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Session 2006 - 07 Publications on the internet General Committee Debates Consumers, Estate Agents and Redress Bill |
Consumers, Estate Agents and Redress Bill |
The Committee consisted of the following Members:Mr C.
Shaw, Committee
Clerk
†
attended the Committee
Public Bill CommitteeTuesday 24 April 2007(Afternoon)[Mr. Mike Weir in the Chair]Consumers, Estate Agents and Redress BillSchedule 6Estate
agents’ redress
schemes
Amendment
proposed [this day]: No. 23, inschedule 6, page 62, line
29, leave out ‘may’ and insert
‘shall’.—[Lorely
Burt.]
4
pm
The
Minister for Trade (Mr. Ian McCartney):
I
welcome you to the Chair again this afternoon, Mr. Weir. I
hope that we enjoy the sitting as much as we enjoyed the first sitting
today. Before dealing with amendment No. 28, I should like to report
back to the Committee following the discussion of clause 13 in last
Tuesday’s sitting. I told hon. Members that I would raise the
issue of the recalibration of token payment metres with Ofgem. I have
today received a written response from Ofgem, which has also written to
the Clerk of the Committee in that regard. I was not sure this morning
whether the Clerk had received that response, so I apologise for that.
In case hon. Members have not received the response, I have brought
copies of both the letter and the memorandum that Ofgem prepared for
the Committee. I hope that they will bring hon. Members up to date on
Ofgem’s position and help them to consider whether they might
want to raise other issues on Report stage. Copies are on the
Table.
On amendment No.
23, I shall first respond to the hon. Member for Solihull and then deal
with the issues raised by my hon. Friend the Member for Ealing, North
and suggest a way forward, which I have not yet discussed with my
officials. The Government’s aim in introducing the estate
agents’ redress provisions is to require all estate agents to
join a high-quality redress scheme. I am happy to make it absolutely
clear to the House, as I did in numerous debates this morning, that we
intend to ensure that they are high-quality, not Mickey Mouse, schemes.
[
Interruption.
] I will say Donald Duck schemes
then.
A high-quality
scheme is one that uses generally accepted criteria for best practice,
which include accessibility to all consumers, including vulnerable
consumers; ease of use; clarity of operation; timeliness of complaints
resolution; and responsiveness and transparency of decision making. We
want to ensure that all home buyers and sellers have access to redress
for legitimate complaints against estate agents. The amendment would
make it compulsory for the Secretary of State to lay an order requiring
estate agents to belong to a redress scheme. We cannot accept
the amendment, as it is possible to envisage scenarios in which, for
short periods, there is no approved scheme for agents to
join.
The Office of
Fair Trading can withdraw its approval from a scheme if it no longer
meets the approval criteria. We discussed the circumstances in which
that could happen during our consideration of an earlier amendment. For
example, approval could be withdrawn amid serious concerns that scheme
was not providing to the OFT information that it had about agents not
complying with legislation. Approval might also be withdrawn after a
change in the governance structure that, in the OFT’s opinion,
compromised the ombudsman’s independence. The OFT must be
notified of any change to the running of the scheme within14
days of the change taking place. The OFT will quickly be aware of
changes to the scheme and will be able to assess whether they affect
its approval.
Approval
would also be withdrawn if there were concerns about the effectiveness
of the complaints handling system, where an unacceptable backlog of
unassessed cases had built up. If a scheme was unable to handle the
number of complaints, because it was not adequately resourced, for
example, the OFT could withdraw its approval. The amendment would make
no difference to what would happen in practice; all estate agents would
be required to join a redress scheme. I hope that the hon. Member for
Solihull is reassured about the drafting of the clause.
My hon. Friend the Member for
Ealing, North raised the issue of fly-boarding, which is the practice
of putting up false “for sale” or “sold”
boards, to represent to consumers that an estate agent has more
properties on the books than is actually the case. “For
sale” boards must comply with the Town and Country Planning
(Control of Advertisements) Regulations 1992. Fly-boarding can be
addressed under the Trade Description Act 1968 and the Control of
Misleading Advertisements Regulations 1988. Abuse of that type appears
to have fallen considerably. I shall come back to that in a
moment.
As a
consequence of enforcement interventions by the OFT and local authority
trading standards services, many more estate agents are signing up the
relevant parts of the ombudsman’s code of practice for estate
agents, which forbids fly-boarding. The OFT took action against
fly-boarding in 2004 against a company called Mankind Property
Services, trading as Bairstow Eves Countrywide. Its new office in New
Cross, London, had to give written undertakings not to erect false
“for sale” boards in contravention of the Control of
Misleading Advertisements Regulations 1988. Fly-boarding is to some
extent self-policing, as complaints are usually made by rival estate
agents who have a knowledge of the local market and spot false sale
boards. That is the background to the issue, but it does not help my
hon. Friend with his complaint.
The Office of Fair Trading
recommended that agents should be required to identify the specific
property in question on their sale boards. That was not proposed in the
Bill, because we needed to consider compatibility with the unfair
commercial practices directive, which was not completed at that point.
Although abuses of that sort are half folly, I take this recommendation
seriously, and I assure my hon. Friend that the OFT, my team that will
be established to implement the
legislation and the team that is currently in place to implement the
unfair commercial practices directive will be brought together to have
a meeting to consider what more can be done to resolve the issue.
Without prejudice, I hope to try to have that discussion before we next
meet on the Floor of the House when the Bill is considered on Report. I
cannot guarantee that, but I will try to do so and report back to the
Committee on the discussions
held.
Mr.
Mark Prisk (Hertford and Stortford) (Con): I am sure that
the Committee welcomes the Minister’s comments. Does he intend
to ensure that the principal trade bodies or professional organisations
involved in the industry are at least consulted before that meeting so
that it might be informed by the views of the principal representative
practitioners, or will he do that after the
meeting?
Mr.
McCartney:
First, the OFT has already consulted on the
issue, which is why it has made its recommendations. I am simply saying
that I take the issue seriously, and I take it even more seriously when
the OFT has already considered the matter. We could not deal with the
issue when drafting the Bill, because of the formulation of the unfair
commercial practice directive. I am simply suggesting that I bring the
parties together and then come back to the Committee and inform it
about what was said. I hope to do so before the Bill is considered on
Report, but if that is not feasible, I will have to say that I was
unable resolve the issue at that stage. If I can do something, I would
rather get it right than just try to curry favour with people. I
reassure my hon. Friend the Member for Ealing, North that, having taken
his point seriously, I will try to do something about
it.
Stephen
Pound (Ealing, North) (Lab): My right hon. Friend has an
enviable reputation for rapid action, but he has surpassed even his own
high standards today. I thank him most sincerely for that—on
behalf of not myself, but my constituents and other hon. Members who
have raised that concern. We will look with great interest to the
statement that will be made on the Floor of the House; but in the
meantime, I thank my right hon. Friend for his prompt and positive
action.
Mr.
McCartney:
I thank my hon. Friend for his kind remarks. I
cannot definitely commit myself to dealing with the issue on Report,
but I will try my best to do so. However, hon. Members should rest
assured that, whether it is done on Report or at another time, I will
come back with a substantive reply to the Committee, and if that has to
be in writing, so be it. Given that the OFT has already done the work
on the issue, I hope that we can consider it and find a way forward. I
hope that the hon. Member for Solihull can accept my explanations and
will withdraw her amendment, but I will wait to find out whether she is
happy with what I have
said.
