Estate Agents (Licensing)

– in the House of Commons at 12:00 am on 22nd December 1972.

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2.11 p.m.

Photo of Mr James Hill Mr James Hill , Southampton, Test

Before commencing the debate, I declare my interest. I am a senior partner of a long-established firm of estate agents—it was established in 1819. For that reason I have as good a right as any to bring this subject forward today.

We are all fully aware of the long history, which started as long ago as 1888. At that time a Bill was presented to provide for the registration of architects, engineers and surveyors. Estate agents were first named in a Bill to introduce registration in 1914, but the Bill lapsed at the end of the parliamentary Session. Another Bill was introduced on 16th February 1923—the Landed Property Practitioners (Registration) Bill. The Bill fell, but it resulted in the formation of the Incorporated Society of Auctioneers and Landed Property Agents. The next Bill was introduced in February 1928, and it nearly succeeded. It failed by 132 votes to 122 votes because it was opposed by the promoter of the 1923 Bill.

The incorporated society continued to keep up parliamentary pressure on this subject, and in 1934 there was appointed a Select Committee of the House of Lords under Lord Mersey. The Committee's recommendations included certification by a magistrate of the good character and financial adequacy of applicants for auctioneers' licences, and the keeping of a central registry.

The saga continues. On All Fools' Day in 1936 another Bill was introduced, the Auctioneers and House Agents (Protection of Public against Abuses) Bill, which failed. Then came the Second World War between 1939 and 1945. Immediately after the war, in 1947, the Irish Parliament passed the Irish Auctioneers and House Agents Act. By this time there were nine societies in the United Kingdom. In 1959 four of these societies stated that agreement had been reached between them on the provisions of a registration Bill. In 1962 my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) presented the first of the new series of Estate Agents Bills. This time opposition came from the newly-formed National Association of Estate Agents, in defence, rightly, of the unattached agents. The Government remained neutral on the Bill and it again failed.

In June 1965 another Estate Agents Bill failed. By this time the nine societies had become 10, with the addition of the National Association of Estate Agents. The 10 societies supported the 1966 Estate Agents Bill, which was presented by my hon. Friend the Member for Northants, South (Mr. Arthur Jones). The Bill fell, although it received Government support, because of the calling of a General Election by the present Opposition. The 10 societies created a voluntary system of registration on 1st October 1967. The Estate Agents Council was incorporated but this, too, has since died.

Surely today must be the end of the road. All I am asking for is a fairly simplified form of licensing. Early-day motion No. 100, which is supported by over 30 hon. Members, reads as follows: That this House urges Her Majesty's Government to bring forward legislation to license all estate agents, appoint a registrar for the profession, protect deposits of client's moneys, and ensure a test of competency as part of their current proposals to protect the consumer. It is hard to doubt the necessity for that motion.

To get back to the two Bills which nearly but did not quite succeed, on 22nd March 1963 and on 28th January 1966 my hon. Friends the Members for Isle of Ely and for Northants, South attempted to steer identically named Bills through the House. On Second Reading of the 1966 Bill my hon. Friend the Member for Northants, South said: The purpose of the Bill is to ensure that the competence and conduct of practising estate agents are of a standard sufficiently high for the protection of the public."—[OFFICIAL REPORT, 28th January 1966; Vol. 723, c. 559.] Having read the Bill, I realise that the coverage it gave was perhaps too cumbersome to comply with the then limited time processes of the House. All the provisions incorporated in the Bill, in a more simplified form, I shall try to persuade my hon. Friend the Under-Secretary of State to consider.

Clause 1 provided for the establishment of an estate agents council which would be required to secure adequate standards of competence and conduct among persons carrying on business as estate agents. I am sure that none of us would disagree with that.

Clause 5 dealt with those persons who would qualify for registration. If a person was not a member of an established body he was required to satisfy the council as to his good character and competence to enable him to engage in proper practice as an estate agent. I do not think anyone would disagree with that. The clause went on to provide that a person would be eligible for registration if he had a business on the date of the introduction of registration or during the preceding 12 months. That caused a little controversy at the time, but the provision could be altered by the registrar when appointed. One obviously cannot exclude those who are already in business at the time of the introduction of licensing procedures.

