House of Commons Hansard Debates for 1 Mar 1991

Column 1234

user of the building, since it tells him how much space he will have, but for the investor in commercial property it is important for another reason. It is essential to know the area in a building if a sensible valuation is to be reached. If the final rental value of a property is to be determined by the area, that area must be a factor in determining the yield of the investment. Assuming that the area is more likely to be overstated than understated, wrong measurements will lead to a wrong calculation of the rental value--so the person to whom the property may subsequently be let will pay more than he would have if the calculation had been made correctly ; or, if the property is re-measured, the property purchaser will obtain a lower rental than he had expected.

If a purchase price is based on a multiplier of 10 years' annual rent, the effect of over-measurement will be increased by a factor of 10. Valuations are, after all, largely based on comparisons. Recently there was a well- publicised example of two hugely different valuations applied to the sale of five London restaurants owned by Scotts. One firm of valuers put a value of £6.4 million on them ; another professional practice valued them at £2.3 million--despite the fact that both followed the broad guidelines contained in the Royal Institution of Chartered Surveyors' red book. The RICS comment on the matter was that valuation is a matter of opinion. It can be argued that the value is what someone will pay for a property, but what he will pay for it is determined by what he thinks it will fetch in the rental market.

Mr. Moate : I would not disagree with my hon. Friend's conclusions, but does not that example show that applying the Trade Descriptions Act to deals of that sort is inappropriate? Any professional investor of this sort will have valuations and surveys done for him and will have his own professional advice. If a mistake is made he can sue his professional advisers if necessary, so the Bill would not have a significant role to play.

Mr. French : My hon. Friend's remarks follow the line of argument of my hon. Friend the Member for Hendon, South (Mr. Marshall). The difficulty with it is that we need to draw a line somewhere. My hon. Friend may say that the large commercial investors do not need this sort of Bill, but if he also accepts my point, that small business men need this type of protection, he will see the dilemma : the need to draw a line somewhere. I suggest that it would be virtually impossible to draw that line satisfactorily. So we have to decide whether the Bill should apply to commercial property and I believe that it should.

Another iniquitous practice in the commercial sector is drawing comparisons that are false. When describing the attributes of property A, the agent may say that property B has achieved a rental value of X pounds per square foot, whereupon it emerges that property B's rental level of X pounds has not been achieved but is merely the level that the agent is hoping to achieve for that property. This practice is rife in the commercial sector. Agents base comparisons on hope and expectation, not on hard facts. Such a practice should be caught by the Bill.

To return to the subject of measurement, it is pertinent to inquire how we should define a misdescription of measurement. My hon. Friend the Member for Nuneaton gave us a straightforward example, but the matter is a little more complex than that. In the commercial sector different types of property have traditionally been measured in

Column 1235

different ways--a practice which needs to be clarified. The Royal Institution of Chartered Surveyors has a code of practice on how to measure, and practitioners who follow it will find it comprehensive. If followed carefully, the code makes it difficult to go wrong. Unfortunately, however, far too many practitioners do not follow the code of practice and are ignorant of its contents. That is evident from the frequency with which the RICS receives inquiries from people who wish to know more about the code of practice and who should know more about it.

I shall now deal with the internal measurement of commercial properties. The net amount of space will determine the value of the building and, according to the RICS code of practice, the measurement should not include lifts, stairways, landings and corridors. However, what about the corridor that is wide enough to take a desk? If it is to be meaningful, net internal area should mean net usable office space, but many agents do not adhere scrupulously to that definition.

When should a kitchen be included in the measurement of office accommodation, and what about a ceiling that is too low for a desk to be placed under it? Those matters are addressed by the RICS code of practice, but many practitioners who should know better do not take sufficient notice of it. One of the Bill's great advantages is that it will make practitioners who are often casual about these matters pay attention to a code of practice that is designed to produce clarity and accuracy of information.

There are problems about class B1 property covered by the Town and Country Planning (Use Classes) Order 1987. Class B1 means that the building may be used largely for office purposes, research and development or industrial use. It depends on the location and the user. The Office Agents Society deals largely with high-tech use of B1 properties and its practice is to measure net internal area. However, the traditional practice of the Industrial Agents Society, which deals more with the industrial side of the market, is to measure gross internal area. It is not a misdescription if what is being described is made clear, but we need to guard against people presenting a figure and describing it as net when it is gross. The RICS code of practice also deals with irregular rooms in residential properties. Rooms with chimney breasts or L-shaped rooms are difficult to measure. The Bill may encourage estate agents not just to provide measurements but to supply plans and outline diagrams to show the shape and precise measurements of a room. The RICS code of practice contains guidance about what to do when measuring chimney breasts, projections, bay windows or other features that are to be found in the majority of houses. The code aims to ensure that accurate measurement is achieved and understood so that there is some form of common language.