Lorely
Burt (Solihull) (LD): I am very interested and somewhat
reassured by what the Minister has said. He talks about exceptions that
would justify the retention of the word “may”. I am
sufficiently reassured by him saying that the intention is that the
word “shall” will be
used. I am extremely pleased that the debate has given an opportunity
for the hon. Member for Ealing, North to air a concern that I am sure
is common to all hon. Members. I, too, look forward to hearing the
results of taking the issue forward. On that basis, I beg to ask leave
to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Susan
Kramer (Richmond Park) (LD): I beg to move amendment No.
24 , in
schedule 6, page 62, line 29, at
end insert
‘(a)’.
The
Chairman:
With this it will be convenient to take
amendment No. 25, in schedule 6, page 62, line 31, after
‘work”)’,
insert—
‘(b) developing and
directly selling residential property to members of the public;
or
(c) facilitating temporary
periods of residence to members of the public at residential property
not owned by those members of the
public;’.
Susan
Kramer:
Thank you, Mr. Weir. My apologies to
you and the other members of the Committee for not being present during
this morning’s
sitting.
Susan
Kramer:
I gather that I may have been sorely missed,
because my hon. Friend the Member for Solihull was so effective. I am
providing a little relief for her by moving the amendment.
AmendmentsNos. 24 and 25 must be read together, otherwise
neither makes any sense. They raise, once again, two issues that were
touched upon under clause 2, and which willbe raised in
relation to other amendments that will be proposed later in the
discussion. They are crucial to the Bill’s character, to provide
proper protection for consumers, and they address schedule 6.
Proposed new section 23A in
schedule 6(2) currently
reads:
“The
Secretary of State may by order require persons who engage in estate
agency work in relation to residential property (“relevant
estate agency work”) to be members of an approved redress scheme
for dealing with
complaints.”
We would
change that with these two amendments, so that it would
read:
“The
Secretary of State may by order require persons
(a) who engage in
estate agency work in relation to residential property
;
(b)
developing and directly selling residential property to members of the
public.”
There would also
be a paragraph (c), which I will go into in just a second.
Paragraph (b) clearly deals with
developers who are selling either directly, off-plan, or whatever else,
who are not covered under the existing language. We feel that that is a
huge loophole and that developers are not held accountable under the
same kind of redress requirements that apply to an independent estate
agent. Indeed, there is nothing to say, because there are so many forms
by which people can set themselves up to sell residential property,
that a developer could not use individuals, such as those who could
form, for example, a casual estate agency, to sell that property
off-plan.
We think that there is a huge
loophole and that this is a great opportunity to tackle it. More and
more people are buying from developers, particularly as we rely more on
new builds for opportunities to move.One has only to look out
of the window in Londonto be aware of how widespread is the
engagement of developers in producing new homes for the market. Not to
have that covered by the Bill strikes me as an incredible
failure.
Paragraph (c)
is probably even more important. It would draw into the redress scheme
those
“facilitating
temporary periods of residence to members of the public at residential
property not owned by those members of the
public.”
Those are
cumbersome words, but we all know that that is the language of letting.
Again, that is an attempt to bring letting into the scheme. The
Minister willbe aware that the letting industry is huge; it is
worth £12 billion a year. I believe that the Minister accepted
on Second Reading that those who rent are often among the most
vulnerable in our communities. Under the Bill, they are offered the
least protection. Again, I will not reiterate what we have discussed,
but Shelter has examples of case studies of individuals being charged
£300 just to get information on a potential let, when the only
work put in by the agency was a phone call to either side. People are
trapped and suffer real abuse. Many estate agents handle both sales and
lettings, so, again, it is relevant for the Bill to cover both sides of
what they do.
We are
conscious that the Government are putting in place a temporary deposit
protection scheme, but that does not cover many of the disputes that
surround lettings in the broader sense. We also understand that, on
Second Reading, the Minister said that a review was in hand. This is
something that the Office of Fair Trading did not consider when it
looked at the world of estate agents and it is something that was under
review. It was said that, in a couple of years, something might come
forward. It seems to me that this is obvious and straightforward. We
know that there are sometimes20 years between Bills that
address real estate issues, so why not use this opportunity to put in
place language to protect the most vulnerable? These two amendments
provide an opportunity to do
that.
4.15
pm
Mr.
Prisk:
These two amendments appear to address concerns
which a number of members of the Committee share about the scope of
what is estate agency work and what is not. Mr. Weir will be
aware that we, on these Benches, have tabled two substantive new
clauses that address these issues, and which I trust we will have the
opportunity to debate later. Therefore, I will not paddle through the
arguments in their entirety now.
I endorse entirely the
aspirations of the hon. Member for Richmond Park (Susan Kramer) in
seeking to put forward these concerns. My worry is that the wording is
somewhat unclear. Amendment No. 25, for example, refers
to
“facilitating temporary
periods of residence to members of the public at residential property
not owned by those members of the public”.
I would not necessarily call that
the language of residential lettings, although I think that I know
where the hon. Lady is heading with it. The reference to
“periods” in that context seems peculiar, and I think
that it is the idea of leasehold interests that is intended. Therefore,
my problem with the wording as it stands is that I am not clear whether
it makes any sense, either in or out of context.
The proposal seeks to amend this
Bill rather than address the source of the definition of estate agency
work, which lies in section 1 of the original Estate Agents Act 1979.
An estate agent is defined as being a person who stands between the
house purchaser and the vendor, and so the question is how the
legislative definition can amend or complement that concept of estate
agent as intermediary. I am not clear as to whether these amendments
achieve that, which is why I have serious reservations about them. The
aim is right, and I strongly support it. We have a 28-year-old
definition that clearly needs to be modernised, but, sadly, the
drafting falls short of the mark.
Mr.
McCartney:
Before I deal with the amendments and my
reasons for, unsurprisingly, rejecting them, I will deal with the two
general points made as part of the overall case put by the hon. Member
for Richmond Park.
The
first general point was on letting agents, who are subject to different
regulations from estate agents. They are governed by the Accommodation
Agencies Act 1953, which makes it illegal for agents to charge
prospective tenants for lists, addresses or details of properties that
they have in their possession. I think that that was the point the hon.
Lady was making. European legislation on unfair consumer contracts and
unfair commercial practices also applies to this area. I will write to
the hon. Lady and to hon. Members on how that will happen in
practice.
On property
developers who act as independent estate agents, any person doing
estate agency work, as defined by section 1 of the 1979 Act, will be
caught by the redress provisions. They do not have to call themselves
estate agents; it is what they do that matters. That is an important
point of clarification for thehon.
Lady.
Amendments Nos.
24 and 25 seek to extend the redress provisions beyond estate agency
work to include lettings work and the sale of new-build properties. To
be fair, the hon. Lady is being consistent. Identical amendments were
tabled by the Liberal Democrats in another place, and they received no
support there—probably not just because of the
Government’s position, which I will come to in a moment, but
because, as the hon. Member for Hertford and Stortford (Mr.
Prisk) said, even if one agrees with their principle, they are
seriously flawed in
structure.