Clauses 12 and 13 dealt with the keeping of a separate account for clients' money and the interest thereon in certain circumstances. Clause 14 required the deposit of a guarantee bond to ensure proper conduct by agents. None of those provisions could be argued against. Such was the power of the debate that my hon. Friend the Member for Harrow, Central (Mr. Anthony Grant), who will be replying today, said: I support the Bill because I believe that it is in the very best interests of my clients and the public at large. It is against the background of the public interest and not just the interests of clients that the debate should flow. In the long run, in spite of what has been said by other Members, I believe that what is basically good for the public will be proved to he good for the profession, He then said—and I thought that his heart was very much in the right place: There are all too many tragic cases of people who have suffered at the hands of a minority of dishonest and irresponsible agents. In my own professional experience "— My hon. Friend was then a practising solicitor— I have known many clients who have suffered greatly as a result of the actions of such a minority. It is fair to say that the vast majority of transactions have gone through with complete smoothness,… My hon. Friend then praised the vast majority of the estate agents. He said: When a dishonest agent emerges, it is not only the client or the members of the public who suffer. The professional estate agency business as a whole suffers "— The then hon. Member for Bedfordshire, South said in that debate that already the professions were having to be licensed. The Professions Supplementary to Medicine Act 1960 had laid down that professions like physiotherapy and chiropody were to be registered. I am sure that that has been only for the best for the medical profession.

In replying to the debate the then Minister without Portfolio, Sir Eric Fletcher, said: Although it is a Private Member's Bill, I think it is fair to say, in answer to the point made by the hon. Member for Bedfordshire, South (Mr. Cole), that this is a subject in which the Government recognise that we have a responsibility to legislate. Indeed, if the Government were not already committed to a very large legislative programme, we ourselves might have wished to introduce a Bill on the subject. However, in the circumstances, we are only too glad to have the opportunity of facilitating this Bill and getting it into a form which, we hope, will be generally acceptable to the House."—[OFFICIAL- REPORT, 28th January, 1966; Vol. 723, c. 592, 627.] I should not like my hon. Friend's reply today to be word for word from the Minister without Portfolio's brief in 1966.

Great hopes were put on the Estate Agents Council.

The Financial Times of 9th November 1968 said: No one knows how many estate agents there are in the country, hut some guess estimates go as high as 25,000. The law of averages dictates that there must be some sharks in this number, and it is a problem which reputable agents are now trying to solve.The need for reform has led to the formation of the Estate Agents Council, which is backed by all of the professional bodies. Members must take out a guaranteed indemnity policy to protect the public from fraud or dishonesty, and must follow a rigid code of conduct. I am sorry to say that within a short time there were divisions of opinion between the 10 societies, and the Estate Agents Council came to a very sticky end. Perhaps the profession was not ready for it, perhaps there was not enough Government support, or perhaps there has been too much bickering by the professional bodies.

Now I must utter a word of warning. We are to enter the EEC on 1st January, and I believe that we should harmonise this form of licensing with the countries of the Common Market. The situation there is most interesting. Most of them are seeking to have a system of licensing, though the systems are all slanted differently. In France and Belgium the importance of protecting clients' money is the major theme. Italy has a system of registration concerned principally with the ability to pass an oral examination and the provision of character references. There are no legal requirements for the protection of clients' money. West Germany, Luxembourg and the Netherlands are in much the same position as the United Kingdom as their professional organisations and national Parliaments are contemplating the introduction of legal requirements for the practice of estate agencies. The Republic of Ireland and Denmark, two of the smallest countries, already have licensing systems. Could not one of our first moves on entering the Common Market be to standardise the licensing of estate agency?

Many estimates have been made of the number of estate agencies that are practising. I am sure that, as my hon. Friend said in 1966, only a minuscule percentage ever flout the law. I believe there are about 40,000 individual members of the chartered surveyors' professional society. Nearly 50 per cent. are working for local or national government and, being qualified professionally, they do not have the same need for licensing as perhaps the smaller firms which do not have the necessary professional qualifications.

