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5 July 2007 : Column 1125

Orders of the Day

Consumers, Estate Agents and Redress Bill [ Lords ]

As amended in the Public Bill Committee, considered.

New Clause 1

Amendment of definition of ‘estate agency work’

‘(1) Section 1 of the Estate Agents Act 1979 (c. 38) is amended as follows.

(2) After subsection (1) insert—

“(1A) The Secretary of State may by regulations made by statutory instrument make provision for amending the definition of ‘estate agency work’, as set out in this section.

(1B) Regulations made under this section may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, each House of Parliament.”’.— [Mr. Clifton-Brown.]

Brought up, and read the First time.

1.29 pm

Mr. Geoffrey Clifton-Brown (Cotswold) (Con): I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Sir Michael Lord): With this it will be convenient to discuss new clause 2— Standards of competenc e—

‘(1) Section 22 of the Estate Agents Act 1979 (c. 38) (standards of competence) is amended as follows.

(2) For subsections (1) and (2) substitute—

“(1) The Secretary of State will by regulations made by statutory instrument designate any body of persons as an approved body to which people engaged in estate agency work, including both the sale and lettings of residential property, must belong.

(2) The approved bodies must make membership conditional on signing up to rules and codes of conduct, which will—

(a) set minimum standards of training and qualifications required, and

(b) ensure that firms have adequate professional indemnity insurance and, as appropriate, clients money protection insurance.

(3) No order shall be made under subsection (1) unless a draft of it has been laid before, and approved by a resolution of, each House of Parliament.

(4) Before making an order under subsection (1) the Secretary of State must consult—

(a) organisations representing the interests of consumers,

(b) other persons appearing to the Secretary of State to be representative of persons who have an interest in the matter.”’.

Mr. Clifton-Brown: I welcome the Minister to his new post. We had a brief word earlier; he has previously covered many of the duties involved, and it is a pleasure to have dealings with him again. I also apologise on behalf of my hon. Friend the Member for Hertford and Stortford (Mr. Prisk). He is abroad on long-standing European business and cannot be present, so I am dealing with this Bill in his place, although I did not take it through Committee.

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One of the matters that received a lot of attention in Committee was part 3 of the Bill, which deals with the regulation of estate agency. New clause 1 and the Liberal Democrats’ new clause 2 give us a very good opportunity to have a real discussion on Report today about what the Bill does and does not cover in terms of regulation of the residential market. There are indeed some grey areas, which I shall come to in due course.

The purpose of our new clause is to permit the Secretary of State to amend the definition of estate agency work by statutory instrument, subject to affirmation by both Houses. This follows the amendments that we tabled in Committee to amend the definition of estate agency work in the Estate Agents Act 1979. Clearly, 1979 was a long time ago, and the residential market has moved on a great deal since that legislation was enacted. Indeed, residential lettings, which are not covered by the Bill, have increased by at least a third since then. The purpose of the new clause is therefore to amend the definition of estate agency work in the 1979 Act to take into account direct and off-plan sales by house builders, and to bring residential lettings within its scope. As a result, all those activities would be subject to the new redress and other procedures in the Bill—we welcome them—which would aid consumers.

The Government rejected the Conservative amendments, claiming that they wanted to consult consumers and the industry before deciding whether the law needed amending, and I have no doubt that the Minister will say that today. The idea is that Ministers would in future introduce legislation to deal with that subject. However, the Government have had more than enough time to consider these matters, and there has been more than enough in the way of studies and lobbying from the various groups involved to be able to consider how the residential market should be regulated. The new clause allows us, as I said, to debate the need to update the definition of estate agency work to take into account the rising number of direct sales of houses and the need to include residential lettings so that everyone is covered under the improved redress scheme.

Estate agents are already regulated by a number of Acts. The 1979 Act contains a negative licensing provision whereby an estate agent who has breached the Act’s provisions and/or been convicted of certain criminal offences may be banned. However, that is a negative, after-the-event licensing regime. Section 22 of the 1979 Act contains a provision to regulate the standards of competence for estate agency, but it was never enacted. The Earl of Caithness tried to move an amendment on Third Reading in that regard, but it was not carried.

The Property Misdescriptions Act 1991 made provision for it to be a criminal offence to make false or misleading statements, in written or oral form, about certain matters relating to property. Estate agents were further regulated by the Enterprise Act 2002, which enabled the Office of Fair Trading and trading standards to obtain injunctions to stop estate agents breaching protective legislation, so there is already a considerable amount of legislation surrounding estate agents, who were of course further regulated by the Housing Act 2004. Some 10,000 estate agents are
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members of the National Association of Estate Agents, but it is estimated that only 66 per cent. of all estate agents are members of that professional body.

At this point, I should declare an interest as one of only four chartered surveyors in the House.