As I said,
letting agents are subject to different regulations from estate agents,
namely the Accommodation Agencies Act 1953. The Government have already
taken action to improve the rights of tenants. The tenancy deposit
scheme that came into force at the beginning of April deals with one of
the main causes of concern for tenants: their deposits being withheld
unfairly by landlords or their agents. Landlords have the choice of
three schemes, but they
must join one. For the first time, all tenants who keep their property
in good condition will have the reassurance of knowing that they can
get their deposit back. Tenants who have problems securing repayment
will have access to a free dispute-resolution service under the deposit
scheme.
In addition,
the Government are acting to protect the most vulnerable members of
society from exploitation. The Housing Act 2004 requires the mandatory
licensing of high-risk houses in multiple occupation. Therefore,
private landlords who manage homes in multiple occupation of three
storeys or more, or occupied by five people or more who form more than
one household, will require a licence from the local authority.
Furthermore, the local authority will have the discretion to extend
licensing to other categories of multiple occupation homes to address
particular management problems that may exist in such properties. The
Government are aware of the concerns of the quality standards of
newly-built homes. That was one of the issues that was addressed by
Kate Barker in a review of the issues underlying the supply of housing
in the United Kingdom. Her report, published in 2004, recommended that
the house building industry did not demonstrate increased levels of
customer satisfaction. By 2007, the OFT should conduct a wide-ranging
review of whether the market for new housing was working well for
consumers.
It is
extremely disappointing that the House Builders Federation has not
responded to Kate Barker’s call to put in place a code of
practice governing new house sales. I asked the OFT to look into the
market. I have been reassured that it is aware of Parliament’s
concerns, and of the debates that we had on Second Reading and since,
and that it is keeping open the option of a market study, and currently
assessing the industry’s response. If the OFT does not look at
that, I give the Committee the assurance that we will.
I say to the hon. Members have
spoken today that they need to look carefully at the issues on this
matter, and assess whether further action is needed. I want those
issues to be resolved, which is why I have prompted a Government review
of the wide property market, after consulting the Minister for Housing
and Planning, my hon. Friend the Member for Pontefract and Castleford.
The review will look at regulation and redress across the whole
property sector, including lettings. It does not make sense to look at
one area in isolation. We need to look at the whole story to ensure
that if we take measures in one place, that does not disadvantage the
market in the long term for consumers. Simply extending the regulation
in stages to agents and property developers without further thought is
just plain sloppy. We should apply some intelligent thought to what is
appropriate to each area, and co-ordinate it. On the plan to start the
work in the summer, officials are in the process of drawing up terms of
reference for the work, and are looking at the timescales. We need to
target the review into areas where gaps remain in the redress
provisions for consumers, although there are sure to be significant
areas of consumer detriment. Debates in the House and in another place
have already identified issues of particular concern, which will be
addressed by the review, including all comments made about the Bill in
another place and on the Floor of the House. I have
accepted that there is evidence of concern and have sought to meet that
with the officials dealing with the review.
The Bill is not the place to
make changes. Part 3 of the Bill amends the Estate Agents Act 1979,
which does not cover lettings. Detailed work will need to be done to
ensure that all the sections of the Estate Agents Act and secondary
legislation made under the Act work better for letting agents and
property developers. The Act’s scope is limited specifically to
the buying and selling of land, which is clear from the fundamental
definition contained within the Act, such as “interest in
land” and the duties owed by estate agents, such as information
to be given to clients.
Moreover, the Bill implements
the recommendations made by the OFT in its report on the estate agency
market in England and Wales. That report did not look at the lettings
market, or at the market for new-build properties. We have no clear
evidence base on which to take action at this stage. Although those
markets are closely related, there are significant differences between
them, and we need to take that into account in terms of any proposals
that we bring forward to the House at a later date. It is also
important that we consult properly with industry and stakeholders. I am
sure that we agree that if the Government are to take action, it should
be based on evidence and, hopefully, a common approach to dealing with
the issues that the hon. Member for Richmond Park raised and with which
I have total empathy and understanding. I am not trying to put off the
date, or avoid the need to do something; I think that we should do it
in a more effective and comprehensive way, and the Bill is not the
place to do that. I hope, with those assurances, that the hon. Lady
will withdraw her amendments. If she presses them to a vote, I will ask
my colleagues to reject
them.
Susan
Kramer:
First, I thank the Minister for the assurances
that he has just given us, because he has very much strengthened the
comments that he made on Second Reading, which is greatly appreciated.
What we want to see is a solution to problems, rather than to engage
into any kind of grandstanding on the issues. Although I concede that
the words that are used in the amendment are rather inelegant, the
solution is actually quite elegant. It would have brought those bodies
into the redress scheme with relatively minimal effort. There is no use
crying over spilt milk by saying that lettings and direct sales were
not brought into the concept of the Act from the beginning, which would
obviously have been the easiest course of action for everybody and
brought about a remedy
sooner.
Based on the
Minister’s assurances, we shall not press the amendment to a
Division. We look forward to the work that I understand will be started
in the summer either under the auspices of the OFT or directly by the
Government. I look forward even more eagerly to the action that will
flow from it—not just a review but actual action to deal with
potential abuses. I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Mr.
Prisk:
I beg to move amendment No. 41, in
schedule 6, page 65, line 7, leave
out ‘may’ and insert
‘must’.
The
Chairman:
With this it will be convenient to discuss
amendment No. 42, in schedule 6, page 65,line 19, leave out
‘a’ and insert
‘the’.
Mr.
Prisk:
Amendment No. 41 is a fairly simple probing
amendment that is intended to ensure that a code of practice has been
approved by the OFT in accordance with the criteria set out. Will the
Minister clarify the circumstances in which the OFT might wish not to
approve a
scheme?
Amendment No.
42 is a different matter altogether. The purpose behind it is to
establish the case for a single code of practice. Consumers need
clarity and simplicity whenever possible, particularly when they are
seeking redress. We discussed that earlier in our deliberations. The
more uncertainty or complexity, the fewer people will seek, let alone
secure, reasonable redress for their
grievances.
In
discussing redress schemes and ombudsman schemes we have had a lot of
discussion about whether there should be one scheme or more. The
problem is that if there were one, it would mean scrapping several
established schemes. There is already more than one ombudsman in the
market, with one in England, one in Scotland and so on. However, what
really matters to home buyers is that the principles upon which those
schemes are based remain either very similar or preferably the same.
That is the principle behind the amendment—to have one code of
practice. There might be several ombudsman schemes, as there are now,
but they would be based on one clear code. In those circumstances,
consumers would be much better placed to understand what would happen
and they would therefore have much greater confidence in the
system.
The Government
argued in another place that best practice could be achieved if several
codes existed, but there is no reason why the best codes that are out
in the public domain could not be drawn together in a single code.
After all, the perspective to consider is not that of the agent, the
legislator or the ombudsman. It should be that of the home buyer or
home seller. Having several different codes of practice, and several
different schemes drawing from them, could lead to considerable
confusion and might lower, or at least not help, consumer confidence
about how the redress schemes will work. Because we support the redress
schemes, we want to ensure that the public have the maximum confidence
and understanding of the basis upon which they operate and therefore
exactly what they are entitled to
expect.
To put my
question to the Minister simply, how will consumers benefit from there
being more than one code of
practice?
Mr.
McCartney:
First, I accept that the amendments are
probing; indeed, they were tabled in Grand Committee in another place
by Baroness Wilcox and Lord De Mauley. My noble Friend the
Parliamentary Under-Secretary explained the effect of
the amendments, and I shall do so again to set out the arguments for
resisting them.