My hon. Friends the Members for Wyre Forest and for Nuneaton asked whether the Bill should apply to builders. I believe that it should extend to builders. Some estate agents are worried that if builders are not covered by the Bill, estate agents will somehow be at a disadvantage. I do not think that that would be the case. Builders should be covered by the Bill, but, if they are not, estate agents could be at some advantage, not a disadvantage. That is because buyers will know that a purchase from an estate agent is based on reliable information. They could not have the same confidence in builders. If they were excluded from the provisions of the Bill, builders would be at a disadvantage and, for that reason, it would be better for them to be

Column 1236

included. That applies especially to builders who sell houses off-plan. That happens a great deal, especially in the present market. Many purchasers can be misled by it and fall victim to false description.

The Law Society broadly accepts the thrust and purpose of the Bill, but agrees that it would be more appropriate for its provisions to be contained in the Socilitors Act 1933, which brings together provisions relating to the conduct of solicitors. I disagree with that argument. It is essential for solicitors in the estate agency business, of which there are about 250, to be covered in the Bill. I do not share the Law Society's faith in its ability to achieve the same results as the Bill. The history of the Law Society's regulating of affairs shows that all too often the interests of solicitors are placed above those of the client. That is evidenced by the number of complaints, many of which are admittedly unsubstantiated, but some are upheld, that are received every year by the solicitors' complaints bureau.

The Law Society has carried out much good work and achieved good results in some areas, but it has not been stringent enough in addressing some of the practices of its members. If we acceded to its argument that solicitors should not be included in the Bill, I have no reason to suppose that things would be any different. That would create two classes of people selling property. They would be subject to different sets of rules and that is undesirable. Solicitors in Scotland are in a rather different position. If that matter is not raised in this debate it will have to be carefully considered in Committee because Scottish solicitors have particular problems, although it is not my place to go into those now.

I strongly support the Bill, but it could be improved by the inclusion of the commercial sector, and such inclusion is essential. The Bill is not the last word on the regulation of estate agents and I look forward to further measures from the Department of Trade and Industry, especially on matters such as the bidding up of prices, which is a rife and iniquitous practice. We must stamp out claims of higher bids and I hope that orders will ensure that that is firmly dealt with. Pressuring buyers to take out other services is also iniquitous and unacceptable. The Bill makes a start by dealing with the misdescription of property. That is in the paramount interests of the consumer and will achieve higher standards in that small part of the estate agency profession which is not as ethical as it should be.

11.9 am

Mr. Austin Mitchell (Great Grimsby) : I am happy to follow the hon. Member for Gloucester (Mr. French), who has just delivered what an estate agent might describe as a short speech.

I am proud to be a sponsor of this important but simple Bill, which will plug a gap in the legislation. That is a good role for private Members' Bills. The gap is in the Trade Descriptions Act 1968, which applies to goods and services but not to properties. A hotel, for instance, cannot advertise itself as being adjacent--which is a fairly flexible term--to a facility such as a railway station, a swimming bath or even the House of Commons if that is not true. A property, however, can be advertised as being adjacent to such facilities, whether it is true or not.

We should be able to rely on the particulars given by estate agents, just as we should be able to rely on the details of goods and services. Probably because of the gap

Column 1237

in the legislation, a peculiar lyricism has developed among estate agents, most of whom seem to be Oxford or Cambridge English graduates, or to have attended the Goebbels college of doublespeak, sometimes attended by political parties and Ministers, if their catch-all statements are anything to go by. As a result, estate agents' descriptions are often unreliable. My feelings about my own property are particularly malevolent, but, when trying to sell a property, estate agents become lyrical. The Roy Brooks school of insulting properties seems to have died out ; instead we read descriptions such as "quiet road", referring to a howling four-lane carriageway. One of my constituents bought her property because of what had been described as a "rural aspect", unaware that planning permission had been granted for the building of 2,000 houses on the rural aspect to which she had been so attracted. In another case, a covered back passage was described as a conservatory. Of course, descriptions of property are often subjective, but in many instances there are objective criteria by which to judge misdescriptions. The legislation could apply to location, address, aspect, proximity to facilities, tenure, nature and characteristics of the title, the amount of ground rent payable, community charge, structural characteristics, service charges, accommodation, measurements and size--an especially difficult area, which is often subject to misdescription--physical characteristics, fitness for purpose, strength, survey inspection, the person by whom the building or its components were manufactured, fixtures included or excluded from the sale, previous history and past treatment. Accurate descriptions are important in all those respects and the consumer must be able to rely on the information provided by the estate agent.

