New clause 1
Consumers, Estate Agents and Redress Bill
5:45 pm

Lettings

Brought up, and read the First time.

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Mark Prisk (Shadow Minister (Small Businesses and Enterprise), Trade & Industry; Hertford and Stortford, Conservative)

I beg to move, That the clause be read a Second time.

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Michael Weir (Spokesperson (Energy; Work and Pensions; Trade & Industry); Angus, Scottish National Party)

With this, it will be convenient to take new clause 3—

‘After subsection 1(1) of the Estate Agents Act 1979 (c. 38) insert—

(1A) In this Act the expression “estate agency work” also refers to persons—

(a) developing and selling; and

(b) directly selling

residential property to members of the public.”.’.

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Mark Prisk (Shadow Minister (Small Businesses and Enterprise), Trade & Industry; Hertford and Stortford, Conservative)

New clause 1 seeks to bring the business of lettings agencies within the Bill and to regulate an industry that now handles over £12 billion of people’s  money annually and yet, ironically, it is an industry that is without the redress that we have all discussed in a number of debates about the Bill.

That anomaly is not understood by the public, especially when residential sales and lettings are often handled by the same agency—by the same people in the same office. Without including residential lettings in the regulations set out by the Estate Agents Act 1979 and therefore in the Bill, we would, in seeking to promote the arguments for redress schemes and all the other changes that we have discussed, only be doing half the job.

The Conservatives are not the first people to seek this updating of the law. Tenants’ groups, for example, want to see this change and so do a majority of the principal property organisations, including the Royal Institution of Chartered Surveyors; the National Association of Estate Agents; the British Property Federation, and the Residential Landlords Association. All these organisations wish to see the law updated.

At present, lettings agents can get qualified, but it is not obligatory. The British Property Federation tells me that an average agent might handle in the region of 150 to 200 properties worth about £30 million in rent, and yet there are no regulatory rules or codes of practice that he or she is required to follow and no obligation to handle complaints appropriately or to be part of a redress scheme, all of which we have applauded and agreed on in the Committee.

Of course, many tenants get caught out. I know from my own citizens advice bureau how some agents in this market behave. Indeed, the National Association of Citizens Advice Bureaux tells me that roughly 4,500 negative inquiries were made against lettings agents in any typical year in the last few years. Very often, such concerns are raised by some of the most vulnerable members of society. Indeed, the National Association of Estate Agents, which is a reputable organisation, says that the majority of complaints that it receives about its members concern the lettings sector.

I am sure that Ministers will say to us—we heardthe beginnings of their argument earlier—that the Government are putting in place, for example, the tenancy deposit protection scheme, and that is being put into practice. That scheme is welcome, but it only applies to deposits and it provides no mediation for the many other kinds of disputes that arise, which we have discussed in other debates. Therefore I believe that we need to go further.

New clause 1 would amend section 1 of the Estate Agents Act 1979 to extend the definition of estate agency work to include residential lettings and management. Some of the scams that are perpetrated in this market include, for example, charging both landlords and tenants for the same service; charging for simple procedures that are already covered by a landlord’s management fee, and charging exorbitant fees for basic functions. There are a string of examples; perhaps the best known are outlined on theGuardian Unlimited website. For example, someone was once charged £60 simply for the process of administering VAT; £150 for a cleaning fee; £150 for a credit check, and £100 for an administration fee. I think that the hon. Member for Richmond Park referred to some of these examples before. All of those charges were made without good reason.

It is true to say—I think that the Minister alluded to this before—that the national approved letting scheme sets a minimum service standard and seeks to ensure financial probity in this market. However, there is no obligation on companies to join. Equally, although professional bodies exist and maintain good standards, 60 per cent. of letting agents are neither in NALS nor a member of those professional bodies. That is one of the principal reasons why the industry continues to attract the unscrupulous, and the industry recognises that.

The new clause would bring residential lettings within the established legal framework. It would ensure that residential sales and lettings were regulated in exactly the same way; it would give trading standards officers and the Office of Fair Trading the powers that have, as we all recognise, helped to tackle the issue of rogue estate agents in respect of sales; and it would mean that the improvements included in the Bill would apply to the whole of the residential market rather than just half of it.

