Clause 14 - Acting as an estate agent

Homes Bill – in a Public Bill Committee at 7:00 pm on 23rd January 2001.

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Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Spokesperson (Environment, Food and Rural Affairs) 7:00 pm, 23rd January 2001

I beg to move amendment No. 53, in page 8, line 41, leave out from `Only' to `a' and insert

`a person who in the course of a business is engaged in estate agency work and who has'.

Photo of Roger Gale Roger Gale Conservative, North Thanet

With this it will be convenient to discuss amendment No. 48, in clause 15, page 9, line 18, at end insert

```estate agency work'' has the meaning given by section 1(1) of the Estate Agents Act 1979;'.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Spokesperson (Environment, Food and Rural Affairs)

It is worth pausing in order to probe the Government a little further on precisely what they mean by acting as an estate agent. It is a curious anomaly that anyone can set up as an estate agent; they need no training or experience to deal with what, for many, is the most expensive and important transaction in their lives.

Most estate agents are covered by one or more of the professional bodies and will have had extensive training; many will have had many years' experience and be able to handle such matters with a great deal of professionalism and the requisite judgment. However, cowboy agents, with no experience or training, can set up a stall overnight. They may be covered by section 22 of the Estate Agents Act 1979, but that deals only with ethical matters and not with minimum standards of competence. It would be interesting to know whether the Government believe that the Bill should impose minimum standards of competence. After all, the purpose of the Bill is to make buying and selling of houses quicker and more efficient. The cowboys are precisely the sort of people who ought to be rooted out.

I wish to probe the Government also on exactly what the Bill covers. For example, does it cover firms or individuals who are not estate agents but who have set themselves up to handle a particular sale and who then subcontract the work to an estate agent? In such circumstances, the firm or individual that started the process would be liable for producing the seller's pack, but if they were not skilled in the work of estate agency, how would they know whether the seller's pack was complete in all particulars? It would be useful if the Government were able to give us some idea of their thinking. I shall let the Minister reply before saying any more.

Photo of Nick Raynsford Nick Raynsford Minister of State (Department for Environment, Transport and the Regions) (The Regions)

Clause 14 identifies who is to be regarded as a person acting as an estate agent for the seller of a residential property. The amendments would replace the definition of

an individual, body corporate or partnership with a place of business in England and Wales with the definition of someone engaged in ``estate agency work'', as set out in the Estate Agents Act 1979. I understand the motives that have led to the amendments, but, although the definition of an estate agent in clause 14 draws on the definition of estate agency work used in the 1979 Act, for several practical reasons it is not appropriate to use that definition in the Bill. I hope that when the hon. Gentleman hears the explanation he will accept it.

In considering why the 1979 Act definition is not appropriate for the Bill, we need to remind ourselves of the link between marketing and the requirement to provide a seller's pack. First, the 1979 Act definition includes several other actions by estate agents that do not involve marketing. It could include acting for a buyer, which would not come within the ambit of the Bill. It could also include acts preparatory to the marketing of a property, which might even include the preparation of a seller's pack. Both those activities do not relate to marketing and are therefore outside the scope of the Bill.

Secondly, the 1979 Act definition omits several situations that we would want to include in the scope of the Bill. For example, section 1(2)(a) specifies that the Act does not apply to things done

in the course of his profession by a practising solicitor or a person employed by him.

However, under the new provision it will be possible for a solicitor to prepare a seller's pack. Indeed, it is likely that some solicitors will be inclined to become involved in a range of services, so that they can provide a seamless service to customers. While solicitors' property shops are not yet as common in England and Wales as they are in Scotland, we believe that their numbers may increase as a result of the business opportunities offered by the seller's pack.

Clause 14 contains a definition of estate agency work that we have developed to be appropriate to the Bill. It draws on and is close to the definition in the Estate Agents Act 1979, but it also reflects the requirements of the Bill. I realise that there might be some virtue in maintaining a single definition for the same profession in the 1979 Act and the Homes Bill. However, the definition that we have used makes it abundantly clear to estate agents which of their activities might cause the obligations under the Bill to apply. There is nothing confusing about the definition, which closely echoes the definition in the 1979 Act, but which is preferable in the context of the Bill.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Spokesperson (Environment, Food and Rural Affairs)

The National Association of Estate Agents is worried by the two different definitions. Will the Minister explain more precisely why the definition under section 1(1) of the Estate Agents Act 1979 could not have been used in the Bill? It would have made matters simpler for everyone involved in the estate agency business and for trading standards officials trying to enforce the Bill.

Photo of Nick Raynsford Nick Raynsford Minister of State (Department for Environment, Transport and the Regions) (The Regions)

As I pointed out, the definition in the 1979 Act includes several activities that do not come within the ambit of the Bill. To include them would be confusing, because it might imply a potential liability with respect to an offence. In fact we have carefully avoided that. For example, section 1(1)(a) of the Estate Agents Act 1979 mentions acting

with a view to . . . effecting the introduction to the client of a third person who wishes to acquire a property. The hon. Gentleman's example, which he gave in an earlier discussion, of an estate agent acting perfectly properly within the ambit of estate agency work, would not come under the Bill. That is why the distinction is necessary.