Misdescriptions waste an enormous amount of time, because the buyer must go and look at the property before he can identify a misdescription. It is also a deceit, because some matters cannot be checked. I am not a structural surveyor ; if a property has been described as structurally sound, it is difficult for someone like me to find out whether it is true.

For all those reasons, the gap must be plugged. The Bill should not be seen as a blow against estate agents, with whom I have considerable sympathy : my wife is out of work, which gives me a kind of fellow feeling for anyone currently working in estate agency. The fact that politicians suffer from the same halitosis of the intellect makes my fellow feeling even greater. Estate agents are having a hard time ; if the four horsemen of the Apocalypse passed the shop window, many of them would see that as a sign of good things approaching, given the Government's position on interest rates.

Estate agents are, in fact, sympathetic towards the Bill. The more enlightened sections of the business want to be regulated effectively. Effective regulation is already beginning : estate agents are seeing the need for reform. The Government's own proposals are fairly feeble. We should require qualifications and competence simply by enforcing the Estate Agents Act 1979. I was on the Standing Committee of that measure. The Committee stage was fairly attenuated because of the rush to finish it before an inevitable election, but it is important legislation.

Column 1238

The present powers of the Office of Fair Trading serve only to explode the nuclear weapon of banning estate agents. We need a flexible scale of penalties, including fines.

All that, however, is for the future. This Bill is complementary to the changes that are to come. I am sure that the Bill will be successful. I hope that the Government will support it. The Minister, being a member of the No Turning Back group--perhaps it is called the Will Ye No Come Back group nowadays--will almost certainly support it with gritted teeth because of his free-market principles. Let me point out to him that accurate information is an important part of the proper functioning of markets. A free marketeer can support the Bill as much as someone who believes in the proper regulation of markets.

The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Edward Leigh) : I have said many times, not least since I took over this job, that a free and successful market is a well-informed market.

Mr. Mitchell : I entirely agree.

As I say, I hope that the Government will welcome the Bill. The estate agents certainly welcome it and the Consumers Association, which played a part in its paternity, supports it strongly. I hope that the House will do so as well. I have one caveat, however. The Bill covers those who sell property as agents for others. As others have said, we really need a level playing field. The Bill should also apply to solicitors who sell property as estate agents. There are 250 or 300 in the country, and in Scotland it is a normal part of solicitors' business. I understand that the Law Society thinks that the position should be regulated, but that it should be covered by the solicitors' own legislation.

I hesitate to disagree with my new friends in the Law Society, having attained a degree of respectability by being entertained for lunch there, but it would be ludicrous to impose a different set of enforcement structures to apply to misinformation or misdescription provided by solicitors acting as estate agents from the procedures applied, through trading standards, to misdescriptions provided by estate agents. It would be absurd to go through two separate channels. The same is true of builders selling property, and the same lyrical misdescriptions are given when property is sold by businesses. The Bill should also apply to building societies and banks selling property that has been repossessed. I shall move amendments in Committee to try to extend the coverage to those bodies.

Let me draw the House's attention to my early-day motion 528, entitled "Estate Agents (Property Misdescriptions) Bill", which is strongly supported by the House, having been signed by 53 hon. Members in the three days that it has been on the Order Paper. It urges that the legislation should apply

"to all those concerned with the marketing of property in the course of a business so as to ensure a level playing field between them."

That is an important principle which I would hope to incorporate in the Bill, but not in any way that endangered the Bill's passage. It is a protection which is necessary for the consumer.

I shall not speak at length because the Criminal Procedure (Insanity and Unfitness to Plead) Bill, which might disqualify me from speaking in a debate such as this, has my support and I hope that we shall be able to discuss it today.

Column 1239

I do not want to spend time echoing agreement with the Bill that is before us. It represents another step in a long campaign to provide better protection for house buyers and to open up a more competitive and better regulated market for buying houses. It is a campaign in which Ken Weetch, the former Member for Ipswich, who in estate agents' terms has moved on to higher things, played an active part when he was in this place. We have the Estate Agents Act 1979, and I introduced a house buyers' Bill.

