Estate Agents (Independent Redress Scheme) Bill [HL]

– in the House of Lords at 2:08 pm on 18 November 2005.

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Photo of Lord Dubs Lord Dubs Labour 2:08, 18 November 2005

My Lords, I beg to move that this Bill be now read a second time.

At the outset, I should declare an interest. I am just about to sell a house and buy another, which should be made clear before I develop the argument about this Bill. There are an estimated 1.5 million residential property transactions each year. The total value involved is estimated at £232 billion. Buying or selling a property is the biggest financial transaction that many of us have to face. Yet it is highly stressful and buyers and sellers often feel very vulnerable when they embark on that process.

The Estate Agents (Independent Redress Scheme) Bill will make a simple amendment to the Estate Agents Act 1979 to require all estate agents, whether they are members of a trade body or not, to sign up to an independent complaints procedure. It means that all home movers will be able to access redress without having to resort to court—a point which is very important. Obviously, going to court is open to people now, but it is a cumbersome, expensive process. Surely, we need something simpler and better than that.

This will be a mandatory registration scheme, and any estate agent who behaves really unprofessionally would not be able to practise if he is found guilty of such unprofessional conduct. I should say now that I am grateful for the help and advice I have received in preparing this Bill, in particular the staff at Which?, who have gone out of their way to provide me with both support and information.

While it is true that from 2007 every house put up for sale will need a home information pack, and a complaints system will be set up to cover this aspect of the buying and selling process—but only this aspect—my Bill would go much further because it is intended to cover all residential purchases and sales. It is interesting and amusing to consider which groups are the least trusted in Britain. Research published not long ago in the Daily Telegraph showed that estate agents are trusted by 16 per cent of the population. Red-top tabloid journalists are trusted by 14 per cent, while politicians rate slightly higher at 20 per cent, rising to 40 per cent depending on party—I shall not say which—and whether the politician is a Minister or the local MP. Let us face it: we politicians are not very popular, journalists are not popular and neither are estate agents. It is clear that we have to find a way forward from this difficulty, at least with regard to estate agents.

During the passage of the Housing Bill through this House in 2004, the Government pledged to bring forward proposals that would extend the scope of independent redress schemes for those who have cause to make a complaint against an estate agent, but nothing seems to have happened. I refer to an OFT report published in March 2004 which set out a number of recommendations for reforming the industry. In particular it recommended that a statutory redress mechanism should be set up if the industry could not deliver improvements through voluntary codes of practice. The consumer group Which? did not believe that the report went far enough, and nor do I. The industry was given two and a half years to sort itself out. It has failed to do so, even though many in the profession want to improve its image. I shall refer to people in the estate agent industry later in my remarks. Furthermore, the OFT's latest plan for 2005–06 identifies the housing market, including estate agents, as a priority theme.

It is interesting to note that the Government broadly endorsed the report from the OFT. Perhaps I may mention briefly how they responded to the proposals. One government response stated that a consultation document would be published on how the OFT proposals could be brought into effect, and to see what more could be done to strengthen the regulation of estate agents. So far as I know, that document has yet to materialise. The Government also said that they would use the Housing Act to provide a redress mechanism. They have confined themselves to the proposals as regards home information packs, to which I have already referred. They have not yet found parliamentary time for any further legislation in this area.

A third suggestion was to work with stakeholders to develop methods to evaluate trends in consumer detriment in this market, along with making the case for an industry qualification and national quality standards for estate agents. I am not aware of any proposals to take this forward. Finally, the Government response stated that they would consult on amendments to the legislation, including measures to make estate agents' dealings with consumers more transparent, and to give the OFT and local trading standards departments further tools to tackle unfair practices and better protect consumers. Again, neither I nor the staff at Which? are aware of any such consultation.

It is perfectly clear that consumer confidence in any profession must depend on maintaining very high professional standards. That is agreed by estate agents and of course it applies to professionals generally. I turn now to the Ombudsman for Estate Agents. That organisation does provide some redress, but membership is not compulsory and therefore a large number of estate agents do not adhere to the scheme. In any case, anyone disciplined under it is not debarred from practising as an estate agent. By that I mean serious disciplinary measures. So there is no way of preventing anyone either becoming an estate agent or remaining in business as one even if they do not meet any professional standards.

Currently the level of consumer dissatisfaction with estate agents is very high. I shall not take the time of the House by repeating the many statistics, but it is estimated that in 2004 some 5,500 complaints were brought before the Ombudsman for Estate Agents.

