Thank you, Chair. Amendment 21, tabled by Leanne Wood, would limit payments in default of the contract to just lost keys and late payments of rent. It appears from the debate that has surrounded this issue more widely that the intent of the amendment is that any other costs associated with the default of a contract could be absorbed by the security deposit. Security deposits are dealt with under the Housing Act 2004 and are strictly regulated to protect the interests of all parties involved. Where a deposit has been paid, that deposit must be safeguarded. This is not an alternative means for landlords to dip into when they need to recover costs where a tenant is at fault. Where taken, security deposits must be protected and returned to the contract holder at the end of a contract, as is currently the case.
I don't consider that default payments should be restricted to the late payment of rent and lost keys. There may be other legitimate situations where the contract holder is at fault and where a landlord may seek repayment from the contract holder over the course of a contract, and these may differ from contract to contract. I consider that such a restrictive limitation to a contract would be harmful to the relationship between contract holders and landlords. Landlords may be extremely reluctant to let their properties in this way.
Amendment 21, in affecting the treatment of security deposits, would extend the scope significantly beyond what was agreed through the general principles debate. We would inevitably have to look at what the payments are and what payments could be taken from the security deposit. If there was a dispute, this would need to be dealt with under a dispute-resolution process. There would need to be a means for managing how default payments are taken from security deposits and, if the sums involved were quite low, in the region of £20 to £30, for example, this would be a highly inefficient use of resources, even if it were permitted. Our guidance, which we have sent committee a summary of, will set out substantial information on payments in default, and Rent Smart Wales will be using this guidance to monitor, via agent audits, the levels of compliance.
Amendments 23 and 22, tabled by Leanne Wood, would put in place regulations whereby Welsh Ministers could prescribe the limit on the level of the default payment that may be required by an agent or landlord. This would be a very limited use of a regulation-making power in setting out a limit on how much could be charged for replacing a set of keys or how much could be charged for late rent. This would be an overly restrictive approach to take when dealing with these types of defaults, which we cannot support.
The amendment assumes that all contracts are short term, but not all are, and we actively encourage contracts that last for longer periods. Security deposits may be held for a period of three, five, or even 10 years, until the tenancy ends, during which time there may be many instances where the contract holder is at fault and for which the landlord would seek to be reimbursed for any incidents that may occur, and it wouldn't be appropriate for the deposit to be used in this way.
A security deposit is not provided to pay for issues that are caused by a tenant throughout a tenancy. Even if it were, a landlord would not be able to reclaim any losses back from the deposit until the end of the tenancy. Conceivably, this might be after many years. I don't want to risk making landlords more reluctant to rent a property for a longer period because they would be fearful that the security deposit would be used for purposes for which it was not intended, leaving uncertainty as to what happens to the deposit when it has run out. Usually, it is a month's rent.
Amendment 24, tabled by Leanne Wood, in setting a 14-day period before a late rent default payment can be made, would be unfair to landlords, especially smaller ones. Landlords rely on income from rent and have a right to expect it to be paid on an agreed contractual date. For some, not being able to rely on receipt of an income on a specific date might jeopardise their ability to make mortgage payments or pay staff. In introducing this Bill, I have to be mindful of the interests of both landlords and contract holders. The proposed amendment would potentially give a two-week extension or flexibility on rent payments each and every month, to which I cannot agree. This would not be helpful to the landlord or the tenant, and may risk the property on which they both rely if the landlord is reliant on the rent to make their mortgage payments.
The majority of landlords rent just one or two properties, so they are more likely to have to make a mortgage payment, and wouldn't be in a position to do so if the rent was not there from the contract holder. At times as well, a landlord may even be renting a property themselves, so will be even more dependent on getting a regular income through the rent they're owed.
I do acknowledge the aims of the amendment, which I understand seeks to alleviate the situation whereby some tenants face charges perhaps because of delays in benefit payments, or income being out of sync when the payments are due. However, I believe that the amendment proposed introduces greater risks than benefits. Whilst I am committed to continuing to seek out ways to support tenants, especially those who are most vulnerable, I can't support this amendment.
Turning, finally, to amendment 25, which seeks to provide that late payment fees are limited to one charge per rental period, I'm afraid, whilst having merit in the issue it seeks to address, it does have the potential for significant unintended consequences. Examples of rogue agents and landlords charging multiple late payments are, I agree, very troubling. On amendment 25, there is a risk that the amendment could result in an unintended consequence of disadvantaging contract holders who pay on a weekly or a fortnightly basis. This amendment will make it possible for more than one late payment fee being charged in a month. This could particularly hit hard individuals on low incomes who disproportionately rent in this way.
The Bill does currently provide for regulation-making powers that can be used to revisit permitted payments, including payments in the event of a default. I've asked my officials to contact Shelter directly to explore the situation they have highlighted in more detail. This is part of my desire to keep the issue under active review, and to work with key stakeholders to find a way to address abuses of the system that protect the interests of both good landlords and tenants. This would allow us to ensure that intervention on this issue is better targeted to poor practice where it exists, and may help develop the role of the private rented sector in meeting housing needs here in Wales.