The OFT
will not approve a scheme that does not meet the criteria set out in
the Bill. It will also be able to publish guidance about how it will
interpret those
criteria, so whether or not there is more than one scheme or code of
practice, it is certain that schemes will be able to operate
effectively only if they reach the standards required by the
regulator.
I wish to
explain why I do not support the intention behind the
amendments—to require the Government to design a single code of
practice that all redress schemes would use to judge the conduct of
estate agents. I accept that the intended effect of such a code is to
introduce compulsory minimum standards. We have already extensively
debated more explicit attempts to introduce positive licensing, so I
shall not coverthat ground again. Indeed, we covered a lot of
it this morning, when we spoke a lot about what the standards would
look like if a scheme was approved and about what they should
cover.
4.30
pm
I know that this
is not the intention, but the amendments could weaken the Bill by
creating uncertainty about which code was being referred to. The hon.
Member for Hertford and Stortford might come back and say, “We
want a single code so that there isn’t any uncertainty,”
and he might think that the words in the amendments are plain, but I
shall explain what I mean in a moment.
As drafted, the Bill allows an
ombudsman to refer to a range of industry guidance documents in coming
to a view about the grounds on which a complaint can be made and what
standards of behaviour can reasonably be expected in the industry. In
previous discussions, we said that the redress scheme covered not only
serious complaints—even up to those that could require criminal
prosecutions—but complaints about general issues, which might
look small on the face of it, but which might involve issues that were
very disruptive to the individual’s attempts to buy and sell
property. Schemes have therefore been designed to take into account not
only breaches of the law per se, but poor practice that arises when
services are provided to the consumer. We are trying to maximise the
opportunities for the ombudsman to look at the grounds for a complaint
to see whether the consumer’s expectations of the estate agent
they are complaining about are reasonable.
A number of industry bodies have
their own codesof practice or similar documents. The
ombudsmanfor estate agents, the National Association of Estate
Agents and the Royal Institution of Chartered Surveyors, of which the
hon. Member for Hertford and Stortford is, I think, a member, all have
codes of practice or rules of conduct, which they expect their members
to follow. We see no reason for an ombudsman to look only at one code
or for the Government to tell industry which code estate agents should
follow and which should fall by the wayside. It is for the regulator to
determine such matters.
At the same time, estate agents
know that they will risk claims being made against them if they fail to
comply with good practice in a general sense and not just as prescribed
in one document. That goes back to the point that I made in one of our
debates about dealing not only with serious complaints, but with the
estate agent’s general conduct towards the client. It is
important to bear in mind that a general sense of good practice cannot
be laid down in a single document,
because it goes across a whole array of activities carried out by estate
agents and their staff.
It is also important to note
that the present drafting future-proofs the Bill against future
developments. We have had quite a lot of good debates, including this
morning, about ensuring that legislation can cope in a fast-changing
market place and that changes can be made to secure and maintain
consumers’ rights. We are attempting to ensure that potential
changes do not make the legislation redundant or out of date or prevent
it from quickly transmitting changes in the marketplace to protect the
consumer’s interests. Best practice will develop, and new
guidance and codes will emerge over future years. It is therefore
important not to tie the ombudsman’s hands to a document that
will inevitably become out of date.
The Bill’s drafting
contains some sophistication to deal with a varied approach to
assessing complaints, but the amendments would remove that
sophistication. Our approach builds on current practice in the
industry, and will ensure, with the approval of high-quality schemes,
that consumers have redress for complaints against estate agents who
fail to comply with good practice in a general and a specific
sense.
With that
explanation, I hope that the hon. Member for Hertford and Stortford can
accept that we are trying genuinely to meet his objective of ensuring
that we have certainty about the high standards in the codes of
practice.
Mr.
Prisk:
The Minister has put forward two central arguments.
One is that it is better to have a general code or a range of different
documentation against which business may or may not be held to account
and that knowledge of such expectations about general conduct is more
likely to raise standards. That may be the natural perspective from the
Government’s point of view, and I understand the belief behind
it—it may be proved to be true—but there is a difficulty.
A lot of smaller businesses—most agencies, particularly the
law-abiding ones that are trying to do the right thing, are smaller
businesses—will be anxious to ensure that they are crystal clear
about their obligations. If they cannot identify the things that they
are required to achieve by consulting a single source, there is a
weakness in the suggestion that they will know what their obligations
are.
The difficulty is
that there are two different perspectives. The one of Whitehall is
understandable; it looks down at the market and says, “We want
to encourage this general conduct and it is advantageous to have
available to us the option of a range of different documents and
rules.” However, I am keen to ensure that the majority of
businesses in the market understand what is required of them.
Preferably, they should be able to find that out from a single
source—its information might come from a range of
contributors—so that they know where they stand and what is
expected of them. Then they will also know that if they are held to
account they will be able to demonstrate what they have done correctly.
The lack of clarity worries me.
The future-proofing element has
some merit, given the way in which the Bill is drafted. I would have
preferred to see in the first instance a set of schemes
that are based on the fact that there is currently a range of redress
schemes, but which have the potential to be based on one. The
legislation could make it possible to base the process on a common set
of standards so that the industry knows where it stands and so does the
house buyer or seller.
The Minister has done his best
to put the Government’s view. I think that he and I have the
same end aim, but I am not convinced that he has addressed my concerns,
so I wish to press amendment No. 42 toa vote.
I beg to ask leave to withdraw
amendment No.
41.
Amendment, by
leave,
withdrawn.
Amendment
proposed: No. 42, in schedule 6, page 65, line 19, leave out
‘a’ and insert
‘the’.—[Mr.
Prisk.]
Question
put, That the amendment be
made:—
The
Committee divided: Ayes 6, Noes
9.
Division
No.
1
]
AYESNOES
Question
accordingly negatived.
Lorely
Burt:
I beg to move amendment No. 26, in
schedule 6, page 68, line 25, leave
out ‘£1,000’ and insert
‘£10,000’.
The Chairman: With this
we may discuss the following: Amendment No. 27, in schedule 6, page 68,
line 25, leave out ‘£1,000’ and insert
‘£3,000’.
Amendment
No. 28, in schedule 6, page 70, line 31, at end
add—
‘5 In section
3(8) (orders by Director General of Fair Trading) for “the
statutory maximum” substitute
“£10,000”.’.
Lorely
Burt:
The amendment stands in my name and that of my hon.
Friend the Member for Richmond Park. All the
amendments here—certainly amendments Nos. 26 and
27—relate to the penalty for not being a member of a redress
scheme.
Mr.
Prisk:
May I just correct the hon. Lady? In fact,
amendment No. 28 does not relate to redress schemes; it relates to
something else.
Amendment No.
26 seeks to increase the maximum fine from the Government’s
suggested amount of £1,000 to £10,000. It is noteworthy
and commendable that the Government have already moved from a
£500 amount, which was originally suggested in another place.
However, we are discussing the maximum fine that can be imposed; it is
not the usual fine. We are seeking to put a benchmark so that, where
there are companies serially infringing, occasion after occasion, the
amount of the fine can escalate to ensure that it is effective in its
intention, which is to guarantee that an organisation is part of a
redress scheme.
We
would like to ensure that, although the usual fine will not necessarily
be £10,000, there will at least be the ability to raise the fine
against vexatious organisations, to make sure that the fine really
bites on those organisations.
