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Grand Committee
Wednesday, 10 January 2007.
The Committee met at four o’clock.
[The Deputy Chairman of Committees (BARONESS TURNER OF CAMDEN) in the Chair.]
Consumers, Estate Agents and Redress Bill [HL]
(Third Day)
The Deputy Chairman of Committees (Baroness Turner of Camden): If there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Clause 52 [Membership of redress schemes]:
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Truscott) moved Amendment No. 124:
“( ) Sections 172 to 174 of the Housing Act 2004 (c. 34) (redress schemes dealing with complaints about the activities of estate agents in relation to home information packs) are omitted.”
The noble Lord said: If, during Committee, I have not taken up any of the points that Members of the Committee have made, I will of course write to them.
Amendments Nos. 123, 153 and 154 will enable the Government to repeal Sections 172 to 174 of the Housing Act 2004. It was originally intended that during the passage of the Housing Act, sections would be added with the intention of achieving full redress provisions for estate agents in England and Wales, with the longer-term aim of widening that to all estate agents in the UK when a suitable legislative vehicle became available. The redress provisions that were added to the Housing Act could be made to apply only to complaints relating to home information packs due to the scope of the Housing Act.
Our intention is to have adopted at least one redress scheme under the Housing Act for the purpose of HIP-related complaints against estate agents by the time such packs are introduced on 1 June 2007. However, when the redress provisions in the Bill are commenced, which we expect to be in April 2008, estate agents will be required to belong to a redress scheme that covers all estate agency-related complaints. However, the noble Baroness, Lady Wilcox, with her usual perspicacity, asked at Second Reading how the redress provisions under the Housing Act would fit with those under the Bill. The amendments will allow us to repeal the Housing Act redress provisions. However, we will do that only when the redress board set up under the Bill comes into force. This will provide for a smooth transition between the two sets of provisions; it will also reduce uncertainty in the industry and reassure estate agents that they will not be subject to two different duties under two different Acts.
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The amendments to Schedules 7 and 8 are consequential. In terms of the transition, when the order requiring estate agents to belong to a wider scheme comes into force, all complaints from that date will be dealt with under the wider scheme. The Housing Act provisions relating to redress will be repealed in so far as they relate to new complaints. It is still to be determined how outstanding complaints under the HIP scheme or schemes will be dealt with. One option is for the approved HIP scheme or schemes to continue to operate as an approved scheme or schemes until those complaints have been dealt with. Alternatively, they could be transferred to the new scheme. That will be decided when one or more schemes have been approved by the OFT and once the Bill receives Royal Assent. I beg to move.
On Question, amendment agreed to.
Clause 52, as amended, agreed to.
Schedule 6 [Estate Agents’ Redress Scheme]:
Lord Lee of Trafford moved Amendment No. 125:
The noble Lord said: As my noble friend Lord Razzall is recovering from the trauma of following England and losing to the Australian Parliament, I shall, with leave, speak to Amendment No. 125.
I declare an interest as a non-executive director of Emerson Development (Holdings) Ltd, a large private property development and housebuilding group, which builds approximately 450 houses each year and operates its own customer charter. I also have a declarable shareholding in Pochin’s plc, a quoted property developer and building services company with a smaller housebuilding division.
We support the estate agency aspect of the Bill, although we believe that it does not go anything like far enough. Our approach is similar to the one that the noble Earl, Lord Caithness, so clearly set out yesterday afternoon. Amendment No. 125 would place a requirement on the Government to bring in a redress scheme. That is long overdue. Indeed, organisations such as Which? have been campaigning for more than 40 years for the reform of the estate agency market. By changing the wording from “may” to “shall”, the amendment would ensure implementation. I beg to move.
Lord De Mauley: This is one in a series of amendments that would convert the word “may” to “must” or “shall”. It would change the Bill so that the Secretary of State would be required to issue an order for all estate agents to belong to a redress scheme. This is complementary to our argument for a single code of practice for all redress schemes, so we are pleased to offer our support.
Lord Truscott: The purpose of the Bill as regards redress schemes is to authorise the Secretary of State to make it compulsory for those carrying out estate agency work, as defined in Section 1 of the 1979 Act, in relation to residential property to join a redress scheme. However, as the Bill makes clear, before
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Lord Lee of Trafford: Given what the Minister has said, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lee of Trafford moved Amendment No. 126:
“(a)”The noble Lord said: The purpose of Amendments Nos. 126 and 127 is to ensure protection under the redress scheme for those who buy property without any estate agency involvement. Although the vast majority of residential properties are sold through estate agents, a sizeable number are sold to the public directly from housebuilders or similar—developers usually operating a manned site office with plans, prices and so on and with a show house available for viewing. Although we accept that the vast majority of serious housebuilders operate with integrity and are covered by HBF or NHBC charter, there is a case for bringing them into the redress scheme, which would make the scheme all-embracing and give the public additional reassurance.