As to the hon. Gentleman's argument that estate agents should be licensed, the Government, like their predecessor, do not favour regulation except where it is absolutely necessary. The Department of Trade and Industry is keeping an open mind on whether estate agents should be formally licensed. At present, the Department is not convinced that that would deliver a significant increase in the level of consumer protection. The Director General of Fair Trading already has powers to act against estate agents who breach the requirements of the Estate Agents Act 1979 and he has shown that he is prepared to use them where justified.

It would be helpful if I clarified a point that was twice raised on 18 January by the hon. Member for Cotswold. It concerns the position of an estate agent who introduces a client seeking to buy a property to another estate agent who is marketing a property, or to a seller. I have taken further advice. Where an estate agent acting for a potential buyer seeks to introduce him to another of his clients who is trying to sell a property, the agent will have to have a seller's pack in his possession. The requirement to have a pack will be by virtue of the fact that the estate agent is acting for the seller rather than because of the business relationship with the buyer. So where an estate agent acting for a buyer seeks to effect an introduction to a seller for whom the agent also acts, there will have to be a seller's pack.

However, an estate agent who acts only for the potential buyer is not required to have a seller's pack as he is not marketing anything nor is he acting on instructions from the seller. I hope that that clarifies the matter. The hon. Gentleman will now be aware of the distinction. I am grateful for the opportunity to set the record straight on that important matter, not least for the National Association of Estate Agents, who will be able to read our proceedings in the Official Report.

It is a common occurrence for more than one agent to be instructed by a seller to market the same property, a situation that is known as multiple agencies. Once the Bill comes into force, each agent so instructed will be required to have a copy of the seller's pack in his possession. That is logical.

However, the National Association of Estate Agents has raised the circumstance where an agent acts solely as a sub-agent for another and therefore has no relationship with the seller, that being solely the responsibility of the main agent. In such circumstances, it would be excessively onerous to require the sub-agent to have a seller's pack. Therefore, where the marketing is carried out by the main agent through sub-agents, the agent would have the obligation to hold the seller's pack at all times without the requirement applying to all sub-agents. That seems a practical and sensible way forward. I hope that it will comfort those worried about how the obligations of the Bill will apply on that complex issue.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Spokesperson (Environment, Food and Rural Affairs)

I am grateful to the Minister. He always answers in a concise and helpful way. I shall probe him further about two aspects.

Does the Minister think that clause 14 will catch everyone who purports to be an estate agent? Will it catch the rogue person, who sets himself up as an estate agent overnight, and simply puts up a board stating that he is a house seller? Will it catch the person who is open for whatever business, house selling being one of many activities? Will the clause catch the trader who is not normally recognised as an estate agent?

We have talked about the draconian sanctions under the Bill, but what if one happens to be the poor, unfortunate vendor caught up by an unregistered estate agent? It could be a catastrophic experience. The Government should keep an open mind. If it appears that one or two people are providing a less than professional service because they are not registered with any of the professional bodies, it would be reasonable to consider revisiting the question of whether it should be compulsory to be registered as an estate agent. It is a serious matter that concerns the largest transaction that someone is likely to make in their life. We do not want untrained people acting for sellers and buyers of houses. It will not do the estate agency profession or its image any good, and it will provide a lurking danger to the general public. Sales may go wrong rarely, but when they do, they will go wrong with a vengeance, and those most important transactions will become much more difficult and expensive.

Photo of Nick Raynsford Nick Raynsford Minister of State (Department for Environment, Transport and the Regions) (The Regions) 7:15 pm, 23rd January 2001

I hope that I can give the hon. Gentleman the comfort for which he is looking. Clause 14 will catch the sort of rogue traders that he describes if they market a property for a seller. It will not catch rogue traders acting as estate agents on behalf of a buyer, because it is concerned only with the process of marketing properties. It will be a complete answer to the problem of unqualified people, who are likely to deliver a poor service, setting themselves up as rogue estate agents. That is a separate issue, and I shall return to it in a moment.

The provision will cover any individual body corporate or partnership that markets properties and has a place of business in England and Wales. That is a much broader definition that will catch rogue traders. I do not want to detail circumstances in which they will not be caught. Of course, they will not be caught if they have premises outside England and Wales, for the simple reason that there is no enforcement mechanism without the complicated arrangement of a reciprocal procedure with Scotland. Anyone who sets up his premises in Scotland is badly placed to market properties in England and Wales, so we do not think that that is a serious issue, although it might technically be seen as a loophole.

I was asked whether we should revisit the issue of the licensing of estate agents. I made it clear that, although the Government have no current plans to proceed with such licensing, we have a genuinely open mind. We are conscious of the extent of the work that the National Association of Estate Agents has carried out to raise standards in the profession, and of the representations that we have received on the issue. We prefer the voluntary route where possible, but we recognise that there is sometimes a need to take action to protect the public interest.

I hope that the hon. Member for Cotswold will be reassured that we will keep an open mind on the matter. I ask him to withdraw the amendment.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Spokesperson (Environment, Food and Rural Affairs)

I love the image of the Minister as the Minister with the light touch. Time will tell whether he fulfils that criterion. I am not sure that he will do so with the enactment of the Bill but, be that as it may, his response was helpful and courteous, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 14 ordered to stand part of the Bill.

Clause 15 ordered to stand part of the Bill.

Further consideration adjourned.—[Mr. Robert Ainsworth.]

Adjourned accordingly at eighteen minutes past Seven o'clock till Thursday 25 January at fifteen minutes to Ten o'clock.