Amendment No. 27, which was
tabled by the Conservatives, seeks to raise the amount from
£1,000 to £3,000. I must confess that I am slightly
confused, because, as I understand it, the amount released to the press
was £10,000. I am intrigued to know quite what has
happened.
Susan
Kramer:
Perhaps my hon. Friend might like some
clarification. I think that the press release from the Conservatives
was about on-the-spot fines of £10,000 for non-membership of a
redress scheme.
Mr.
Tobias Ellwood (Bournemouth, East) (Con): On a point of
order, Mr. Weir. We are here to discuss amendment No. 26,
not to discuss a press release that the Conservatives may or may not
have sent out.
The
Chairman:
I think that it was a reasonable point to make
in the course of a debate, as long as we do not dwell on it too
long.
Lorely
Burt:
I certainly would not dwell on such an issue.
Suffice it to say that the Conservatives and the Liberal Democrats feel
that the maximum fine is not sufficient and £1,000 will not do
the job as a maximum fine when there is a serial offender.
I would like to speak briefly
about amendmentNo. 28, which was also tabled by the Tories. It
relates to the powers of the director general of the Office of Fair
Trading to fine rogue estate agents. As I understand it, the statutory
maximum fine at the moment is £5,000 and the amendment would
raise it to £10,000. However, as I understand it, by putting a
figure on the amount primary legislation would be needed to ensure that
it keeps up with inflation.
Stephen
Pound:
I am grateful, as ever, to the hon. Lady. Could she
just clarify a point for me quickly? I am tempted to support amendment
No. 26. The
wording in the Bill says “not exceeding £1,000”.
She is proposing to delete “£1,000” and insert
“£10,000”. Thus, is she proposing that it should
say “not exceeding £10,000”, on the basis that the
fine could be six pence halfpenny, or £100, or any sum? Is she
proposing the same wording, “not
exceeding”?
Lorely
Burt:
I am grateful to the hon. Gentleman. I am pleased to
clarify that, in amendment No. 26, that is the wording that we are
seeking to include—“not exceeding £10,000”.
That would give sufficient leeway for on-the-spot fines to relate to
the seriousness of the offence, unlike amendment No. 28, which was
tabled by the Conservatives. While we believe that it is important to
have large possible fines for rogue estate agents, there may come a
point when flexibility is required. As circumstances change and as
inflation may or not increase, depending on which Government we end up
with after the next general election, primary legislation may be needed
to keep up with this. We are not minded to support amendment No. 28. We
feel that £10,000 is the appropriate maximum amount which will
give plenty of leeway to make an appropriate fine to levy on individual
companies who are not members of the redress
scheme.
4.45
pm
Mr.
Prisk:
The three amendments relate to fines, but in
different circumstances. That is the point to bear in mind. One set of
fines relates to breaches of the rules of the redress schemes, which
come under this part of the Bill, and one fine—the
£10,000 in amendmentNo. 28—relates to breaches
under the OFT’s powers, which is a separate point. I hope that
that clarifies the matter because it can be
confusing.
Amendment
No. 27 would increase the limit for the fine for not being part of the
redress scheme to £3,000. The Government propose that every
estate agent, or everyone training an estate agent, must be part of
such a scheme. The Government’s desire to require agents to
belong to the scheme is very welcome. We strongly support it. However,
the fine that was originally proposed was just £500. That is
inadequate. In the other place it was increased to £1,000
following an amendment by Lord Dubs, a Labour peer. The Government
accepted that after some debate.
Given that the average estate
agent’s fee is now £3,000—obviously in London and
the south-east it will be higher than that—we feel that the fine
of £1,000 is still inadequate. It needs to be higher. If the
Bill is to send the right signal to that minority who give estate
agency a bad name and who flout the rules, it needs to focus their
minds on the fact that if they breach the redress proposals they will
be fined an amount that they will notice. That is why we propose a fine
of £3,000.
What
is the £10,000 about? Amendment No. 28 would impose a large,
maximum fine for those people who have been found to have flouted the
laws under section 3 of the Estates Agents Act 1979, which the Bill
seeks to amend. As the hon. Member for Solihull pointed out, the fine
is currently £5,000. Section 3 of the Act provides the OFT with
the ability to prohibit someone from trading as an estate agent. The
procedure that the director-general of the OFT follows
is quite clear and includes a number of investigation and warning
points. It is therefore separate from the issue of redress
schemes.
All hon.
Members will be aware of some of the appalling cases of rogue estate
agents who have cheated the public in a number of different ways over
the years. They are, of course, a minority, but their activities have
resulted in people being robbed of savings, being caused considerable
heartache and, in many cases, being subject to serious financial loss.
Recently the media have highlighted a number of different cases, and we
saw them on “Panorama”. The Evening Standard has
also been vigilant in highlighting a series of cases where people have
been cheated and where practices have been completely
unacceptable.
It is
clear that the OFT’s powers need strengthening and that a clear
signal must be sent that rogue agents will be barred and face financial
penalties. As we know, the Government are proposing limited increases
in the OFT’s and trading standards officers’ powers. That
is fine, but it will not necessarily be noticed by the real rogues,
given that, as I said, the average estate agent’s fee is
£3,000.
Stephen
Pound:
I am rendered almost speechless by the distance
that the Conservative party has moved from the laissez-faire days of
yore. Does the hon. Gentleman anticipate tariff bands for varying
offences, and if so, will he indicate where he feels that the tariff
bands should be
set?
Mr.
Prisk:
I suspect that the hon. Gentleman knows that there
are a range of fines. The maximum for a summary conviction stands at
£5,000—I think that that is level 5 or 4. I would guess
that the Minister has that emblazoned on his
memory.
The fines rise
through a series of tiers. A £10,000 maximum fine would send a
simple but clear message to the rogues. Decent agents have nothing to
fear from this because—remember—the fine would come only
when someone found to have broken the rules has been investigated by
the OFT and barred from trading as an estate agent. We argue that point
because the kind of person who becomes a rogue estate agent is,
frankly, also the kind of person who, having been barred by the
director-general of the OFT, will go on to be a rogue car dealer,
plumber or whatever it may
be.
Although it is
important that such an individual can be barred from estate agency, we
must send them a clearer signal that deters them from coming into the
business in the first place. Otherwise, they will come into it, nail or
scam somebody, and then move on to something else. We need to send them
a clear financial signal.
Lorely
Burt:
The hon. Gentleman is talking about an individual
who comes into estate agency and then enters a number of other
industries. However, I remind him of the discussion that we had this
morning: requiring people to be qualified and have the appropriate
amount of insurance surely would act as a barrier to entry for someone
purported to be a rogue estate agent. The scenario that he is talking
about, therefore, would not occur so
easily.
Mr.
Prisk:
I admire the hon. Lady’s optimism about the
kind of people with whom we are dealing. They will happily get around
the qualification procedures that we discussed. It is not an issue of
confidence, but of ethics, as I said. I think, therefore, that we need
to send them the clearest financial signal that if they are found
guilty by the director-general, in the way that I have described, not
only will they be barred from estate agency, but they will pay a fine
that they will note. I hope that that would then prove to be a
deterrent and encourage many of them not to trade in the industry. As I
said, it is important that they be barred, which is the case under
rules that the Government have in law. However, it is just as important
that we hit them where it really hurts—the
wallet.