As a Conservative, I am instinctively cautious about arguing for more regulation. However, as a chartered surveyor and a constituency Member of Parliament, I know that we need to put lettings on the same regulatory footing as sales. The fact that the National Association of Estate Agents, the Royal Institution of Chartered Surveyors and the rest of the industry agree shows that the measure is long overdue.

On lettings, let me put the argument in the words of Shelter, which says clearly:

“Shelter sees first hand the negative consequences of high letting agent fees on people who are already struggling to pay private rented sector rents. This bill provides an opportunity to improve regulation of this sector and ensure consistency and affordability of letting agent practice.”

That is the important issue that I wish to address through new clause 1, which deals with bringing residential lettings in line with all the things that we have said that we believe are good for sales. Through new clause 3, we seek to extend what we mean by estate agency work.

The Act is 28 years old. I mean the 1979 Act, not the Bill that we are discussing, although I appreciate that, having sat for three days, some Committee members might feel that it is indeed 28 years old. I suspect that I might have contributed to that sense of slow passage of time—

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Jim Fitzpatrick (Parliamentary Under-Secretary, Department of Trade and Industry; Poplar and Canning Town, Labour)

No, surely not.

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Mark Prisk (Shadow Minister (Small Businesses and Enterprise), Trade & Industry; Hertford and Stortford, Conservative)

The Under-Secretary is very kind. However, the Estate Agents Act 1979 which, I have to confess, I studied at university, it was that long ago, has not allowed us to move forward with the changes in the market over the past 15 or 20 years. There have been significant deregulation and expansion in the mortgage field and the growth in buy-to-lets and in direct sales by house builders and developers—just across the road there is a significant development, all of which was sold not through the estate agency market but directly to home buyers. None of those things will be covered under anything that we have discussed today, because they do not count as estate agency work under the current definition of estate agency.

Thanks to that definition any individual who purchases from that block, or similar blocks that hon. Members know of in their constituencies, will not be covered, so it needs to be changed. We need to take the opportunity to modernise the legislation and to make it relevant to the market as it is today. After all, the long title of the Bill says that it is

“to amend the Estate Agents Act 1979”.

I made it clear to Ministers on Second Reading and prior to this debate that I would like to work with all members of the Committee, and with the Government, to update the legislation and thereby to help all home occupiers. The Government have made positive noises on the issue, and those are very welcome. My aim is to ensure that we end up with the best possible legal framework for the market.

New clause 3 tackles two specific and important changes in the way in which people buy and sell their homes, namely direct sales by house builders and developers and the growing online market. The 1979 Act defines estate agency through the principle that an estate agent is an intermediary. That remains true in most transactions for most people. However, direct sales by house builders and developers have become extremely important in the new homes market, of which a substantial part is first-time buyers. It is especially important for them, as consumers, to be protected, as they would be if they were undertaking conventional transactions.

The same can be said of the increasing number of online property exchanges. I tried to work out how many there were, and I managed to count to over100 different web-based services. Although I appreciate that many of them are merely portals, or shop windows, that do not seek to effect a transaction, an increasing number do seek to effect transactions between persons.

The Minister told us that the aim of the Bill is to ensure that home buyers and vendors have redress, but because the Acts that it seeks to enhance have been overtaken by market developments, the 1979 Act needs to be changed if our discussions on redress are to have any real meaning for members of the home-buying community, especially for first-time buyers.

I do not pretend that the wording of new clause 3 is perfect. It would add a new clause that deals with non-intermediary transactions to the 1979 Act. Section 1A relates to the many cases of homes being developed by house builders and sold direct, without an agent being involved. I am told that in the south-east that is now the norm for most new developments, and unless we include them, much of the property market will continue to be exactly as it is now, and nothing will change for many people when the Bill is enacted.

Section 1A(b) of the new clause refers specifically to internet sales, as at present it is unclear that the Act applies to them. I fully recognise that there difficulties in that part of the new clause, but it is important that it is considered, and the Minister will want to allude to it.

On Second Reading, the Minister said that it was important that the residential market should be better regulated, and I entirely agree with him. Ensuring proper redress is vital to all home buyers and tenants  and the new clause would help in that respect by ensuring that consumers can seek redress for all residential transactions, not just those based on a 28-year-old definition.