In addition, probably about 5,000 other people complain to local trading standards officers about the service they receive from estate agents. So, if we assume that there are some 24,000 people employed in estate agencies in the UK, and if we combine the two sets of figures that I have quoted, this represents almost one complaint for every two estate agents—a very high level of complaint.

The problems faced by consumers cover a wide range of what I call unprofessional behaviour. These include misdescription of property, although that is illegal; providing false information, such as saying that there is planning permission when there is not; financial losses to buyers through charging commission fees when they are not due or colluding with property developers; not informing a buyer whose offer has been accepted that the property has been put back on the market; pressurising a vendor to sell and to accept a lower offer so that someone who is possibly in collusion with the estate agent can buy it; and discrimination through not passing on an offer because a buyer has decided not to use the estate agent's mortgage services. There are examples documented of all these practices. It is clearly unacceptable that consumers should be badly treated in such a way and have limited redress as at present.

Research shows that fewer than half of those who had bought or sold a home were always happy with the services they received from estate agents. Experiences included 29 per cent who said they were not kept well informed during the process; 14 per cent who said the estate agent incorrectly described the property; and 12 per cent who said that the estate agent had put too much pressure on them. There was little difference in these figures between the experiences of buyers and sellers. All of these practices could lead to financial loss, as well as making an already stressful process even more so. Clearly this is not a desirable situation.

But some estate agents in the industry have high professional standards. I have had conversations with and received briefings from the National Association of Estate Agents. It has some 10,000 members and probably covers about half the estate agents in Britain. I very much welcome the support it has given to the Bill. Other professional bodies in this area also support the Bill but I do not have that sufficiently well confirmed to be able to quote them.

The NAEA maintains that it should be a mandatory requirement for anyone practising as an estate agent to belong to an organisation which has minimum entry standards, codes of conduct and a disciplinary system. That is also the aim of the Bill. It is ludicrous that I could set up as an estate agent tomorrow. I have no experience at all, I would not know how to do things properly, and yet there is nothing to stop me doing it.

The NAEA was very helpful to me and gave me some advice. It advised me that my Bill should be extended to include lettings because there are also quite a number of complaints about rented property, not only purchased property. It clearly is not desirable to ask the House to support the Second Reading of a Bill while saying that I want to add something to it. On the other hand, there are so many precedents of governments of both parties introducing Bills and then introducing many amendments to them that I shall not be too embarrassed about doing so. I believe the House will accept that in good faith.

The NAEA also advised me that if any of its members act unprofessionally they could in extreme cases be expelled, but that that would not stop the estate agent from continuing to practise. The NAEA also believes that agents should be regulated in a way similar to other bodies that operate in the house buying and selling process. There is regulation in regard to financial advisers, people advised in conveyancing and people involved in surveys—and yet the estate agents themselves are not regulated. That is surely a gap in protection for the consumer.

If the Bill were to become law, millions of people would be better protected than they are at present. It is a modest but sensible step forward which I hope the Government will look upon sympathetically. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Dubs.)

Photo of Baroness Byford Baroness Byford Spokespersons In the Lords, Environment, Food & Rural Affairs 2:19, 18 November 2005

My Lords, it is a great pleasure to follow the noble Lord, Lord Dubs, who has brought an important Bill before the House. I shared his disappointment when I saw that the Government had not picked it up and run with it earlier when they were dealing with the Housing Bill. I shall not go over all the ground covered by the noble Lord, who has gone through it very clearly. I, too, have received a good briefing from Which? and the National Association of Estate Agents, for which I am grateful.

I have a couple of specific questions for both the noble Lord and the Minister. The noble Lord said that the NAEA suggested that the Bill should cover lettings, which is probably sensible.

Under proposed Section 27A(1):

"The Secretary of State may by order require an estate agent to be a member of an independent consumer redress scheme".

The provision only says "may". What happens if the estate agent does not wish to belong to such a scheme? I am not an expert in these matters by any means, but I cannot see what the counter-balance would be if the estate agent did not want to be involved. The noble Lord is proposing a scheme that he hopes will be desirable and to which people will feel that they should belong, but what will happen if they do not?

The noble Lord mentioned home improvement packs, a subject that I have raised in the House on several occasions. I do not know whether the noble Lord or the Government—my dilemma is who to ask—have ever thought about how long those packs will be valid for. Will they be valid for six months or a year, or will certain parts have to be updated during that period? Might that have implications for what the Bill is trying to achieve? I am trying to be constructive, not destructive, because this is a very good Bill.