Mr.
Ben Wallace (Lancaster and Wyre) (Con): I want
clarification on the penalty notices. Will they have the same effect as
we have seen elsewhere? One of the problems is often the record-keeping
of the officers or those who give them out. Certainly, we have seen
that in the police environment: people have been given them for
shoplifting, but that has not always been recorded, so the details on
some serial offenders have not been stored or logged and they have not
been traced. Perhaps I missed it—I am sure that I
have—but will schedule 6 provide that persons in receipt of a
notice are logged with an authority or passed on to the OFT, so that
they can be traced if, for example, they move from an area covered by a
trading standard office in London and set up shop in Lancashire? That
is important if people are to have faith in the penalty notice
system.
Mr.
McCartney:
This has been an interesting little debate.
Mirror, mirror on the wall, who’s the toughest of them all? The
Liberal Democrats and the Conservatives are vying over who really is
the friend of the consumer and, as a consequence, saying that the
Government are soft. Let us remind people that this is the first
Government ever to take action in this sector. We have introduced
redress, which, as it currently stands, is established for the scheme
at up to £25,000; access and new powers for the OFT and for
trading standards officers, including the ability to prevent companies
and their employees from working in the sector; and the ability and
capacity of the OFT working on the ground with trading standards
officers to take immediate action when they receive a complaint. We are
discussing a not inconsiderable resource for the
consumer.
As the hon.
Member for Hertford and Stortford said, one amendment deals with the
failure to join a redress scheme, and another deals with banning orders
and failure to comply with a banning order. Let us remember that a
banning order is issued when someone
has committed a serious offence, perhaps even a criminal offence, and at
that point action has already been taken. I shall return to why that is
important.
Amendments
Nos. 26 and 27 focus on the level of the penalty charge, but the charge
is not the full enforcement story. We must not get penalty charges out
of proportion. They are a trigger point for far tougher potential
sanctions. Ultimately, estate agents face the prospect of being banned
by the OFT, following an investigation, as a result of not belonging to
a redress scheme. That is a very serious sanction, and, to most estate
agents, that deterrent will be worth far more than £3,000 or
£10,000. It will mean the total loss of their business, revenue
and livelihood.
A
penalty charge is a quick and simple deterrent that gives local
authority trading standards officers a quick and simple sanction
against estate agents who arenot members of a redress scheme.
It is important to remember that the £1,000 charge can be
repeated again and again—it is not a one-off charge. It is an
incentive, is it not? If someone wants to snub their nose at the
consumer or at a law designed to clean up the activities of people in
this sector, it will be a very expensive operation indeed. Not only
will they have a financial loss again and again, but they could lose
their capacity to operate as a
business.
The penalty
charge can be repeated every day, if necessary. Let me give an example.
If someone makesa complaint to a trading standards officer, it
is immediately logged. If it is found that the estate agent is not a
member of a redress scheme, they will face a potential fine of
£1,000. No doubt they will be informed that they are in breach
of the law and that they should get themselves registered. If the
trading standards officer checks the following day—they will be
able to identify when the agent has registered—and the agent
still has not registered, another £1,000 can be charged. The
trading standards officer cannot vary the amount. They cannot say,
“I will give you a second chance this time and fine you only
£500.” That will not happen. The fine will be
£1,000, £1,000, £1,000. It will be repeated and
repeated, if
necessary.
Hon. Members
have not realised the potential ofthe fine. If a trading
standards officer is faced with a blatant and continuing breach, he can
inflict a considerable financial penalty, but, crucially, it is left to
trading standards officers to use their judgment and discretion in the
light of the
circumstances.
It is
expected that the penalty will be higher than the cost of membership of
an approved scheme. Let me explain the process in a bit more detail.
When an estate agent is found to be in breach of their duty to belong
to an approved redress scheme, the trading standards officer may issue
them with a penalty charge, currently laid out in the regulations at
£1,000. Should the agent fail to join an approved scheme
quickly, the trading standards officer can continue to issue penalty
charges. At the same time, the trading standards officer will be under
a duty—this goes back to the point that the hon. Member for
Lancaster and Wyre rightly made about whether there is an audit trail;
this is just as important—to inform the OFT about any estate
agent who is not a member of a redress scheme. If an estate agent
continues not to belong to a scheme, the OFT
will be able to consider the fitness of the estate agent to practise and
will be able to issue a warning order, which could ultimately be
followed by banning the agent from practising. In sufficiently serious
cases, the OFT could bypass the warning order process and decide to go
straight to banning the
agent.
5
pm
The Committee
can begin to see the story; it is more than just a matter of
£1,000. Any estate agent, individually or collectively, who
decides not to comply is a loser from the moment it takes that
decision, anda complete loser if it continues not to comply.
In addition, under the Enterprise Act enforcers can take action such as
seeking injunctions from the High Court against estate agents
prohibiting infringements under the Estate Agents Act. Therefore, the
penalty charge itself is only part of the process, which is why we
should not over-exaggerate the importance of the figure, despite what I
said about it being charged time and again, if
necessary.
There are
many advantages to having a quick and simple sanction, issued with
minimum bureaucracy, but it also has limitations. The benefits offered
by having a simple civil penalty process are greater than those offered
by a penalty charge regime that has a range of fines with a higher
maximum. Case law shows that where high fines can be levied individual
circumstances should be taken into account to ensure that the fine
imposed in a particular case is not excessive—a necessarily more
bureaucratic and time-consuming process. It gives the opportunity for
the rogue elements to string things out and continue in business until
they come before a court. With a £1,000 fine they pay
up—end of story. If they do not pay up, there is another
£1,000 fine. Each time it happens the OFT is notified and it can
order an immediate
ban.
Mr.
Wallace:
I am grateful for the Minister’s
clarification of the proposal. I am confident that we are on the road
to solving the problem that I raised.
How broad can the OFT be in
naming individuals? We are only too aware, often through watchdog
programmes, that although the salesman may be caught out the directors
of companies stay at arm’s length and may reappear in a new
company. How far can the OFT go in banning individuals or issuing a
penalty charge notice to ensure that those people who take advantage of
new, young salesmen are caught and held to
account?
Mr.
McCartney:
When you are banned, you are banned. If someone
works for estate agent A, they cannot just pop next door and work for
estate B. They are banned for a specific purpose, because they are not
fit. If the company is closed, it is because it is not fit. It is
important to make that clear and that is why it is such a total loss if
people decide to defy the law and refuse to put into place what is
required by the enforcement officers—the OFT or the trading
standards officer.
Mr.
Wallace:
I understand what the Minister is saying with
respect to individuals, but directors of companies is a broader matter.
If we are to close down
on an industry abuse, directors, no matter how far
removed, must have some corporate responsibility. If a company is
closed down, do all the directors have a tag against their names? How
far can that
go?
Mr.
McCartney:
As the Bill shows, if individuals are culpable
they will have the full letter of the law against them, as will the
organisation concerned. I return to a point that the hon. Gentleman
made at a previous sitting, that other legislation comes into play if
directors are operating a business in an unfit way. The hon. Gentleman
does not want a junior member of staff to carry the can and I agree
with him. There was a television programme a few months ago in which an
estate agent—I will not mention any names, but I think we all
know who it is—was exposed for very dodgy practices, which they
will get done for under this Bill. The excuse was that one rogue
employee was to blame, and he was sacked. In those circumstances the
employee and the employer would have been liable for those breaches
under this Bill and that is critical. We cannot have people using their
power as an employer to make an employee carry out dodgy activities on
their behalf and walk away from it.