We owe it to those who are making the major purchase of their life to provide appropriate protection. The buying of a house can be an ordeal unless the purchasers have proper information and proper backing and the agencies through which they buy are properly regulated. The Bill goes some way further down the road of protection. The 1968 Act is flawed. This is not an epoch-making Bill. To use estate agents' language, the earth will not move if it is enacted. It represents another step along the road to protecting the consumer. I congratulate the hon. Member for Coventry, South -West (Mr. Butcher) on introducing it. I commiserate with him on his illness. I congratulate the hon. Member for Wyre Forest (Mr. Coombs) on moving it so ably in his absence. I wish the Bill every success. 11.22 am

Mr. Roger Moate (Faversham) : The hon. Member for Great Grimsby (Mr. Mitchell) will be pleased to hear that I do not intend to make a long speech. That is a Conservative pledge, not an estate agents' description, and therefore it will be implemented in full, as always.

The hon. Member for Great Grimsby talked about lyrical misdescriptions. I had the misfortune the other day to hear a Liberal Democrat party political broadcast. Like many others, I am prepared to face a general election as soon as may be, but the prospect of facing party political broadcasts of that sort week after week, and not only from the Liberal Democrats, with all those involved indulging in what might be politely called lyrical misdescriptions, fills me with enormous sympathy for the British public as well as for myself. If we could find some way of incorporating such misdescriptions within the Bill, it would have my support. I congratulate my hon. Friend the Member for Wyre Forest (Mr. Coombs) on the impressive way in which he moved the Second Reading. I join others in wishing my hon. Friend the Member for Coventry, South-West (Mr. Butcher) a speedy recovery. It is partly because of those who are backing the Bill that I view it with some sympathy. I have to say that initially I was somewhat sceptical of the proposition that lies within the Bill, and that is scepticism that has some pedigree. I took part in the consideration of what became the Estate Agents Act 1979. The then Minister, the hon. Member for Norwood (Mr. Fraser), said :

"There was a time last year when I used to think that the worst five-letter word in the English language was the name of the hon. Member for Faversham (Mr. Moate)."--[ Official Report , 30 January 1979 ; Vol. 961, c. 1391.]

One of the reasons for that remark was that I have long been suspicious of and opposed to consumer legislation that, rather than protecting the consumer, does more to create closed shops. We have seen examples of that in various professions. I remain extremely suspicious of the provisions in the Estate Agents Act 1979 that provide at a later stage for minimum standards of entry, which in effect lead ultimately to the closed shop.

Column 1240

We are all in favour of high minimum standards, but I am against proposals that make it difficult for enterprising individuals to enter a profession, to create a new competitive spirit and to break new ground. I am glad that since 1979 the selling of property has been opened up rather than restricted. I was pleased also that when the Director General of Fair Trading carried out his review he specifically disapproved of extending section 22 to include some sort of licensing procedure, and thereby to make it much harder for new entrepreneurs to come in and compete with the establishment. If we make standards too high and thereby create a closed shop, the consumer will be damaged. I am much in favour of penalising individuals, companies or practitioners who take the consumer for a ride, but how do we best protect the consumer?

I listened carefully to the speech of my hon. Friend the Member for Wyre Forest. I found myself in total agreement with the simple proposition that the Bill incorporates, which is that if the Trade Descriptions Act 1968 applies to a range of goods and services, why should the Bill not apply to small commercial properties? I accept the arguments that have been advanced in favour of that proposition. It is implausible to try to distinguish between the buyer of a small house or a small shop. In effect, the buyer is in the same position. Why should small commercial projects not be included in the scope of the Bill? The same logic can be applied to solicitors. If solicitors set out to be estate agents, why should they not be subject to the same rules as estate agents? Why, therefore, should they not be covered by the Bill?

I apply the same logic to builders and developers. I go this far because extending the Trade Descriptions Act to cover property is not an especially major step forward. In extending the logic of the law, I do not think that we would be inflicting a particularly onerous burden upon those who have high professional standards and conduct themselves in an ordinary way. I suggest that we should be logical and apply the Bill uniformly to both domestic and commercial properties.

Just this week there was a headline story in the Sittingbourne newspaper, the East Kent Gazette, about the possibility of lead pollution affecting certain large housing estates. It is my hope, and the expressed view of the local authority, that by the time the tests have been carried out it will be possible to establish that there is no health risk. No one wishes to raise alarmist fears or cause even more alarm than that which already exists on these estates. It is my hope and belief that once the tests have been conducted it will be demonstrated conclusively that the land is not contaminated and that there is no health risk. They are pleasant houses on pleasant estates. Residents are being advised, however, to have tests conducted on younger children because of the threat of lead pollution. For the time being, a serious blight hangs over many houses.