I understand that at present if people consider there has been wrongdoing or they have not been dealt with properly by the estate agent, they appeal to a trading standards officer. Does the noble Lord view his scheme as taking a quicker and less expensive route or as having tighter controls and outcomes? I address that question to the Minister as well.

In paragraph 7 of its briefing, the National Association of Estate Agents admitted that only 40 per cent of its members are members of the ombudsman scheme for estate agents. How realistic is the proposed scheme and how does the noble Lord anticipate getting full support for it? Having said that, I agree with the noble Lord that buying and selling a house is, apart from getting married, one of the most fraught times in one's life. I am not suggesting that marriages go wrong although, sadly, some do. But buying a house involves an enormous amount of capital and is a long-term commitment for many people.

It is in all our interests to come up with schemes which help people and make things simpler for them, particularly in cases where they are wrongly advised. The noble Lord was right to highlight the fact that sometimes they are not given the right information at the time, nor told of offers made. I suspect that it is difficult to prove but there are ways of doing it.

Lastly, why did the Government not include the new scheme in the previous Bill? Have they conducted more research since then that ties in with what the noble Lord, Lord Dubs, is trying to do? I thank the noble Lord for explaining the measure fully. I am sorry that my comments are brief, but he covered the issue well. I hope that my few questions might help him in advancing his Bill.

Photo of Lord Addington Lord Addington Spokesperson in the Lords (Sport), Culture, Media & Sport, Spokesperson in the Lords (Disability), Work & Pensions, Deputy Chief Whip, People With Disabilities, Non-Departmental & Cross Departmental Responsibilities 2:25, 18 November 2005

My Lords, this Bill should have happened a long time ago. When we think about what is involved, it is painfully obvious that something should have been done. As I have said before, I have recently been through the process of buying and selling houses. The process can be fraught and there is an odd relationship with the person who is marketing and professionally representing you at the same time.

There are also stereotypes that must be lived with—"well appointed" might mean that the walls may stand up only if the wind is not in the wrong direction and other such jokes. Only lawyers have more jokes against them than estate agents. One reason for opposing the Bill could be that we may be improving the status of one of the few professions that is held in lower public esteem than us—it is the only one that I can see at the moment. However, we should really have acted a long time ago. If the professional bodies within the industry are encouraging the Government, action should be taken.

The Bill in front of us seems to be a good vehicle. If it is amended and expanded, that may be to the good. However, if this is not the right way forward, I hope that the Government will assure us that something else will happen shortly. I cannot see why we should wait. The only thing that would tempt me to smile on any process of waiting would be to hear that the measure would be guaranteed to get government time. If not, this Bill should have the full backing of the Government and Parliament.

The most attractive proposal is in Clause 1, which states:

"The Secretary of State may by order require an estate agent to be a member of an independent consumer redress scheme".

I believe—I trust that this is correct—that that makes the proposal effectively compulsory and that people will know that; they will know the way forward. The noble Lord, Lord Dubs, nods his head. That means that people know where to go and what to do. They know where to make complaints.

I was probably less anti-estate agent before last night when I tried to cross at a pedestrian crossing and was nearly run down by a Foxton's decorated Mini as it came through a red light, but we will leave that to one side.

Other complaints can be made in the process. For example, where do we complain when we discover, as I did, that we were not receiving the interest on a deposit on the house that we were buying? We had to chase hard to get it, because it was not offered. That is a comparatively small complaint, but there are others in the Bill. If people know where they can get an immediate response, they will feel more comfortable. The industry itself will respond more quickly because it cannot use the ultimate stalling tactic of going to the lawyers. Everything will be easier if we have something like this Bill in place. I hope that the Government will support the Bill. If they do not, they had better have a good reason and a timetable for a new proposal.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip, Government Whip 2:28, 18 November 2005

My Lords, I am sure that we are all grateful to the noble Lord, Lord Dubs, for his full and helpful explanation of this measure, the Estate Agents (Independent Redress Scheme) Bill. The noble Lord's Bill raises important issues about how we should provide consumers with redress when they suffer at the hands of estate agents, and how we can improve and extend the provisions on redress in the Housing Act 2004.

Let me say at the outset that the Government welcome the principles of the Bill and I am pleased to see that that is shared throughout the House. I am glad to have the opportunity to explain to your Lordships the Government's approach to these issues. It may be helpful for me to begin by going over the background to these issues, some of which the noble Lord also alluded to.