To be fair, there will be
occasions on which someone is operating in a way that is unacceptable
and there is a breach, and the employer may not know about that. That
is why both situations are covered. Action has to be evidence based. I
hope that that explanation helps the hon. Member for Hertford and
Stortford.
£3,000
is not a suitable amount for a trading standards officer to walk in off
the street and levy against an estate agent, and £10,000 even
less so. That sort of levy would appropriately by imposed only by a
court or tribunal where the penalty charge could be varied. This
penalty charge will be the same amount every time—£1,000.
That is already at the high endof the civil penalties scale.
No environmental civil penalties exceed £500, and £1,000
is considerably higher than the £500 referred to in the
Housing Act 2004. The hon. Member for Hertford and Stortford
is right. £5,000 is level 5 under the Magistrates’ Courts
Act 1980, I have been reliably informed—not that I have had to
face that myself, by the
way.
Following careful
consideration of the arguments, we have already accepted an amendment
to the Bill to increase the maximum level to £1,000, as the hon.
Member for Solihull said, but going any further would be unfair. Let us
remember that the real sanction, after a proper and fair process has
been conducted, is that an estate agent can be banned if found unfit
following non-membership of a redress
scheme.
Amendment No.
28 is intended to increase to £10,000 the maximum fine that can
be imposed by a magistrate on an estate agent who has breached a
banning order. In my view, if the case is serious enough to warrant a
£10,000 fine, it should be dealt with by the Crown court, where
there is no limit on the fine that can be imposed. If we are talking
about deterrence, that is where deterrence should lie. If the case is
serious enough for a £10,000 fine to be imposed, it should go to
the Crown court, because we are talking about a very serious breach
with that level of
fine.
The amendment is
technically in the wrong place. I do not say that for clever dick
purposes. It would fit better in clause 55, which relates to
prohibition orders.
However, the amendment enables me to explain what we
need to do. At the moment, if a person is considered unfit to act as an
estate agent and is banned by the Office of Fair Trading from doing so
but continues to practise, one of two things can happen. They can be
convicted in a magistrates court and required to pay a fine not
exceeding the statutory maximum, which is currently £5,000, so a
£10,000 fine could not be imposed in those circumstances,
because the law sets out that the maximum that can be levied is
£5,000. In more serious cases, defendants are tried in the Crown
court, where they are liable to pay an unlimited fine, so if we are
really looking for a return in these cases, that is where they should
go—the fine is
unlimited.
Magistrates
have the power to send a case to the Crown court for sentencing if,
after hearing the evidence, they decide that the offence was so serious
that a higher fine should be imposed than they have the power to
inflict. We are covered in two ways. If a case goes to the magistrates
court and the evidence is such that the magistrates decide that the
level of fine that they have powers to levy is insufficient, they can
send it to the Crown court for sentencing. In my view, the types of
case that the hon. Member for Hertford and Stortford rightly
highlighted should in any event go to the Crown court, where there is
not a £10,000 fine, but an unlimited fine. The Government are
not being soft on the issue—far from
it.
Mr.
Prisk:
But in the nature of the legislation at the moment,
that is not necessarily an option that is
available.
Mr.
McCartney:
It is. In all circumstances, it is. Let me
explain what is changing. This takes us back to the debate that we had
earlier about the new powers of access to records and the maintenance
of records. Why is that so important? It provides an audit
trail—an evidence trail—where it is difficult at the
moment for that to happen. If people do not maintain the evidence and
audit trail, that is a breach in itself. So I say to anyone who thinks
that they will be clever enough not to keep the records so that they do
not face a £5,000, £10,000 or unlimited fine,
“Forget it, pal”, as they say where I come from. That is
an offence in itself, which could lead to a banning order for them and
their company. Any attempt to undermine the capacity to represent
fairly both the consumer and the good businesses in this marketplace is
doomed to failure, in my
view.
I am glad that
the amendments were tabled, in that, although I said at the beginning
that there was a competition to see who was the toughest, in reality,
if there is a toughness in this, I hope that I have explained that it
comes from the Government in how we have set this out.
I thank hon. Members for their
amendments, and, given the opportunity, I hope to explain that we are
not operating a minimalist approach. The proposal is to put in context
the overall strategy, structure and process to be used by the Office of
Fair Trading on the one hand and trading standards officers on the
other, and their interrelationship as regards issuing on-the-spot
fines, as well as in their dealings with the magistrates court and
higher courts, if required. If we put all those building blocks
together, we will see that our position is
significantly strengthened as regards dealing with rogue estate
agents.
Moving on,
section 53(8) of the Estate Agents
Act—[
Interruption.
] I cannot read my notes.
[
Interruption.
] I am sorry, it is section 3(8) of
the Act. I heard a voice from God, and God is a female.
[
Laughter.
] That will confuse the Liberal
Democrats. I will be in trouble with the Church of England, the
Catholic Church and everyone
else.
Section 3(8)
provides that an estate agent whofails to comply with a
banning order can be convicted in the Crown court or the magistrates
court, whichjust confirms what I have been saying for the
past10 minutes. [
Interruption.
] It is
good to have God on your side. I hope that my explanation helps to
convince hon. Members for the Conservatives and Liberal Democrats that
we are not going soft—far from it. The sanctions here are
significant.
Lorely
Burt:
This has been an extremely useful and wide-ranging
debate and, before I go on to speak to our amendment, I wish to comment
on the remarksof the hon. Member for Lancaster and Wyre. The
Minister says that, eventually, a rogue estate agent can be banned, and
that point is accepted. However, the hon. Gentleman raises a good
question about who is covered by that ban. It is important that we have
good, strong legislation in place to deal with directors who are serial
offenders. That reminds me of work that we are considering at the
moment to do with the serial liquidators of small businesses. Not only
are they a pest to the industry, but they have caused the downfall of
many of the small businesses that supply them and of their customers,
who deserve protection. I hope that this will introduce a debate that
we can take forwards.
The hon. Member for Hertford and
Stortford has proposed his amendment for a £3,000 maximum
penalty, and he rightly says that that represents one deal. For some
deals done in south-east England, that may be less than is appropriate.
The reason why my hon. Friend the Member for Richmond Park (Susan
Kramer) and I put forward the figure of £10,000 is that we feel
that such a sum would be a genuine sanction for a serial
offender.
Stephen
Pound:
One thing emblazoned on all our minds is the
parliamentary answer given by my rt. hon. Friend the Minister on 23
April to written question 131784 from the hon. Member for Richmond
Park. The Minister
stated:
“In
2006, the Office of Fair Trading (OFT) received 210 complaints about
the conduct of estate agents.”—[Official Report,
23 April 2007; Vol. 459, c.
946W.]
He went on to
say that 117 investigations were carried out, which led to three
warning orders and five prohibition orders. Does the hon. Lady agree
that what she is proposing may act as a deterrent as well as a
sanction?
Lorely
Burt:
The hon. Member for Ealing, North makes another
valuable point, and I agree. What surprises and interests me about the
figures is how few complaints there are, given the prevalence of what
certain hon. Members in this room and the general public would consider
to be the misleading, inappropriate and downright illegal activities of
some estate agents. I thank him for that.