The fear has arisen because of the previous usage of the land. Perhaps up to 80 years ago it was used for tipping spoil from the brickworks. Subsequently, it became agricultural land. It has now been built on. This is perhaps a fairly extreme example, but often these days we are building on reclaimed land.

Surely the house purchaser is entitled to know what the previous usage of the land was. Surely he has an entitlement for that to be incorporated in a description that comes within the terms of the Bill. The purchaser of domestic property is entitled to protection on that score. Whether he receives it from the developer and original

Column 1241

seller of the property, or as a consequence of legal searches, I do not know. However, he is entitled to that information.

My hon. Friend the Member for Coventry, South-West has said that house purchase is one of the most important and stressful events in a person's life and compares with marriage or divorce. Because that is so, one does not expect a buyer to depend entirely on an estate agent's descriptions. One does expect him to rely on the information discovered by his solicitor as a result of searches, and on that produced by survey, if there is one. There is no legal obligation to undertake a survey, but it is a foolish buyer who does not commission a survey when making such an important purchase.

If, as I suggest, a potential purchaser is entitled to information about the previous uses of the land concerned, he must obtain it either through searches or a survey. I return to the example of the developer who builds on a site for the first time, who must surely have more access than anyone else to such information. I urge property developers and builders to welcome the opportunity presented by the Bill to announce their intention to give purchasers all available information about previous land usage. If it contains anything of concern, the developer can take steps before trying to sell the houses to mitigate that concern or to overcome any problem that has been revealed. It is unacceptable for house purchasers to encounter at a much later stage worry, alarm, blight, and--perhaps even worse--an adverse effect on their health.

It may be argued that property developers are covered by the National House Building Council guarantee, but that is not always true. I should like to see consideration given to ways in which the NHBC certificate could incorporate guarantees covering problems of the kind that I described. Nevertheless, in the case that I cited, a number of the developers--and this is sadly true of other parts of the country--are no longer in business, so it would be hard to seek redress from them.

There is a powerful argument for including builders and developers in the Bill. That might extend only modest protection, but I still think that it ought to be provided. I would not want to see such a measure serve as another step towards a closed shop and the elimination of competition. I fear that many who speak so reasonably today will seize the opportunity to keep out what used to be called the unqualified practitioner. I hope that that does not happen. By adopting a sensible trade description approach, we are doing the right thing by the consumer, but we ought not to go too far. Earlier, I intervened on my hon. Friend the Member for Wyre Forest when he cited the example of a hotel situated close to a railway line. It was a bad example. Any purchaser, particularly the buyer of a hotel, would check out such fundamental considerations. It would be wrong for the public to imagine that the Bill will compensate them if they are the losers in such situations, because it will not. It is incumbent on purchasers to check the basic facts, and they will do so in 99 per cent. of cases. It would be a strange and naive person who took at face value everything that he was told by an estate agent--which must by its nature be a simplified and abbreviated advertisement.

Column 1242

The Bill still will not compensate someone who loses a few hundred pounds--a serious loss--because he commissioned a valuation on the basis of false information. The Bill is designed to give powers only to prosecute an agent guilty of such an offence and not to secure compensation for any loss. The Bill simply makes a good effort to raise professional standards and to remind practitioners that it is their duty to be accurate, which is not a particularly onerous duty to observe. However, it will not serve to compensate my constituents, or anyone else who is misled and incurs a great deal of cost as a result. It cannot be otherwise, because presumably there is no legal contract between a prospective purchaser and an agent--so in the case of that client being misled, there is no recourse in civil law. I would be sorry if, to use the words of the hon. Member for Great Grimsby, the more lyrical aspects of estate agents' advertisements were eliminated by the Bill. It is rather sad that the Roy Brooks cult of the 1950s and 1960s no longer has any followers. That estate agent was very successful by being as offensive as he possibly could about the properties that he was trying to sell. His advertisements were a splendid feature of life. One regularly turned to them in The Sunday Times, but we can no longer do that. Many of the more amusing examples of the estate agents' vernacular are part of our way of life. I hope that it will not prove necessary for advertisements to be so precise, meticulous and legalistic that that will prevent estate agents from being a little romantic.

We need to extend trade description provisions to ensure that the house- buyer gets what he thought he was getting, but, ultimately, we depend more on solicitors, valuers and surveyors than on estate agents. If we forget that, we shall be misleading our constituents and it is vital that we do not do so. The aspects that concern me are not addressed by the Bill, but are more likely to be covered by the regulations. We must ensure that estate agents who market other services or who, without the knowledge of the vendor, are making financial arrangements for the purchaser or who in some way conceal some other kind of financial deal are no longer permitted to do that. The information that the Law Society requires solicitors to obtain for their clients in respect of searches could also provide vital protection.