My hon. Friend will no doubt tell me that we must prove the need. Just a few small examples of what has happened will help to do that. An immigrant set himself up in South London as an agent and collected deposits from his compatriots abroad on a house that did not exist. Having collected £20,000 by post and other means, he disappeared. He was subsequently caught and is now serving four years' imprisonment. If he had been licensed he might have had a bond to protect his clients' money.

An agent in South London was holding a deposit for an applicant as stakeholder. The proposed purchase fell through and the applicant asked for the return of the deposit. It was not forth coming, even after considerable correspondence and promises, and the applicant was finally obliged to serve a writ on the agent for the return of the money. The client was finally reimbursed his money, together with the court fees, but he was obliged to pay his own solicitor's fees.

A Middlesex agent misappropriated money in his client's account over a period of years. He managed to cover his tracks for some time. When he was finally brought to account for several thousand pounds, he committed suicide.

The Government have a moral obligation not to make it easy for such people to flout the law. A weak person like that Middlesex agent should never be put in a position where he can thoroughly abuse the system and in the end take his own life.

What I am asking for is something quite simple; that all estate agencies be licensed. I have some guidelines for my hon. Friend. I suggest the following provisions. First, the definition of "estate agents" contained in the articles of association of the Estate Agents Council should apply. Secondly, after a date to be prescribed in the Act, no person, firm or company should be per- mitted to discharge the relevant functions unless he holds a licence to do so. Thirdly, licences should be granted by a registrar appointed by the Government for this purpose.

Fourthly, an applicant should be qualified to receive a licence if he has not been convicted of an offence involving fraud, dishonesty or breach of trust, and is not an undischarged bankrupt; if he produces evidence that he is a certified contributor to an accepted compensation fund or holds a guarantee bond effective in respect of deposits received in connection with his designated functions if he produces a certificate from a member of a recognised body of accountants stating that he operates clients' accounts or deposits in accordance with the regulations laid down in the Act, or if he offers proof as a new entrant that he has so instructed an accountant.

Fifthly, and this is most important, a licence could be cancelled at any time by the registrar if the licensee was convicted of any offence involving fraud, dishonesty or breach of trust, or if it came to the notice of the registrar that membership of a compensation fund had been withdrawn or lapsed so that the guarantee bond had been withdrawn or lapsed. Lastly, the Act should provide for a register of licensed estate agents always to be maintained.

If my hon. Friend will look carefully at these points, perhaps in conjunction with the Fair Trading Bill which is now in Committee, and bring forward some form of licensing, I am sure that the consumer will be protected; members of the profession will be grateful, because the onus and the smears fall on their shoulders; and the public will realise that the Government are taking steps which have long been needed.

2.31 p.m.

Photo of Mr Ernest Perry Mr Ernest Perry , Battersea South

I congratulate the hon. Member for Southampton, Test (Mr. S. James A. Hill) on raising this subject. I know of his great interest in trying to bring the realms of estate agency into some sort of legitimate organisation. The amount of research which he has undertaken shows that he means every word that he says.

I am not an expert practitioner in high quality verbiage, but I know that when a person sells a house and there is somebody buying the house, nine times out of ten the intermediary is an estate agent. It is essential, to ensure that there is protection for both seller and buyer, that there should be mandatory membership of an estate agents' organisation of some form.

The Under-Secretary of State has in the past persevered in a manner which only evokes my admiration. I remember his Private Member's Bill on clients' money accounts, and how hard he worked to get the Bill through the House. I served with him on the Estate Agents Bill during 1965. The Bill failed only because the then Government decided to go to the country. The most important stage of the Bill had been reached, namely, the question whether estate agents should be able to indulge in buying and selling property themselves. I well remember the work of the hon. Member for Harrow, Central (Mr. Anthony Grant) and the hon. Member for Northants, South (Mr. Arthur Jones) in trying to push the Bill through the House. As things have remained the same since 1888, it is about time it came to fruition.

There are now 10 organisations catering for estate agents, but there are thousands of estate agents outside any of the organisations. I had the privilege on 2nd November in this House of bringing up the case of one estate agency in my constituency, Redgwell and Harris, the senior partner of which was a Mr. William Harris. A fire had taken place in a building, and an old lady was to be dispossessed. I am glad to say that she was given a flat by the Wandsworth Council the next day. But one of the most important matters that arose from the investigation was that despite the fact that the firm had been in business for 40 years as estate agents, when a correspondent of that well-known paper, the Daily Express, visited the firm, it was established that it was not a member of any estate agents' organisation.