Mr. Richard Benyon (Newbury) (Con): Five.

Mr. Clifton-Brown: Ah—my hon. Friend, who is now an Opposition Whip, has pointed out that he, too, is a chartered surveyor. I was of course including him among the four, but I congratulate him not only on being a member of the eminent body of chartered surveyors, but on his promotion to the Opposition Whips’ Bench. It is great to see him there. So there are only five chartered surveyors in the House, and I am delighted to be here.

Perhaps I should say a little more about estate agents and some of the practices that they get up to when I discuss the new clause tabled by the hon. Member for Richmond Park (Susan Kramer), but suffice it to say at this stage that the purpose of our new clause is to update the regulation of estate agents. Although we do not approve of the Liberal Democrats’ proposal for a full licensing scheme, not including the residential letting sector, the direct sales from developers sector and some agency sales via the internet are a considerable lacuna—perhaps the biggest in the Bill. We want to be very clear whether the Bill does cover that latter activity; I hope that the Minister can enlighten us when he replies.

As I said, the rental sector has increased by at least a third since the 1979 Act was passed. The letting sector is huge and if today’s interest rate rises are anything to go by, I suspect that it will become even bigger. Of course, it deals with some of the more vulnerable in our society—those who are less able to defend themselves when things to wrong—so not including it in the Bill seems a huge lacuna. I should be grateful if the Minister enlightened us as to why the Bill does not cover the rental market.

Also on the increase—and also not included in the Bill—is direct sale from developers to consumers. Anybody involved in the housing market, particularly in the south-east, knows that this sector, too, is growing apace. However, it seems that that sector is not to be regulated, either. A lot of people buy houses off-plan directly from developers. They might be first-time buyers, and they probably have not got the expertise genuinely to assess whether the developer in question is selling them a pup, or they are getting the purchase that they envisage from the perhaps rather over-coloured plans. That is the second sector that, in our view, the Bill does not adequately cover, and which new clause 1 would include.

The third sector consists of the various types of organisations—and they do vary—which sell or let houses via the internet. According to a rough estimate that I made the other day, there are at least 100 such organisations offering services in that way. Again, the more vulnerable will be tempted to use their internet search engines to find some form of letting arrangement and to deal with such an agency. They might not have the knowledge to understand whether their transaction is being handled through a true and
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honest mechanism. For that reason, such activities need in some way to be regulated under the Bill.

Before the Minister replies, I should point out that our new clause would not alter the Bill one iota: all it would do is give the Secretary of State the power to deal with such matters. As the market is developing in a fairly dynamic way, particularly on the internet, it would be very sensible to include this power in the Bill. It might prove to be like section 22 of the 1979 Act, in that it is never used, but given that the House is unlikely, owing to pressure on parliamentary time, to return to the issue of regulating estate agencies for at least five years—perhaps even 10 years, given how this House operates and the sheer volume of legislation that it has to handle—not dealing with this issue now would be a real missed opportunity. I hope that the Minister will think again, even at this late stage, although I do not hold out any particular hopes.

The hon. Member for Richmond Park will move her new clause 2 in a minute, but I hope that it is in order, while I am on my feet, just to say a few words about it now—or would you prefer, Mr. Deputy Speaker, that I deal with it after the hon. Lady has moved it?

Mr. Deputy Speaker: No, we are debating both new clauses, so the hon. Gentleman may speak to both now.

Mr. Clifton-Brown: Thank you for that guidance, Mr. Deputy Speaker. The hon. Member for Solihull (Lorely Burt) worked very hard and constructively in Committee, along with my hon. Friends, and I understand—for some of the reasons that I have already set out—why she wishes to try to provide a positive regulation scheme for estate agents, although I do not support that. There is considerable legislation covering estate agents already, and there is more in this Bill.

Mr. Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): As the hon. Gentleman knows, I have a high regard for him and it is in that spirit that I wish to put a question to him. I was a member of the Committee, although as a Scots Member I would not have dreamt of intervening on matters so vital to England, and I was left with a doubt in my mind. On the one hand, the official Opposition argue about the role of estate agents, and the hon. Gentleman rightly expressed his worries about how often we can address these issues; on the other, they did not seem to be keen on regulation. They seemed to think that market forces would be sufficient. If the hon. Gentleman could clarify that point, I would be very grateful.

Mr. Clifton-Brown: I have great regard for the right hon. Gentleman, and the clarity with which he made his intervention demonstrates the quality of the service that he gives to the House on a wide range of issues. I congratulate him on that. He will know that my party’s whole stance is opposition to unnecessary regulation and we believe that it is unnecessary to have wholesale regulation of estate agents. As I have said, there is already a considerable volume of legislation that licenses estate agents. The Bill provides a redress scheme and further penalties, and we would like to see how that works out before jumping in with a sledgehammer to try to make it more difficult for youngsters and others to set up as estate agents.