The Bill is a modest measure, but it is sensible, and my hon. Friends have argued for it very well. I do not want to go down the road of the closed shop, but I should like greater emphasis placed on the work done by solicitors in protecting house purchasers. I want to ensure that hidden financial details cannot act to the detriment of buyers or sellers. I hope that my hon. Friend the Under-Secretary of State, to whom I shall be writing about my constituency case, will re-examine the question of protecting buyers from the injury that could arise many years after land has been reclaimed.

11.38 am

Mr. Alan Williams (Swansea, West) : As one of the Bill's sponsors, I place on record my congratulations to the hon. Member for Wyre Forest (Mr. Coombs), who introduced the Bill this morning and to the hon. Member for Coventry, South-West (Mr. Butcher), who originally proposed the legislation but who has sadly been taken ill ; I am sure that we all wish him a speedy recovery.

Column 1243

As the hon. Member for Faversham (Mr. Moate) said, the Bill is modest in its objectives, but it is important none the less. The fact that it is a modest measure should in no way lead us to feel that it does not matter whether we add it to the statute book. It is better to advance in small steps to improve consumer protection than not to advance at all. As the hon. Member for Faversham said, buying a new property is one of the most stressful experiences of people's lives. Moreover, although it is something of a cliche to say it, with property booms it is becoming increasingly true that buying a house is the largest commercial activity and the largest purchase of most people's lives. There is an anomaly, however : one can buy a can opener for £2 or £3 and have the full protection of the law ; one can spend £100,000, £200,000 or even--if one is lucky enough to have it--£300,000 on a property and one does not have that protection. That is clearly an anomaly and it needs to be eliminated.

The hon. Member for Faversham says that he does not want a closed shop. On this occasion, the hon. Gentleman and I are on the same side and I do not want to introduce an element of animosity, but it worries me that someone convicted of fraud could come out of prison on one day and become an estate agent handling enormous sums on behalf of the public the following day, with the public knowing nothing of his activities.

Mr. Moate : If that were the case, I should agree with the right hon. Gentleman, but it would not be possible for such a person to handle large sums, as that would be illegal. He might be able to proclaim himself an estate agent and assist in such transactions, but he would not be allowed in law to handle money or hold deposits on behalf of customers.

Mr. Williams : The hon. Gentleman is absolutely right to draw me up on that. I should have said that such a person would be in a position to induce other people to enter contracts for very substantial sums. I happily accept the hon. Gentleman's correction.

It seems absurd that we should not be including builders who sell on their own behalf. I hope that we shall do so in Committee. I know that the Bill deals principally with estate agents, but the marketplace is changing and in framing legislation, we must ensure that we match the rate of change. We shall be creating a new anomaly if we exclude from the Bill the person who has a 100 per cent. interest in disposing of a property while including a person with a 1.5 or 2 per cent. interest in helping to dispose of a property. At times the pressure on builders is enormous. I am not making a political point, but the industry is one of the most cyclical of all, as we have discovered throughout the post-war period. Builders are continually making fortunes and running into disaster. The pressures on them when they are selling can be massive. That is why it is absolutely right to include builders and solicitors. If there is one group that is in a privileged position over ordinary members of the public in a negotiation it is solicitors who are experts in the law. They should be subject to the same requirement if they decide to extend the use of their expertise into a marketing function. I have never been over-enamoured of voluntary self- discipline within associations and professions because, sadly, I have concluded that, although many people enter into such voluntary arrangements in good faith and with good intent, far too many use them cosmetically to give an

Column 1244

appearance of protection where there is none. In my view, estate agents come into that category. I do not accept the argument that because many of them conduct themselves well we do not need changes in the law. That argument is manifestly absurd. If someone said that because the majority of the public do not commit crimes, we do not need criminal law, we would all say that that was a fatuous argument, yet, all too often, that is the argument advanced in defending the entrenched positions of professions and trade groups which do not want the scrutiny of the law to be applied to their activities. I wish the Bill well. I hope that it will have a successful Committee stage. Most of the points that have been made this morning--particularly by the hon. Member for Wyre Forest--will be very relevant to our discussions at a later stage. I congratulate hon. Members on trying to remedy a 23-year-old legislative anomaly and wish the Bill success.