What does that mean? Those who are members of estate agents' organisations are bound by certain codes of ethics. But those who remain outside can practically do as they like. This means that they have an advantage over their fellow estate agents. The situation today is that anybody can go into this business; anybody can take a deposit, and can offer a house for sale. As the hon. Member for Southampton, Test said, a house can be offered to 10 different people and 10 different deposits can be taken. And anybody of that kind can do a bunk with money, as many have done in London in the past few years. The hon. Gentleman mentioned two examples which occurred in South London, the area from which I come.

It is about time that the Government found time—the last Government were just as lax as the present—to introduce legislation to make membership of an organisation mandatory.

Photo of Wing Commander Sir Robert Grant-Ferris Wing Commander Sir Robert Grant-Ferris , Nantwich

Order. I am sorry to interrupt the hon. Gentleman, but I should have called attention earlier to the fact that we are on an Adjournment debate. I think that the hon. Gentleman knows that the necessity for legislation should not be the subject of an Adjournment debate. Having regard to what has already passed, perhaps the hon. Gentleman will help me by avoiding the word "legislation" as much as possible.

Photo of Mr Ernest Perry Mr Ernest Perry , Battersea South

Thank you, Mr. Deputy Speaker, for correcting me. I realise that you gave me some latitude, and I am grateful. However, the remarks of the hon. Member for Southampton, Test show that there is need for the Government at some time to consider the matter much further. I thank the hon. Member for raising the subject. I hope that the Government will be able to find time to look into the whole question of estate agency and make membership of an organisation mandatory.

2.37 p.m.

Photo of Mr Anthony Grant Mr Anthony Grant , Harrow Central

I am grateful to my hon. Friend the Member for Southampton, Test (Mr. S. James A. Hill) for giving us the opportunity to discuss this important matter, and also for bringing to bear on the subject his considerable knowledge. I am grateful to the hon. Member for Battersea, South (Mr. Ernest G. Perry) for his contribution. The hon. Gentleman has taken a great interest in the matter.

I was fascinated by the reports of previous proceedings in the House. I listened with rapture to the speech made by the hon. Member for Harrow, Central (Mr. Anthony Grant) some time ago. However, a lot has changed since that time. The hon. Member for Harrow, Central has joined the Government and other circumstances have changed to some extent.

Proposals have been put forward for licensing estate agencies. In the last nine months or so there have been five distinct proposals of that kind, and I welcome the chance to make clear our position. Some of the representations which have been made to us have referred to the activities of mortgage brokers and property speculators, and there appears to be some confusion and overlap in the discussion of these activities and the operations of estate agents.

It can be agreed that estate agency is a distinct and separate function, and licensing to control estate agency and mortgage broking are separate matters. However, some of the abuses which occur in mortgage broking are often and mistakenly attributed to estate agents.

Before I turn to what is central to this debate, and by way of separating the issues, I should emphasise that the Government have undertaken to implement parts of the Crowther Committee's report as soon as possible. It is intended that this will include licensing provisions. We have yet to reach final decisions on the full details of the licensing scheme, but any such scheme covering the provision of consumer credit generally would be likely to include mortgage broking.

After that slight digression to clear the ground, I come now to the central theme of the debate, namely, whether there is a need to license or to control estate agency. I agree with my hon. Friend that the great majority of estate agents do an honest and conscientious job for their clients. Those who are members of the national societies work under codes of conduct which give the public a large measure of protection. Their bonding schemes ensure that deposits or other moneys lost through dishonesty or defalcation are reimbursed. If there is a need for statutory control probably it stems almost entirely from the activities of a few unscrupulous agents who are outside the schemes.

It may he of interest to look briefly at all the proposals on the subject which have been made to us relatively recently. The first of the proposals which we have received this year came to us from the Society for the Control and Registration of Estate Agents and Mortgage Brokers, whence the arresting acronym SCREAM. The society based its case for legislation on its belief that while most estate agents and mortgage brokers provide a good service, the activities of a minority call for proper safeguards against such abuses as fraud, misleading advice and exploitation.