The steady rise in the price of houses and building land has resulted in many smaller builders doing what one may term “infill” developments of just one or two properties, particularly in our more affluent areas. Those builders are unlikely to have the reserves and resources that are available to larger housebuilders, particularly if there were to be a serious economic downturn. Therefore, bringing them into a redress scheme makes particular sense.
The amendments are also designed to protect the public when they enter into a leasing transaction via an estate agent. In many ways, tenants are more vulnerable, given that buyers with mortgages have had to demonstrate stability of income, while those buying entirely from their own resources are, by definition, of greater financial substance. Tenants, on the other hand, particularly of cheaper properties, are far less likely to be able to employ quality professional advisers and are thus more vulnerable to the unscrupulous agent. I am very pleased that the National Association of Estate Agents supports bringing residential lettings into this redress legislation.
Of course the leasing issue goes beyond estate agents to include lettings via the internet and other media, including newspapers. I accept that I may be straying beyond the Bill’s Long Title, but perhaps the Minister could give me assurances on how redress may be met in those areas and circumstances. I beg to move.
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Lord Truscott: I am grateful to the noble Lord, Lord Lee of Trafford, for bringing forward these amendments. The amendments to Schedule 6 seek to extend the scope of the redress provisions to lettings work and property developers who sell properties direct to consumers. Some of this was covered yesterday in Committee, and I do not propose to go over the same ground. As I said then, the Government have already taken steps to improve the regulation of the lettings sector. However, we will continue to monitor the operation of the private rented sector and the property sector more generally to determine whether there is a market failure that should be addressed by legislation.
I understand the concern that those who buy a property from a property developer should have the same protections as those who buy a property from an estate agent. However, it is felt that the issues in these markets are different, and we need to consider the evidence carefully to ensure that the same solution is appropriate.
The Government are keen to see comprehensive redress arrangements for all those involved in the home buying and selling process, including property developers. We are aware that there are concerns about quality standards in the completion of new homes. It was one of the issues addressed by Kate Barker in her review of the issues underlying the supply of housing in the UK and affecting the functioning of the housing market. The report recommended that the housebuilding industry must demonstrate increased levels of customer satisfaction and that, if progress was unsatisfactory, or if customer satisfaction levels did not rise substantially by 2007, the OFT should conduct a wide-ranging review of whether the market for new housing was working well for consumers. The OFT is keeping open the option of a review, as recommended by Kate Barker. It is currently assessing the industry’s actions in response to that recommendation, and the Department for Communities and Local Government is continuing to monitor the industry’s work aimed at improving quality standards in the completion of new homes more generally and providing better protection to consumers.
The Bill implements the recommendations of OFT reports based on issues relating to the estate agency market. The Government are looking at how redress should be made available across the whole property sector in the medium term. I can assure the noble Lord that the Government will take action in other areas, as necessary, when an evidence-based assessment has been made. In addition, I should point out that the Bill makes it clear that there is nothing to prevent an approved redress scheme dealing with other types of complaints on a voluntary basis.
Lord Lee of Trafford: I am sorry that the Minister is not more supportive of our amendments, but I hear what he has to say. In the circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 127 and 128 not moved.]
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Lord Lee of Trafford moved Amendment No. 129:
“(a)”The noble Lord said: In speaking to Amendment No. 129, I shall speak also to Amendments Nos. 130, 131, 132 and 137. Amendments Nos. 131, 132 and 137 are the key amendments.
We believe that a penalty of £500 for operating outside the scheme is ridiculously small, and I agree with the remarks made in Committee yesterday by the noble Lord, Lord Dubs, and other noble Lords. The sum of £500 is almost derisory and almost a joke. After all, the average commission for selling just one property in the United Kingdom today is more than £3,000, according to the Estate Agency News of September 2006. We on these Benches believe that a far more appropriate penalty for an estate agent who fails to join a recognised redress scheme should be a direct referral to the OFT. It should then be its responsibility to identify the appropriate penalty, be it financial or a limitation on trading activity.
Amendments Nos. 129 and 130 are linked to our earlier amendments relating to direct selling by developers and the leasing market. They ensure that the referral mechanism applies to those who fail to join a redress scheme in those sectors. How does the Minister propose to ensure that the redress scheme will work effectively when the penalty for non-participation is so insignificant and is thus unlikely to deter rogue elements in the property world? I beg to move.
Lord Borrie: I shall comment on Amendment No. 131. The noble Lord, Lord Lee of Trafford, explained that the £500 penalty laid down is inadequate and that a reference to the OFT could result in a more serious restraint of some sort on the estate agent concerned. However, one effect of the noble Lord’s amendment would be to deprive trading standards officers of their powers to impose a penalty. Trading standards officers are local authority officials with expert local knowledge of their part of the country, and it would be a pity if their role was excluded. I do not support Amendment No. 131 in so far as it excludes trading standards officers. I should declare an interest as a former president of the Trading Standards Institute and a current vice-president.
4.15 pm
Lord Truscott: I am grateful to the noble Lord, Lord Lee of Trafford, and my noble friend Lord Borrie for their insightful contributions. Amendments Nos. 129 and 130 go over ground that we covered when we discussed Amendments Nos. 126 and 127, so I do not intend to repeat myself.