In respect of new clause 3, I hope that the Minister can offer us a little more than the promised review of the housing market as a whole, although that review is welcome as it has merits. My worry is that it has taken 28 years to get to the point of modernising the legislation and that it may take three, four or five more years before any reforms take effect. Depending on what the Minister says, I may therefore want to press the new clauses to a Division.

6:00 pm
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Susan Kramer (Shadow Secretary of State for Trade & Industry, Trade & Industry; Richmond Park, Liberal Democrat)

I shall make a couple of quick comments. Liberal Democrat Members addressed direct sales and lettings in earlier amendments that tackled those issues in appropriate ways. We are glad that our Conservative colleagues supported them in spirit, but they would not support them in the context of the language of the amendments. But we are not proud: our goal is to get proper protection for people purchasing off-plan and those who rent as tenants. We shall therefore support the new clause in a Division.

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Ben Wallace (Lancaster and Wyre, Conservative)

Many hon. Members have in their constituencies a growing number of residential park homes, often on sites run by excellent owners, but in a few cases by highly dubious and unscrupulous owners. They safeguard their estate agency role in the residential home sector or their letting role in the holiday home sector to an extent that exploits sometimes vulnerable people and raises grave concerns.

I have the distinction of having 5,000 such sites in my constituency, more than in any other hon. Member’s constituency. Constituents of the Minister, the right hon. Member for Makerfield, are involved in a legal case against an unscrupulous owner in my constituency. The 1979 Act deals predominantly with those trading in land, and my constituents and many others are exploited because the land is often owned by the park owner but my constituents own the residential park home, which they have purchased as some form of property. Between now and Report, could the Minister see whether it would be possible simply to extend the definition of “estate agency work” to include the growing numbers of residential park homes so that my constituents are given that protection?

There is a park in my constituency near the village of Pilling where the owner not only insists that the park homes are bought and sold exclusively through him, but on a 15 per cent. commission on the advertised price, not the sale price. He therefore advertises a home for £70,000, sells it for £20,000 and still charges 15 per cent. of the £70,000, a price that he picked out of thin air. I will not abuse privilege by naming this individual, but he abuses the position of being the estate agent.

My hon. Friend’s new clauses would help to clarify the situation and I hope that the Bill is used to clamp down on such people and bring park homes within the fold of other properties that people use as retirement homes or, with the cost of housing as it is, as their main residence because they cannot afford to buy in the areas where they would like to live. I ask the Minister  to see whether an amendment to the Estate Agents Act 1979 could give my constituents the protection they deserve and stop these scurrilously criminal people who exploit the most vulnerable people they can find.

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Ian McCartney (Minister of State (Trade & Investment), Department of Trade and Industry, Minister of State (Trade & Investment), Foreign & Commonwealth Office; Makerfield, Labour)

I predicted this morning that things could get sparky this afternoon and I thought that I would be proved wrong until the last few moments when the hon. Member for Hertford and Stortford said two things. First, he said that the Bill was 28 years out of date and that the Government should do something about the “wasted”—I quote myself—years. Apparently the Conservatives are now the self-appointed representatives who are looking after the interests of people in rented housing. Twenty years ago on 11 June, I became a Member of this House. Almost immediately, I was involved in hand-to-hand combat on the Housing Bill, which took away the rights of all private tenants in England and Wales to have security of tenure in order to stimulate the private housing market. Hundreds of thousands of people who had absolute protection, including the elderly and people with a disability, were put at risk of a recurring tenancy agreement, not for a 12-month period but on a six-monthly basis, with no appeal if the tenancy was withdrawn. There was no redress scheme. There was also no redress scheme when it came to the mis-selling of endowment policies.

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Michael Weir (Spokesperson (Energy; Work and Pensions; Trade & Industry); Angus, Scottish National Party)

Order. I think that endowment policies are a little wide of the Bill.

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Ian McCartney (Minister of State (Trade & Investment), Department of Trade and Industry, Minister of State (Trade & Investment), Foreign & Commonwealth Office; Makerfield, Labour)

I am not going to argue about that. My point is that the Bill is about redress. We are trying to determine who speaks up for people in the housing market. I cannot let those remarks go by, given allthat we have been doing as a Government in this regard——and getting no support for it. Again, on redress, it took this Government to get redress for the mis-sold endowment policies. As a consequence, nearly £900 million has been returned to the people who purchased them, who number nearly 430,000. I take no lessons from the hon. Gentleman if we are to have a competition to see who represents the best interests of house buyers.