The Minister
said that this is a quick and simple sanction if an estate agent is not
a member of a redress scheme. I totally endorse those words. However, I
draw his attention to the wording of the Bill, which says that it is
“not exceeding”, so there is no suggestion that
£10,000 would be the standard fine; it is the maximum amount
that could be levied. It gives flexibility so that, if a small estate
agency has not got around to doing the job, you could levy a small
fine; if you are dealing with a large estate agency in the south-east
of England that is a serial offender, then you have the option to levy
a higher fine.
5.15
pm
Mr.
McCartney:
Can the hon. Lady explain to me, as a consumer,
why, if estate agency A treats me badly and is subject to the
law—but unfortunately for me, this estate agency, unlike estate
agency B, is a small business, even though it has been crooked and has
done me in—because it is a small business, it would not suffer
the detriment that business B would have suffered?
This is where you enter the
complicated world of determining conduct on the basis of size when it
should be determined according to compliance with the requirements of
the redress scheme. You join the redress scheme not on the basis of
whether you are a large or a small company; you join the redress scheme
for the simple reason that, if something goes wrong, the consumer is
protected. The level of protection should not be reduced if you use a
small company. This would put good small companies out of business.
Consumers would go to a large company in case something went wrong.
This would cause a real block in the marketplace. Because a company is
small, it does not follow that it is a bad company. However, when they
do not comply, it is not the size that matters, it is the type of
non-compliance. The rights of the consumer should not depend on the
size of the company.
Lorely
Burt: The Minister makes an important point that it is not
size that matters in this situation. In some circumstances, I certainly
could not agree with him more. Throughout our discussion today, he has
talked about the need for flexibility. I would certainly endorse that.
In this circumstance, the need for flexibility is nowhere greater than
where there is a range of different organisations; there are very large
ones and very small ones. Therefore, let the punishment fit the crime
and allow the person who is imposing this fine to have that
flexibility. With that, Mr. Weir, my colleague and I wish to
press this to a vote.
Mr.
Prisk:
I shall do my best to make no remarks about height,
size, or anything else as long as this debate
continues.
Mr.
Prisk:
Thank you very much. It is always nice to have the
support of my hon. Friend. I say that in order to ensure that his
comment appears on the record.
I moved
amendments Nos. 27 and 28. I would liketo go back in order to
address the arguments ofthe Minister. Amendment No. 27 relates
to redress schemes. The principle is the same as that of the Liberal
Democrat amendments. That is, while I fully
recognise that the £1,000 fine is a fixed
figure and can be levied on a number of occasions and is therefore
effective in that context, I do not think that it addresses the central
point that, in the context of the deals that an agent does each
day—the average is £3,000—£1,000 is a small
figure to many of them. This is in the context of redress schemes. If,
in a morning, an agency practice does six deals, that is
£18,000. If there is a £1,000 fine, some
agents—the rogues about whom we are concerned—will take a
risk assessment in their own minds as to whether it is worth breaching
the rule. I do not approve of that—I totally disapprove of
it—but they will make that calculation. I therefore do not
believe that £1,000 is enough for redress schemes. I am anxious
that £10,000 is too much, but we want to get on to the issue of
rogue agents with banning
orders.
Lorely
Burt:
The hon. Gentleman has just said that in a single
morning an estate agent may well make £18,000, so if the
maximum—again I emphasise that word—is only
£3,000, does the hon. Gentleman not feel that that will still
not be sufficient to concentrate the mind of a rogue estate
agent?
Mr.
Prisk:
We are dealing with redress schemes, and although I
feel that £1,000 is probably too small, to leap to
£10,000 for breaching a redress scheme notice seems
disproportionate. As the Minister has made clear, it is a fixed point
rather than a maximum. It would be a maximum under amendment No.
28.
Mr.
McCartney:
The trading standards officers levy a penalty
charge for every case dealt with, and the redress scheme is intended to
be complied with across all customer bases. If there were six, 20 or 30
cases a levy could be imposed in respect of each of them, so it would
be £1,000 multiplied by x number of cases. It would be a very
expensive process for somebody who did not comply. The whole point is
to ensure that they comply. Why? Because if something goes wrong, the
redress scheme protects the consumer in all circumstances. That is why
we want agents to comply, and the scheme provides a really good
incentive. The hon. Member for Hertford and Stortford’s proposal
would create the possibility of a charge of £3,000 multiplied by
30, and under the hon. Member for Solihull’s proposal it could
be £10,000 multiplied by
30.
Mr.
Prisk:
That is an interesting intervention and mirrors one
that was made in the House of Lords when the Government were defending
a level of £500 before accepting a change to £1,000. I do
not believe that that will be any more effective, because in most
instances there will be one or two cases. There could be
extraordinarily exceptional circumstances in which30 cases
happen in a morning, but I think it
unlikely.
Mr.
McCartney:
The point that I am making is not
insubstantial. The redress scheme will cover all the client base, so if
an agent is not in it, his client base will not be
covered.
Mr.
Prisk:
I remain of the view that the £1,000 fine
will not achieve the function that we want, of making it crystal clear
that there is a sharp financial deterrent. The figure of £1,000
will be in the rogues’ minds; the
fact that there are multiple opportunities will not. I feel that
£1,000 is inadequate, and I shall press to a Division amendment
No. 27 on raising that figure to
£3,000.
Amendment
No. 28 relates to banning orders. Again, deterrence is at the heart of
the issue. The Minister rightly said that at the very end of the
process there is the opportunity to go to the High Court, but the
frequency with which that happens is pretty limited. I come back to the
argument about deterrence. The director general of the Office of Fair
Trading has the substantial power to stop one trading as an agent. That
is an important power and one that we support.
We are considering here not the
redress scheme but someone who has got to the point of having a banning
order. As I mentioned earlier, I am concerned here about the kind of
person who then pops up in other vocations—I can put it no more
kindly than that—and is quite prepared to twist the rules. I am
keen to deter such people from coming into the market in the first
place. While the ability to remove them from an industry once they have
broken the rules is important, it would be just as important and
possibly more of a deterrent if we could say to them, “If you
come into this industry and bend the rules and break the practices, not
only will we bar you from this industry, we will fine you
£10,000.” That would be an important message to send, and
it is why I shall also press amendment No. 28 to a
Division.
Question
put:—That the amendment be made.
The
Committee divided: Ayes 2, Noes
13.
Division
No.
3
]
AYESNOES
Question
accordingly negatived.
Amendment proposed: No.
27, in schedule 6, page 68, line 25, leave out
‘£1,000’ and insert
‘£3,000’.—[Mr.
Prisk.]
The
Committee divided: Ayes 6, Noes
9.
Division
No.
4
]
AYESNOES
Question
accordingly negatived.
Amendment proposed: No.
28, in schedule 6, page 70, line 31, at end
add—
‘5
In section 3(8) (orders by Director General of Fair Trading) for
“the statutory maximum” substitute
“£10,000”.’. —[Mr.
Prisk.]
The
Committee divided: Ayes 4, Noes
9.
Division
No.
5
]
AYESNOES
Question
accordingly negatived.
Schedule 6 agreed
to.
Clauses 54
to 57 ordered to stand part of the Bill.
Clause 58 ordered to stand
part of the
Bill.
5.30
pm
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