In March 2004, the Office of Fair Trading issued a report on the estate agency market in England and Wales. The OFT report found that there was significant consumer dissatisfaction with estate agency services, which ranged from suffering serious abuse such as failure to pass on offers to concern about quality of service issues, such as poor administration by estate agents. The noble Lord, Lord Dubs, spoke strongly on that point.

Estate agents have a key role in the housing market, and a hugely significant one. For most people, buying a house is the most expensive purchase they ever make, and sometimes the most stressful, for both buyers and sellers. It is vital that the market works well and that consumers are adequately protected against unfair practices.

As regards consumer redress, the OFT recommended that more estate agents should subscribe to voluntary codes of practice, which provide redress for consumers and set service standards over and above the legal minimum. Because of the risk that that exhortation might not be heeded, the OFT recommended that the Government should take a power to require estate agents to belong to independent industry redress schemes. In their response to the OFT report in July 2004, the Government said that they intended to go further than the OFT's recommendations. We said that we would seek to take powers in the Housing Bill, which was then before Parliament, to enable the Secretary of State to approve one or more estate agent redress schemes and to require estate agents to belong to one. Some noble Lords referred to that earlier.

As some noble Lords may recall, there was considerable support in your Lordships' House for that policy. There was also strong support for the view that the provisions in the then Housing Bill should allow a redress scheme to cover any relevant acts or omissions of an estate agent. Indeed that was the Government's view. However—and this is the point that the noble Baroness, Lady Byford, impressed on me—the House authorities ruled that the scope of the Housing Bill was not wide enough to enable redress schemes to cover general complaints about estate agents. A redress scheme under the Bill would need to be confined to complaints about estate agent services linked to the provision of a home information pack. So the Housing Act 2004 does contain provisions enabling the Secretary of State to approve redress schemes and to require estate agents in England and Wales to belong to one, but the scope of such schemes is much narrower than we had originally intended. Moreover, as we have always recognised, the Bill could not make corresponding provision for Scotland and Northern Ireland. The Housing Bill covered only England and Wales. Further legislation was therefore always contemplated.

As the Government have therefore made clear, we would need further legislation to cover not only Scotland and Northern Ireland but also, following the decision over the scope of the Housing Bill, to enable estate agents redress schemes to address a wider range of complaints by consumers over the service provided by their estate agents. The Bill proposed by the noble Lord seeks to implement those changes. In effect, the Bill would repeal the Housing Act provisions and insert corresponding provisions into the Estate Agents Act 1979, but with the two important changes to the scope that we wish to see. The Bill is very similar to the one introduced in another place in the previous Session by the right honourable Alan Williams MP, which ran out of time before the election. As noble Lords know, the Government offered a handout Bill for this Session to achieve our intentions in that area, but no Member in another place was persuaded to take it up.

I therefore fully support, on behalf of the Government, what the noble Lord is trying to achieve, which is the same as what the Government want to achieve. Those objectives are also shared by consumer groups and by many estate agents themselves and their representative bodies. Compulsory membership of redress schemes will improve standards of service and provide a cost-effective means of redress for consumers. That is necessary to overcome significant consumer dissatisfaction with estate agency services, which was brought out in the Office of Fair Trading report.

Consumer access to independent redress in this sector is currently limited, with only around 40 per cent or so of estate agents belonging to the existing ombudsman for estate agents scheme. That means that many consumers who are dissatisfied by the response of an estate agent to their complaint only have the option of seeking redress through the courts, which can be difficult and costly, as noble Lords have recognised. The Government believe that all consumers buying and selling residential property in the UK should have access to a redress scheme to enable their complaints about estate agency services to be investigated and determined by an independent adjudicator. The availability of a free, independent and efficient redress scheme would be important to consumers in this vital market.

Indeed, so supportive are we of what the noble Lord is trying to achieve that I assure your Lordships that we fully intend to bring forward government legislation, when parliamentary time permits, to implement these shared objectives. The noble Lord will ask, reasonably enough, when that may be. I can only say that it will not be in this Session. The Government will set out their procedures for the next Session in the usual time. I cannot anticipate the Queen's Speech. However, I can assure noble Lords that we fully recognise the importance of legislation on this issue.