In the case of estate agency the society therefore proposed the establishment of a statutory council with disciplinary powers on which estate agents would have a minority representation. The main intentions were that the council should establish a code of conduct for estate agents, set up an indemnity scheme to protect clients' deposits and conduct examinations covering a range of qualifications which would relate to the service offered.

These proposals were discussed with representatives of the society, including three hon. Members, at a meeting on 1st August. I understand that this was a useful and frank discussion at which the society amplified the case for its proposals.

However, we in the Department keep a close watch on the need to protect consumers and the public. I must tell the House that in the past two years or so very few complaints have been made directly to us, in distinct contrast to the number of complaints which arose prior to the speech made by the hon. Member for Harrow, Central in 1965. But it is a fact that there has been a very great diminution in the number of complaints made direct to us. The society agreed to see what additional information it could provide which would help support a case for legislation, if necessary.

Also, at the beginning of August, quite separate proposals were received from the National Association of Estate Agents. The national association, while accepting the necessity for statutory control, made it clear that its objective was to establish controls which would protect the clients of estate agents from loss through dishonesty and malpractice, and it saw no need for additional restrictions or requirements to acquire qualifications to discharge the essentially commercial function of buying and selling houses. The association therefore proposed that legislation should be confined to requiring estate agents to be licensed and bonded with provision for exclusion or revocation of licence for anyone convicted of an offence involving fraud, dishonesty or a breach of trust.

These proposals were discussed by representatives of the association with my officials at a meeting on 7th September. Here again it was felt necessary to make the point that although we were open to persuasion on the need for legislation the present position was that there was no strong evidence that legislation was necessary in the light of what appeared to be changed circumstances in recent years.

The association was disappointed that it was not getting legislation immediately and had to make out a further case, and it referred to the Bill introduced by my hon. Friend the Member for Northants, South (Mr. Arthur Jones) which I like to think nearly reached the Statute Book in 1966.

I must emphasise that matters are very much better ordered than they were in 1966. We have all the main estate agents' societies operating bonding schemes for the protection of clients' money which we did not have in those days.

Photo of Mr James Hill Mr James Hill , Southampton, Test

Does my hon. Friend agree that the only reason for his saying that things are far better today is that his Department does not get so many complaints? If he cared to call together a body of estate agents, he would find that there were just as many abuses. The point is that probably the only way that clients feel that they can get their money back is to go straight to court.

Photo of Mr Anthony Grant Mr Anthony Grant , Harrow Central

Certainly. As I shall emphasise, we have been having discussions and we are prepared to have further discussions with the estate agents' bodies about the attitude that we intend to take in this matter. I was emphasising one difference since those days. It is the fact that most of the main societies operate bonding schemes for the protection of clients' money, and a buyer who wants to be sure that his deposit is safe from loss through defalcation should pay it only through his solicitors or to an agent who is a member of one of these societies. Similarly a seller, who is prob- ably about to embark upon one of the biggest financial transactions of his life, should take the utmost care in appointing an agent. That there has been a distinct improvement in the situation is. I think, shown by a reduction in the number of cases of fraud and unethical practices coming to our notice.

At this meeting the association accepted that it was desirable to strengthen its case as much as possible and it undertook to see whether it could provide more evidence to support its proposals and particularly of the number of defalcations by estate agents both within the schemes operated by the national societies and outside them.

Comments on the proposals which had reached the Department were sought from four more of the national societies concerned with estate agency. The largest of these was the Royal Institution of Chartered Surveyors. It expressed the view that the primary aim of legislation or licensing should be to ensure the security of deposits paid to estate agents in connection with property sales or leases. For this purpose it recommended the adoption of a simple licensing scheme, which it suggested might be operated by local authorities. The right to practise estate agency would then be limited to those who could annually produce proof of bonding and satisfy the authority that they had not been convicted of any offence involving fraud, dishonesty or breach of trust and were not undischarged bankrupts.