11.46 am

Mr. Hugo Summerson (Walthamstow) : It is pleasant to be here on a Friday. Fridays are fun days for Back Benchers because we can get up and speak. Who needs Prime Minister's Question Time, statements on the Gulf or Second Readings of Government Bills when we can come here on a Friday and make ourselves heard?

I welcome the principle behind the Bill and congratulate my hon. Friends the Members for Wyre Forest (Mr. Coombs) and for Coventry, South-West (Mr. Butcher), whom we all wish a speedy recovery, on it. Let me declare several interests. I am the chairman of a mortgage broking company and director of a property company--sadly, both jobs are unpaid. I am also a fellow of the Royal Institution of Chartered Surveyors and a member of the Royal Agricultural College. The Bill would plug a gap in consumer protection and help to restore public confidence in estate agents. Many people would say that public confidence badly needs to be restored. The Bill should hold no fears for responsible and honest agents. Consumers' organisations and the public have shown a considerable interest in the Bill.

Under the law at present, estate agents who misdescribe property commit no offence, even if they do so deliberately. There is a contrast between their treatment and that of other traders, who breach the Trade Descriptions Act if they misdescribe goods. As has been said, buyers can suffer because solicitors' or surveyors' fees may be incurred before misdescription is discovered. Also, they may travel long distances and take time off work to view property. Why should they not if they are looking for another house or flat to be their next home?

The Director General of Fair Trading recommended that the Trade Descriptions Act 1968 should be extended to cover property. I understand that the Government have agreed to do that when parliamentary time is available. The Bill would broadly have the effect that the director general recommended in respect of property misdescriptions, but he also recommended that the offence should be one of strict liability and that neither a code of practice nor an order under the Estate Agents Act 1979 would be a sufficient alternative. An order by the Secretary of State would specify the attributes of property which would be covered by the Bill if they were misdescribed. The Director General of Fair Trading recommended a list of 25 such attributes, and Her Majesty's Government will consult before making an order.

Column 1245

All that information came to me via a brief from the Government Whip's Office, which is why it did not sound very exciting. There appears to be a misconception in that information, which is why I gave it. That misconception is shared by the Consumers Association. I yield to no one in my admiration of the Consumers Association. Last year, my wife sent me out to buy a washing machine. She said, "Before you buy it, you must find the latest edition of Which? that reviewed washing machines and consult it". I duly did that, and a very good washing machine it is, too.

A briefing from the Consumers Association headed

"People tend to inspect properties before buying--so where's the problem?"

states :

"Although prospective purchasers inspect real property before purchase, the frustration, inconvenience, wasted journeys and expense caused by inaccurate particulars must not be under-estimated." Quite right, too. It goes on to state :

"More importantly, by no means all misdescriptions are discovered on inspection. Many physical aspects of a property, such as subsidence work, repair to woodwork, or roof repairs are difficult to inspect. In these situations, the facts are only revealed after the cost of a survey has been incurred. Similar problems can arise when dealing with non-physical aspects of a property--such as ground rents, maintenance charges, timber and other such guarantees, planning permission etc.--where the facts do not emerge until after searches are complete.

The problem may be even larger in Scotland, where offers are binding once made, and purchasers do not have the period available to them between offer and exchange of contracts, during which property particulars can be checked.

In effect, inaccurate property descriptions lead to the inefficient functioning of the market. They result in people not concentrating their searches on the properties most suited to their needs and often relying on information about aspects of the property which cannot be immediately inspected in deciding whether or not to make an offer." The misconception is that it is an estate agent's duty to put down in particulars every conceivable aspect of a property. That is not so, or an estate agent would have to conduct a full-scale structural survey of a property before drawing up his particulars. Estate agents are not surveyors. It is their job to present a property in the best possible light, but they cannot take on board various additional burdens. If they did, there would be further integration of the property conveyancing system. For many years, there has been a debate within the profession about whether there should be vendor surveys as part of a package, but that would simply take matters much too far.

Mr. French : Does my hon. Friend accept that the Bill does not require estate agents to state that information? It requires them to make sure that what they choose to state is accurate.

Mr. Summerson : Yes, of course. I shall refer later to the provisions of the Bill.

My hon. Friend the Member for Wyre Forest spoke about omissions. If an estate agent going around taking his measurements and so on cannot help but notice wide subsidence cracks, is it his job to state in the particulars that wide subsidence cracks exist?

