. That is a lot of money for people to find. These amendments would allow for a holding deposit to be paid, but capping it at three days would reduce the amount being paid in Newham to a deposit of approximately £138. I suggest that is a lot of money, but a lot less than would be charged otherwise.
Amendment 21, also in my name, would prohibit a holding deposit being requested where the person being asked for payment has not been provided with a copy of the draft tenancy agreement. This seeks to address another problem where people are not given what they are expected to sign up to. I hope everyone would agree that is not reasonable. If you are asked to pay a deposit, you should at that point at least be given the agreement you are expected to sign up to. I look forward to the Minister’s response to the points raised.