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As a member of the Royal Institution of Chartered Surveyors, I would like to see estate agents operating at the highest possible level. If new clause 2 is accepted, there would still be rogue estate agents, because some of the bright youngsters, who are bright enough to be rogues, will still pass whatever exams or tests might emerge from the licensing scheme. So a licensing scheme of itself would not stop unethical behaviour. It could set a framework and make it easier to deal with rogue estate agents, but it would not stop them. I would like to set up a framework that encouraged everybody to operate to higher standards. I would like all estate agents be members of the RICS or the National Association of Estate Agents, and put that in their windows. Those bodies could then set standards for continuing professional development, training and so on. Just having a licensing scheme would not stop rogue estate agents.

It will be interesting to hear what the Minister thinks, because the Government opposed the new clause in Committee. He also has to answer the question that the right hon. Gentleman poses.

Lorely Burt (Solihull) (LD): Before the hon. Gentleman leaves this issue, does he agree that someone who intentionally sets out to mislead or even defraud may have all the necessary qualifications? That also applies to solicitors. However, would not a positive licensing system mean that everyone would at least start out with a minimum qualification and understanding of what they are doing? Therefore the likelihood of estate agents acting in ignorance would be reduced and that would be a great benefit to the industry and the customer.

Mr. Clifton-Brown: That is a reasonable point, and I partly agree and partly disagree with the hon. Lady. She made my case by talking about rogue solicitors. We generally regard the legal profession as having some of the highest standards of any professional body. However, that does not stop rogue solicitors. We still see the odd court case in which a solicitor is struck off. The solicitor’s body and regulation by Government means that rogue solicitors can be banned.

As for whether the scheme would raise standards, there is already enough legislation for estate agents. The Bill will introduce new redress schemes and penalties and we need to see how that settles down, although I am not saying that we would be opposed to a full licensing scheme for estate agents for ever more. I know that the hon. Lady probably will not agree with me, but I hope that I have given her some reasons why we will not support new clause 2.

I want to encourage estate agents to work to the highest possible standards. We need to ensure that the public are better informed about what the professional bodies—the RICS, the NAEA and the Association of Residential Letting Agents—do and that we strongly advise them to use members of those organisations.

It may be useful for the House to consider some of the ways in which estate agents operate, and the Minister may also wish to do so when he rejects the overall estate agents licensing scheme. As a professional, I am well aware of some of the pitfalls
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that estate agents can encounter and thus fall short of what they should do. The whole issue of offers is a difficult one and I am not sure that all estate agents handle offers in the most open and transparent way. They may not always report them to their clients as they should or give their client proper advice. They may use offers to wind up the price or fail to report them if they are trying to get a lower price on a house for a friend. The area of offers can be difficult for some less scrupulous estate agents.

1.45 pm

Estate agents and chartered surveyors—my own profession—have often been criticised over valuations, which can be difficult and which may vary for several reasons. In a fast-rising market, such as that in London today, or even a fast-falling market that might occur in a slump, one can value a property one day without knowing that the next that special purchaser will come along and offer 20 per cent. more, making one’s valuation look stupid. That often happens.

Which? has been campaigning alongside the hon. Lady to introduce a full licensing scheme and it sent round anonymous inspectors to see whether estate agents were signing unfair contracts. It found that in many cases the contracts were unfair. I hope that the Minister will confirm that the other provisions in the Bill on solicited calls, as opposed to unsolicited calls, will also apply to estate agents. Let us suppose that an estate agent went to see someone on a solicited basis—that is to say, an appointment has been made—and said, “It will cost this much for us to provide this service to let your house. Please sign on the dotted line now.” If the consumer decides overnight that the charge is unreasonable, will the solicited provisions in the Bill apply to the transaction? Will the consumer have the right to rescind the signed contract the next day?

I welcome the redress scheme, but it does not go far enough. As my hon. Friend the Member for Rutland and Melton (Alan Duncan) said on Second Reading, estate agents can be fined up to £25,000 under the existing legislation, but in only six of the 497 cases brought in 2005 did the fines amount to more than £3,000. I hope that the Minister will be able to reassure the House that the Bill will give the redress scheme real teeth.

The Minister may well say that the Government are to have a review of the three categories that I have set out, but that would be no more than an excuse for inaction. I hope that he will tell us precisely what the Bill covers and, more important, that he will describe the Government’s thinking about lettings, internet sales and direct development sales, and his proposals for their regulation in the future.

Susan Kramer (Richmond Park) (LD): I also welcome the Minister to his new job. This debate is my farewell song on these matters, before I start to deal with planes, trains and automobiles, but it has been a privilege to have been associated with this Bill.

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