Amendments Nos. 131, 132 and 137 remove the penalty charge regime for non-membership of redress schemes. However, it would make the Bill out of step with the Housing Act. More importantly it would take away one important weapon in the armoury of trading standards officers, to which my noble friend Lord Borrie referred.
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I think the intention of these amendments, if I read them rightly, is to ensure that an estate agent who is not a member of a redress scheme is referred to the OFT straightaway. The paragraphs of new Section 23B, which the amendment omits, place enforcement officers under a duty to notify the OFT if they believe that an estate agent is not a member of a scheme. However, when a trading standards enforcement officer finds out that an estate agent is not a member of a scheme, he or she can also issue a penalty charge notice and, as I mentioned at our previous sitting, can continue to issue notices. I do not think that the figure of the penalty notice is the most important element because that can be issued several times over and eventually lead to the banning of the estate agent. That provides a mechanism for giving immediate punishment and an incentive to comply. At the end of the day, we want compliance. Penalty charges also provide an intermediate step from the ultimate sanction of being banned from practising, as I mentioned.
There are around 12,000 estate agency offices in the UK and only one Office of Fair Trading. If a penalty charge notice makes an estate agent join a redress scheme quickly, that frees up the OFT to focus on the persistent offenders who refuse to join a scheme and who deserve to be banned. Of course, the OFT can still consider cases where an estate agent has joined a scheme after being issued with a penalty charge notice if the circumstances warrant it.
If these measures are to be taken seriously, it is important that they are enforceable. Taking away one of the intermediate and more proportionate means of punishing non-membership puts unreasonable pressure on the OFT, which may delay or prevent it tackling other serious instances of misconduct by estate agents. This is not what the Government are seeking to achieve. I hope that that clarifies matters.
The Earl of Caithness: Perhaps I can ask the Minister for help in regard to later stages of the Bill. On the previous two amendments he said that he would not repeat what he said yesterday. That shows how bad the groupings have been and, therefore, how disjointed our discussions have been. It is a pity that the noble Lord, Lord Dubs, is not present. Yesterday we talked about increased fines and bringing in letting agents and we have done so again on these amendments. It has been very difficult to have a consistent discussion on one aspect. I ask that the groupings are a little better on Report, please.
Lord Truscott: I thank the noble Earl for that intervention. We shall certainly look at the groupings for the next stage and ensure that we have a proper debate. It is also difficult when a debate is spread over several days, as it becomes somewhat disjointed. I shall certainly take up the points he raises.
Lord Lee of Trafford: In the circumstances, I withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 130 to 138 not moved.]
Clause 53 [Duty to keep records]:
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Baroness Wilcox moved Amendment No. 139:
The noble Baroness said: As it happens, 139 is the number of my favourite psalm.
The purpose of this amendment is simply to probe the functions of subsection (6) of new Section 21A to be inserted into the 1979 Act. Currently, the subsection states that the Secretary of State may make provisions as to the manner in which permanent records are to be kept and the places at which they are to be kept. I was surprised to see that the Secretary of State will have the power to regulate how and where records are kept. While I welcome the efficient keeping of records and would be glad to see uniformity and accessibility across the board, I should be interested to find out what punishment such regulations could authorise for failure to keep them, and how such record keeping would be policed. Would policing these regulations be another task for the Office of Fair Trading? This seems to be micro-management at best and over-regulation at worst and I will listen with interest to the Minister’s explanation. I beg to move.
Lord Truscott: These clauses relate to the duty to keep records, and the consequences of an estate agent failing to produce information requested by an enforcement officer. Amendment No. 139 would remove the ability of the Secretary of State to provide for how and where records should be kept in regulations. Subsection (4) already gives the Secretary of State power to make regulations prescribing what sort of information should be kept by estate agents. Subsection (6) simply allows regulations also to cover where and how records should be kept.
To answer one of the points of the noble Baroness, Lady Wilcox, the policy aim is for a local authority trading standards officer to be able to visit the local estate agency branch which handled a property transaction and check the records immediately. We do not want trading standards officers to have to travel to where a central database is held in order to check records. In addition, we want to set out in regulations that these records can either be in hard copy or held electronically but must be accessible from the local branch. In practice, individual property transaction files are generally held locally. Regulations will help ensure that inspections by trading standards officers are targeted to the benefit of businesses and enforcers alike. Removing lines 29 to 31 may create uncertainty among estate agents about what they have to do to comply with this duty and may also place a greater burden on trading standards officers if the place where records are to be held cannot be specified in regulations.
To answer the second point of the noble Baroness, Lady Wilcox, about the amendment to Clause 57, subsection (1) of new Section 11A allows a court to make an order under this section if a person,
under the sections referred to. It therefore follows that subsection (2) requires the defaulter,
he failed to do. I am sure that the amendment was intended to be helpful and to try and improve the
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Baroness Wilcox: I thank the Minister for that reply. I still think that this is micro-management at the greatest level. However, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
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