The institution feels strongly that to go further than this in legislation might well be a disservice to the public. It takes the view that if legislation were to require all estate agents to demonstrate a standard of competence before being placed on the register, the standard could not be set very high. It fears that it might none the less be presented in a way which could mislead the public into thinking that every estate agent could also provide the specialised services of a chartered surveyor. This is a matter upon which I believe that we should reflect carefully.

The second largest body—the Incorporated Society of Valuers and Auctioneers—takes a rather different line. It considers that there is a need for a statutory body to control estate agency but standards of entry into the business should be maintained at the level of admission to membership of its society. This, at least in part, accords with the proposals made by SCREAM, but these two bodies part company over another of SCREAM's proposals, that the statutory body should establish an examining function. The incorporated society points to a similar proposal as the cause of failure of the Voluntary Estates Agents Registration Council which was set up in 1967 and unfortunately broke down the following year.

As the House will see, although there was strong pressure for legislation there was a wide divergency of views about the objectives that it should seek to achieve. Consultations between the RICS, the ISVA and the National Association of Estate Agents were held, and there were later discussions between those three bodies and my officials to define the extent of common ground in their proposals. These were the discussions referred to by my right hon. and learned Friend the Minister for Trade and Consumer Affairs in his Answer to my hon. Friend on 4th December, which appears at col. 289.

At that meeting it became clear that the only common ground between the societies was the acceptance of a need for compulsory bonding not linked to any system of licensing. From all the proposals, some of them quite elaborate, and I am sure put forward sincerely with the best intentions, the only proposal that estate agents generally accept is a basic form of insurance to protect clients against loss of moneys.

The Government's central concern is that the consumer—in this case all those who use estate agents' services—shall be safeguarded not only against loss of deposit, but against narrowing of the choice of agent.

Photo of Mr Ernest Perry Mr Ernest Perry , Battersea South

I am glad that the hon. Gentleman has mentioned the consumer. In many instances, with an unregistered estate agent not belonging to one of the associations, the seller does not get the value of the property which he is selling. Sometimes the estate agent takes advantage of him. So it is not only the consumer but the seller who sometimes needs protection.

Photo of Mr Anthony Grant Mr Anthony Grant , Harrow Central

My reference to "consumer" was intended to apply to the buyer or the seller. I agree that both are equally important. In referring to the need not to narrow the choice of agent, I have in mind the report on estate agents which the Monopolies Commission published in 1969. One of the conclusions drawn by the commission was that any proposal that registration should become a statutory requirement should not lead to restraints on entry into the profession which could lead to a closed shop or damage free competition. We have to take this matter carefully into consideration.

Since then, of course, there has been an order which prohibits the charging of scale fees by agents. This came into effect in July this year. We would certainly wish to avoid, as I am sure would many estate agents, any restrictions which made it unnecessarily difficult to enter the business of estate agency or implied that the buying and selling of houses were other than strictly commercial operations. There are specialist functions in these transactions—surveying, providing mortgages, advising on law and conveyancing—but specialists are usually instructed to carry out these functions. The actual buying and selling, negotiation of price, and so on, are commercial operations in which it is to the consumer's advantage to have as free a choice of agent as possible.

Within these general limitations which I have outlined the Government are willing to consider the case for legislation provided it can be shown that it is necessary to protect the consumer. However, it is only fair to point out—I do not want to delude the House—that it is unlikely that in this Session we should be able to produce the legislation. Nevertheless we would welcome any further information that the national societies and SCREAM might be able to provide in response to our invitation. I shall be glad to have any information from hon. Members, particularly my hon. Friend the Member for Southampton, Test and the hon. Member for Battersea. South, or any complaints from the public. When we have this information we will certainly consider it scrupulously and, if necessary, have further discussions with the bodies involved to see what can be worked out.

I have a great personal interest in this subject, as hon. Members know. I am anxious that the public should have confidence and feel that they are safeguarded in what undoubtedly for many people is the biggest financial event in their lives.

I hope that the fact that I cannot immediately promise legislation will not lead my hon. Friend to believe that the Government are not sympathetic to many of the ideas he has brought forward. I repeat the assurance given by other Ministers that we will consider carefully the possibility of legislation provided that we have clear evidence of the needs and interests of the consumer. I am grateful to my hon. Friend for drawing attention to this matter and to the hon. Member for Battersea, South for his contribution.