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Lord Best: I spoke on this issue at Second Reading, and I congratulate the Government on bringing forward these provisionsthey are pleasing to see. I would like to pay tribute to the outside agencies that did all the hard work in the backgroundthe CAB, in particular Liz Phelps, who put a lot of work into bringing forward these ideas, Shelter and the Brent Private Tenants Rights Group.
Before putting the final touches to this, because there is some detail left to deal with, will the Minister convene one or two meetings with those people who have done so much work on it? We need to look carefully at the pilot scheme that this has been based on, and bring in the British Property Federation and others, just to make sure that at the last stages we get the final touches right. I congratulate the Government on bringing forward this important extra part of the Bill.
Lord Lucas: I have a number of detailed questions to ask, but first of all I wanted to suggest to the Minister that he and his team might look at eBay for some lessons to be learnt in relation to this scheme. I do not know if the Minister is a regular trader on eBay, but if he is he will know that the way in which one assesses the wisdom or otherwise of trading with a particular person is their record, which is available on eBay, of completed purchases or sales. Every time a person purchases or sells something on eBay, they give feedback as to whether they have been paid properly,
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and the person who has bought reports whether the goods have been received in good condition and promptly. That way a person builds up a record.
Now, it seems to me that we could do something similar herewe could build up a record for landlords and tenants. A person could look at their landlord, and say, "This landlord regularly repays deposits properly, and things are settled sweetly; he is a good guy to be with". Alternatively, the landlord could look at a tenant and say, "This tenant has a string of black marks, I am not at all sure that I want him". It is an enormous incentive to behave properly. Of course someone could avoid it by changing their name or changing their description, but then they have no record, and, after a while, a landlord with no record is going to be someone whom a tenant will treat cautiously.
The system works on eBay. It works astonishingly wellthere is a very large business being built on the back of that one idea. I think it would fit very nicely with the scheme and I welcome the scheme as a whole. Can I just ask a few questions about it? What is the Government's initial impression as to the cost of this? How much will a landlord have to pay per tenancy for the deposit schemewhat is it likely to cost?
What are the reasons for not making dispute resolution compulsory or at least making it possible for dispute resolution to be binding, if that is what the particular scheme decides it should be? Obviously, there is an appeal for the court beyond that, but commonly in, say, the building industry, these dispute resolution procedures have a strong binding element and appeals are only possible on limited grounds.
I remember taking that particular scheme through this House. It seems to me that that tends to reduce the problems, particularly when dealing with a difficult landlord or a difficult tenant. The matter can be put into dispute resolution and that is quicker, easier and much more informal than any process held in the courtsparticularly if it is a tenant dealing with a difficult landlord. How much will it cost that tenant to go through the court proceedings that will be necessary in order to get back his deposit? In terms of both effort and money, what does it cost?
Lastly, it does not seem to me that there are sufficient penalties for a landlord who does not pay the deposit over to the scheme. Someone has to go to court to force him to do so. He has 14 days in which to act. Ultimately, it has cost him nothing; he has just been able to hang on to the deposit for a while and, if the tenant has been active enough to make him pay over the deposit, he will probably have had it for three or four months. So far as I can see, no extra cost penalty is incurred by having failed to pay it over.
Surely there should be an automatic penalty for not paying over the deposit, which acts as a substantial disincentive to ever doing such a thing. A 100 per cent fine would not seem out of place so that you could be sure that landlords who did this would feel the pain of it and not only when they failed to behave at the end of
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the 14-day period. But obviously, along with my noble friend and others, I wait for a later stage to look into this matter in greater detail.
Lord Bassam of Brighton: First, I thank all noble Lords who contributed to the discussion. It lasted longer than I would have expected, although that is probably quite reasonable under the circumstances. A fair amount of information was given from our side of the Dispatch Box on disclosing how the scheme is to work. I thought that we would have more questions on it. I am grateful for the questions that were raised and for the useful contributions. I shall try to deal with them in turn.
The noble Lord, Lord Hanningfield, was concerned about the costs of the scheme. The noble Lord, Lord Lucas, asked how much it would cost per tenant. I cannot give the noble Lord, Lord Lucas, an answer; we do not have an estimate. But, in essence, the scheme should be self-financing, as I said earlier when moving the amendment.
It was also suggested by the noble Lord, Lord Best, that perhaps we needed to finesse some of the detail. I join the noble Lord in paying tribute to the voluntary organisationsin particular, Shelter and NACABand the local authorities, which have been very helpful in putting together this set of propositions. Their experience has been valuable.
We have consulted fairly thoroughly. As I said earlier, we have drawn on two useful pilots, and we consulted on tenancy deposits between November 2002 and February 2003. That was a very useful exercise. We published a full response to the consultation paper, which is available on our departmental website.
I was asked whether tenancy deposits can be used to offset rent arrears. That makes a great deal of sense. If a tenancy agreement states that, then of course the deposit can be used to offset arrears of rent. I am sure that that will become well established practice.
The noble Baroness, Lady Gardner, asked whether landlords will have to become members in order to use a tenancy deposit scheme. The answer is: no. The custodial scheme at least will be open to anyone without membership. We think that insurance-based schemes are more likely to be used by larger-scale landlords, and I am sure that there will be a benefit in that. We believe that the schemes should be accessible and that the system that we are likely to see adopted will enable that to happen.
The noble Baroness also asked whether landlords can demand a six-week deposit. There is nothing to stop landlords and tenants agreeing to six-week deposits in terms of these provisions. That should be helpful to landlords who want to ensure
Lord Bassam of Brighton: The same response applies. The noble Baroness also asked why there was
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more than one scheme. Landlords have indicated that they are in favour of insurance-based rather than custodial schemes as they can use the deposits as part of their working capital. The clauses allow for the appointment of a public body to administer one custodial scheme, should there be a problem with multiple schemes.
The noble Lord, Lord Lucas, made an interesting suggestion concerning the use of eBay. My children use eBay and are fascinated by it. I know that we have thought of buying items through eBay and it is a very useful facility. My only thought in response to that is: who would validate the information and how would that work? But it is an interesting thought and certainly one on which we shall reflect.
The noble Lord also asked why we should not make dispute resolution binding. I suspect that ultimately the court process will have to be used because that will probably give some finality and closure to an extended dispute. But I think that there is value in dispute resolution, and certainly the scheme as I described it this afternoon should provide for the opportunity of dispute resolution as a low-cost alternative to going to court. In the end, it may well be the case that, where parties cannot agree, the courts have to become involved.
I shall give a little more detail on costs. The custodial scheme will be funded from interest on deposits. There will be no extra cost to landlord or tenant. Insurance-based schemes are likely to charge landlords feesthe trade-off for landlords keeping depositsbut there will be no charges to tenants.
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