The debate rests on new clauses 1 and 3, andcovers almost exactly the same ground dealt with by amendments Nos. 24 and 25. The hon. Gentleman’s interest has come a bit late. The hon. Member for Richmond Park said something very interesting, which I can confirm: in the Grand Committee, and on Report and Third Reading of the Bill during its passage through the Lords, the Earl of Caithness tabled amendments to extend the Estate Agents Act 1979 to include lettings in property management—we rightly had that discussion on amendments Nos. 24 and 24. At no stage did the Conservatives support Earl of Caithness’s amendments. When he put them to the vote on Third Reading, they abstained. In the last debate, the hon. Gentleman was competing to see who was the toughest of them all, but it is now about who represents consumers’ interests. A cynical manoeuvre.

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Mark Prisk (Shadow Minister (Small Businesses and Enterprise), Trade & Industry; Hertford and Stortford, Conservative)

Will the Minister remind me of which political party the Earl of Caithness is a member?

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Ian McCartney (Minister of State (Trade & Investment), Department of Trade and Industry, Minister of State (Trade & Investment), Foreign & Commonwealth Office; Makerfield, Labour)

I suspect that he might well be a Tory grandee, but despite that, the Tories did not support him on the issue of principle. When it came to the vote, they did not support him.

I shall explain again: the Government have taken actions to deal with problems in the letting and property development sector. I do not want to go through all of them because we had a really good debate on amendments Nos. 24 and 25 in which I thought that I showed not just empathy with what was being said, but a desire to do something about it. We decided, therefore, to set up the tenancy deposit scheme, which is very important. It is one of the most difficult areas when dealing with protections and disputes.

Under the Housing Act 2004, we did something about houses in multiple occupation. On the Barker report, I mentioned today, for the first time, that the OFT might consider a market study. However, if it does not look at the issues and come forward with proposals, we will look at doing so ourselves. I have prompted a review—not just a simple little review, but a review of redress and regulation in the wider property market. No Government have ever done that. The hon. Gentleman’s party had nearly two decades in which to do it, but did not. The only review that did take place took away consumer rights in the housing market.

It is important that we start the review in the summer. We should not just pick out what are thought to be the six consumer issues of the day. We must be consistent and look at the market as a whole. The issues are different and will produce different responses and answers. That is why it is so important that the review takes place and that we come forward with proposals.

The Estate Agents Act 1979 does not cover lettings and new builds, so we cannot simply introduce secondary legislation for letting agents and property developers. That does not work in practice. However, I accept that the hon. Members for Hertford and Stortford and for Richmond Park have been consistent in respect of what we are trying to achieve. That is why we put forward in good faith our proposals for the review. I hope that that is accepted.

I know that the matter will probably be pressed legitimately to a vote; it is going to be the big issue. However, I must make it absolutely clear that the Government will look at the wider issues in consultation with the industry and consumers. This is the first Government to provide such redress schemes. No Government have ever gone so far with redress in the housing market. None even came close to doing so. I shall, therefore, resist the amendments.

The hon. Member for Lancaster and Wyre and I had a short discussion outside the Committee on that subject and I asked him to write to me about his concerns. I said that we would look at them in the review that is taking place. However, on his specific issues, it might well be that, as I said earlier, if somebody is operating as an estate agent under the terms of the 1979 Act, they are covered already. If that person looks like, sounds like and is like an estate agent, they are covered by the regulations. It would be useful if the hon. Gentleman could put that in writing to me, so that I can respond.

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Ben Wallace (Lancaster and Wyre, Conservative)

My point was that, in the 1979 Act, the definition of estate agency work related to land, and whether “land” encompasses the definition of a residential park home, as opposed to bricks and mortar or a plot of land.