Your Lordships may ask why, then, we cannot give full support to this Bill. It is not as simple as that. The Government have their own programme for this Session. We and another place already have much business to get through. It is hard to see how the Bill could be enacted in this Session, given other pressures on time. Moreover, although the changes we wish to make to the provisions in the Housing Act may seem simple on the surface, achieving them is not as straightforward as it may seem. It is rather more complicated than simply seeking to transpose the provisions of the Housing Act to the Estate Agents Act 1979. The noble Baroness, Lady Byford, raised the point about sanctions if someone was not prepared to enter a redress scheme; indeed, that is one of the defective points in the current drafting of the Bill that would have to be catered for in full legislation.

It was also asked whether the redress scheme could cover lettings. The Estate Agents Act 1979 does not do so. A case would have to be made for regulating lettings with regard to regulatory principles, and a proper cost/benefit analysis would need to be undertaken. That would be a matter for the ODPM.

My noble friend Lord Dubs raised the question of what is happening on the consultation document that was promised. The Government have been considering the drafting of this document, but we have been considering carefully a number of legal points that arise over how the OFT proposals can be given legal effect. These matters are moving forward.

I hope that will reassure noble Lords. We support the thrust of the Bill, but we must be neutral on it, as we cannot offer government support to ease its passage through both Houses. I hope, however, that your Lordships are reassured by what I have said about the Government's commitment to bringing forward their own legislation in due course.

Photo of Lord Dubs Lord Dubs Labour 2:38, 18 November 2005

My Lords, I am grateful to all noble Lords who took part in this debate. There may have been few speakers, but I think the contributions were helpful and positive from both the Conservative and Liberal Democrat Benches. I will talk about the Government's contribution in a minute.

I will deal with one or two of the points that have been made. It is intended that the scheme will be mandatory. Once the scheme or schemes are in being, it will be an obligation on all estate agents to be members, otherwise they will not be able to operate as estate agents. I am not sure I should chance my luck on trying to do some legal interpretation of the wording now, but the point is that there could be independent consumer redress schemes that were not satisfactory or to the proper standards, and it would be up to the Secretary of State whether a scheme met such a standard before he required all estate agents to be members of it. It is certainly my intention, however, that under the legislation it should be mandatory for estate agents to be members of such a scheme. That is an answer to both the Front Benches opposite.

The problem of having a limited redress scheme as regards the home information pack proposals is that this will be confusing for consumers. People will say, "Well, we can complain, but only on a limited aspect of the purchase transaction". That does not help. When people fall foul of any particular system they like to know, in an open and transparent manner, what their redress is. I fear that, although the Government's motives are good as regards HIPs, and I think it is a welcome step forward, there is a confusing element in having a redress scheme for only a limited part of the house purchase process.

I was also asked about trading standards officers. They perform a useful job but they cover a wide range of goods and services. I seek a specialised service which will cover estate agents. The officers concerned will therefore understand the estate agency business and will be able to develop codes of conduct to establish what is appropriate professional behaviour on the part of estate agents. I hope that will result in a quicker procedure. It would also debar from working estate agents who do not behave professionally and who behave badly. Despite all the good work that trading standards officers do, I understand that they do not have the powers that I mentioned. For that reason I would prefer the scheme I am discussing to be adopted although I accept that trading standards officers do a good job covering a wide range of goods and services. However, the help that they can offer is more limited in the area that I am discussing.

I welcome the Government's support for the principles underlying the Bill. This Bill is very similar to that introduced by Alan Williams MP, but he did not secure any time for that Bill to be debated and therefore could not evoke the government response which today's debate has elicited. Accepting the principle is fine. The Minister said that the Government intended to take action, but not in this Session. However, many Sessions will follow this one. I very much hope that the Government will consider that this is an urgent matter. Any measure that commands such popular support—I believe that this measure will command popular support—constitutes a win-win situation for the Government. Not all government legislation is necessarily as popular as this measure would be. The Government have every incentive to bring such a measure forward. It is in their interests, but particularly in the interests of house buyers and sellers, to do so.

As regards letting, I understand the technical difficulty that the original legislation—the Estate Agents Act 1979—did not cover lettings and that it might be difficult to amend this Bill sufficiently to include them. However, there is a problem with lettings. Many people are very upset at the way they are treated by estate agents when they seek to rent a property. Therefore, I put it to the Government that the matter is worth considering seriously. However, this Bill may become law before the Government consider that matter. We shall see what progress is made.

I thank noble Lords for the support that they have given the Bill. I shall watch with interest its further progress through this House. It may well become law and save the Government much bother in the next Session.

On Question, Bill read a second time.