I wish to refer to the views of the Royal Institution of Chartered Surveyors, which kindly sent me a copy of its letter dated 19 February to my hon. Friend the Member for Wyre Forest. It raised several points which I should like to put to the House. On clause 1(3), it said :

Column 1246

"It is our understanding that under this sub-paragraph where the land in question is to be acquired for use solely as a business, then the provisions of the Bill are not intended to apply. The Bill would, however, apply to land having a mixed use, for example, a shop having a flat above it. We would welcome clarification that this is a correct interpretation.

We inferred at our meeting with you that you were minded to ensure the scope of the Bill encompassed all forms of agency. However, I understand that due to time constraints in publishing the Bill, it was necessary to omit pure commercial agency at this stage, although it is intended to amend the Bill during its progress through the House to widen its scope to that extent."

That subject has already been discussed this morning. I believe that the Bill should include commercial premises, as several hon. Members have already said.

It was stated that many commercial people are, of course, large operators. There has been reference to office buildings in the City of London and the panoply of professional advice that is available. But there are many small business men. Let us take as an example a greengrocer. He may be the world's uttermost expert on ugli fruit, but he will know nothing about leases or the condition of the structure of his property. How could he possibly know about those matters? If he is setting out from scratch in the business of purveying ugli fruit, he will undoubtedly want to keep his costs as low as possible. He will think, "I am not going to take professional advice on this or that. I will just hope for the best," because of all the other costs that he will incur in setting up his business. Commercial premises should be added to the scope of the Bill. The RICS went on to comment on clause 1(6)(e). It said : "We believe it is important that solicitors should be regulated by the provisions of this Bill. Whilst we accept that the Law Society's regulations provide a stringent code of practice within which solicitors are required to operate, to exclude them from the Bill's provisions means they will escape those criminal sanctions which offer an effective deterrent.

Additionally, as solicitors often employ non-qualified staff to run their estate agency practices, it is most important that they are subject to the full provisions of the Bill."

Again, I agree with that. I see no reason why the scope of the Bill should not be extended to cover solicitors, particularly in Scotland, where most estate agency is carried out by solicitors.

On clause 5(1)(a) the RICS suggests that

"a period shorter than three years during which a prosecution could be brought would be appropriate in these circumstances."

On clause 5(2) the RICS asks for clarification of the provision in that paragraph. On the schedules, the RICS said :

"It would appear that the references to goods' throughout the Schedule have been included as extracts from the Trade Descriptions Act 1968. However, it is inappropriate to refer to goods' in the context of real property, and we trust that, some amendment should be made to take account of this."

On schedule 4(1) the RICS asked for clarification of the definition of premises. It said :

"At Sub-Paragraph (a) premises' is defined as any place (including any vehicle, ship or aircraft) except premises used only as a dwelling'. For the avoidance of doubt, it is essential to clarify whether it is the agent's premises where business is conducted that is referred to or the premises which are the subject of the alleged misdescription."

That is not clear at the moment.

"If the former is intended, it is most important that this is stated in unambiguous terms in order that the powers of officers of enforcement agencies are clear."

On schedule 7, the RICS assumes

Column 1247

"that the proposed regulation on disclosure, as set out here is intended to apply to the officers of the enforcement authorities. We would appreciate confirmation that this is the case."

Clause 1(1) refers to false or misleading statements. Clause 1(6)(a) defines false as meaning

"false to a material degree".

Problems of definition are very difficult. My hon. Friend the Member for Nuneaton (Mr. Stevens) spoke about a room which was 10 ft 6 in long but which had been inaccurately rendered as being only 9 ft 9 in long. That is all very well if the room is in a brand new house. There should then be no problem about getting the dimensions correct.

However, estate agents sometimes have to work in extremely difficult conditions. Let us take the example of a large rambling house in the depths of the countryside. The owner died some time ago and the executors have instructed a firm of agents to market the property. The agents go round to the house on a dull and unpleasant winter's day. They arrive to find that the electricity has been cut off and that the house is full of lumber. There is furniture all over the place--some rooms are stuffed full with furniture and rolled-up carpets. There are probably rats running about and cats demanding to be fed. It is also freezing cold.

Mr. Robert G. Hughes (Harrow, West) : Are not those circumstances in which some estate agents would describe a property as highly desirable and ready to move into?

Mr. Summerson : Some estate agents would go even further--they would probably set up as pet shop proprietors.

An estate agent may say that he is doing the best that he can but that all his modern electronic devices, which bounce a beam off one wall to another to measure room sizes, are bouncing beams off furniture or old curtains. In such circumstances, it is often impossible to give accurate measurements. If his measurements were held to be

"false to a material degree",

in accordance with the provisions, the estate agent would probably not have a suitable defence.

Next Section

Home Page