6:15 pm
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Ian McCartney (Minister of State (Trade & Investment), Department of Trade and Industry, Minister of State (Trade & Investment), Foreign & Commonwealth Office; Makerfield, Labour)

The hon. Gentleman wants me to give a detailed answer on a complex issue, where there might even be a legal case. I am trying genuinely to be helpful, and if he writes to me, I will respond. In any event, there are two ways to approach the issue: looking at the specifics and the general review of what is taking place in the housing market. The question may not fall into the specifics but into the issues around the review of the housing market. Either way, I will try to be as helpful as I possibly can to him and his constituents. Many people are in a similar situation in other places, and I know that some of the cases that he raised involve people in my constituency. However, as of yet, they have not asked me to help them, so good luck to him. I hope that he does a good job—I shall keep an eye on him.

The hon. Member for Hertford and Stortford raised several questions about the internet. In December 2005, the OFT issued guidance on the types of activities carried out by internet property retailers and said that their work was unlikely to fall within the definition of estate agency work as contained in the 1979 Act. However, if internet property retailers undertake activities that fall within the definition, they will be required to be members of a redress scheme. I shall write to Members in more detail about that.

I will review what was said in previous sittings. If I have not responded to any questions, I will write to Members so that they have answers before the Bill goes back to the Floor of the House in two or three weeks’ time. With that, I ask the hon. Gentleman to do something that I am sure he will not do. I ask him to withdraw the amendment on the basis that the Government will go ahead with a review. As a consequence, there will be a more proactive and extensive review of market issues, including those that he raised. I have an empathy with those concerns and want to try to resolve them.

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Mark Prisk (Shadow Minister (Small Businesses and Enterprise), Trade & Industry; Hertford and Stortford, Conservative)

The Minister’s mind has failed at the last hurdle. Sadly, just when we thought that we would have a positive debate all the way through, he could not resist the partisan nature of it. If it is the case that changes were not made during the years of the Conservative Government and, indeed, the subsequent 10 years of this Government, that is something on which we should both reflect. I do not seek to make a partisan point about it.

It is a shame that the Minister chose to be negative on the important issue of tenancy rights. It may be that he is embarrassed that many Labour Back Benchers actually support the principles that we are propounding. It may be that he hoped that we had come to the end of the debate and was therefore unwilling to engage in the matter. I hope not, because that would be a shame.

Apparently there is some sort of competition in the Minister’s mind on the question of tenants’ rights. I am not engaged in that process. I am more interested in what we can do now, not in whether mistakes were   made 10, 15 or 20 years ago. Perhaps my party did do something wrong 10, 15 or 20 years ago. If we did, we would be happy to acknowledge that we did. It is a shame that the Minister lowered the debate in that way.

We have been offered a commitment to a review. I am sure that that will really help the tenants who are struggling in the circumstances that I described. I recognise that there is merit in looking at the housing market as a whole. That would have considerable benefits, but a commitment to a review does not amount to much.

We did not get from the Minister any reference, for example, to the anomaly whereby the person who deals with someone who is buying a home will be treated entirely different when they let someone a home. He did not deal with the question about direct sales by house builders. The first-time buyers who make up the majority of that market will find that, if they buy a new home from a house builder, they are not protected by anything that we have discussed in the Bill. They will not be covered.

I had hoped that we might have a little more positive thought. I had hoped that the Minister might indicate that he would put into the Bill on Report a clause that will give a future Secretary of State, whether of his party or mine, an opportunity to amend the 1979 Act. That would allow a considered review of the market but also the opportunity for the Government to introduce in the next 12 months or so changes that would make a real difference to tenants and estate agents. Instead, we were given a commitment to a review. That is fine. If that is the Government’s position, we will listen to it. We will act in a collaborative way, but the commitment is inadequate.

I return to the two points that Shelter raised, which are that the proposals that we made on tenancy be included and that the definition of estate agency be extended. Both would provide us with consistency and affordability for the people involved. That is the aim. That is what Shelter sought, and—

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Tom Clarke (Coatbridge, Chryston and Bellshill, Labour)

Will the hon. Gentleman give way?

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Mark Prisk (Shadow Minister (Small Businesses and Enterprise), Trade & Industry; Hertford and Stortford, Conservative)

No, as I am drawing to a close.

That is where I think we could go. On Report, we will have the opportunity to consider whether positive changes could be made, improving this legislation, and, therefore, it is my wish to press new clause 1 and new clause 3 to a division.

Question put, That the clause be read a Second time:—

The Committee divided: Ayes 6, Noes 8.

Question accordingly negatived.