Schedule 6

Consumers, Estate Agents and Redress Bill – in a Public Bill Committee on 24th April 2007.

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Estate agents’ redress schemes

Amendment proposed [this day]: No. 23, inschedule 6, page 62, line 29, leave out ‘may’ and insert ‘shall’.—[Lorely Burt.]

Photo of Ian McCartney Ian McCartney Minister of State (Trade & Investment), Department of Trade and Industry, Minister of State (Trade & Investment), Foreign & Commonwealth Office 4:00 pm, 24th April 2007

I welcome you to the Chair again this afternoon, Mr. Weir. I hope that we enjoy the sitting as much as we enjoyed the first sitting today. Before dealing with amendment No. 28, I should like to report back to the Committee following the discussion of clause 13 in last Tuesday’s sitting. I told hon. Members that I would raise the issue of the recalibration of token payment metres with Ofgem. I have today received a written response from Ofgem, which has also written to the Clerk of the Committee in that regard. I was not sure this morning whether the Clerk had received that response, so I apologise for that. In case hon. Members have not received the response, I have brought copies of both the letter and the memorandum that Ofgem prepared for the Committee. I hope that they will bring hon. Members up to date on Ofgem’s position and help them to consider whether they might want to raise other issues on Report stage. Copies are on the Table.

On amendment No. 23, I shall first respond to the hon. Member for Solihull and then deal with the issues raised by my hon. Friend the Member for Ealing, North and suggest a way forward, which I have not yet discussed with my officials. The Government’s aim in introducing the estate agents’ redress provisions is to require all estate agents to join a high-quality redress scheme. I am happy to make it absolutely clear to the House, as I did in numerous debates this morning, that we intend to ensure that they are high-quality, not Mickey Mouse, schemes. [Interruption.] I will say Donald Duck schemes then.

A high-quality scheme is one that uses generally accepted criteria for best practice, which include accessibility to all consumers, including vulnerable consumers; ease of use; clarity of operation; timeliness of complaints resolution; and responsiveness and transparency of decision making. We want to ensure that all home buyers and sellers have access to redress for legitimate complaints against estate agents. The amendment would make it compulsory for the Secretary of State to lay an order requiring estate agents to belong to a redress scheme. We cannot accept  the amendment, as it is possible to envisage scenarios in which, for short periods, there is no approved scheme for agents to join.

The Office of Fair Trading can withdraw its approval from a scheme if it no longer meets the approval criteria. We discussed the circumstances in which that could happen during our consideration of an earlier amendment. For example, approval could be withdrawn amid serious concerns that scheme was not providing to the OFT information that it had about agents not complying with legislation. Approval might also be withdrawn after a change in the governance structure that, in the OFT’s opinion, compromised the ombudsman’s independence. The OFT must be notified of any change to the running of the scheme within14 days of the change taking place. The OFT will quickly be aware of changes to the scheme and will be able to assess whether they affect its approval.

Approval would also be withdrawn if there were concerns about the effectiveness of the complaints handling system, where an unacceptable backlog of unassessed cases had built up. If a scheme was unable to handle the number of complaints, because it was not adequately resourced, for example, the OFT could withdraw its approval. The amendment would make no difference to what would happen in practice; all estate agents would be required to join a redress scheme. I hope that the hon. Member for Solihull is reassured about the drafting of the clause.

My hon. Friend the Member for Ealing, North raised the issue of fly-boarding, which is the practice of putting up false “for sale” or “sold” boards, to represent to consumers that an estate agent has more properties on the books than is actually the case. “For sale” boards must comply with the Town and Country Planning (Control of Advertisements) Regulations 1992. Fly-boarding can be addressed under the Trade Description Act 1968 and the Control of Misleading Advertisements Regulations 1988. Abuse of that type appears to have fallen considerably. I shall come back to that in a moment.

As a consequence of enforcement interventions by the OFT and local authority trading standards services, many more estate agents are signing up the relevant parts of the ombudsman’s code of practice for estate agents, which forbids fly-boarding. The OFT took action against fly-boarding in 2004 against a company called Mankind Property Services, trading as Bairstow Eves Countrywide. Its new office in New Cross, London, had to give written undertakings not to erect false “for sale” boards in contravention of the Control of Misleading Advertisements Regulations 1988. Fly-boarding is to some extent self-policing, as complaints are usually made by rival estate agents who have a knowledge of the local market and spot false sale boards. That is the background to the issue, but it does not help my hon. Friend with his complaint.

The Office of Fair Trading recommended that agents should be required to identify the specific property in question on their sale boards. That was not proposed in the Bill, because we needed to consider compatibility with the unfair commercial practices directive, which was not completed at that point. Although abuses of that sort are half folly, I take this recommendation seriously, and I assure my hon. Friend that the OFT, my team that will be established to implement the  legislation and the team that is currently in place to implement the unfair commercial practices directive will be brought together to have a meeting to consider what more can be done to resolve the issue. Without prejudice, I hope to try to have that discussion before we next meet on the Floor of the House when the Bill is considered on Report. I cannot guarantee that, but I will try to do so and report back to the Committee on the discussions held.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

I am sure that the Committee welcomes the Minister’s comments. Does he intend to ensure that the principal trade bodies or professional organisations involved in the industry are at least consulted before that meeting so that it might be informed by the views of the principal representative practitioners, or will he do that after the meeting?

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

First, the OFT has already consulted on the issue, which is why it has made its recommendations. I am simply saying that I take the issue seriously, and I take it even more seriously when the OFT has already considered the matter. We could not deal with the issue when drafting the Bill, because of the formulation of the unfair commercial practice directive. I am simply suggesting that I bring the parties together and then come back to the Committee and inform it about what was said. I hope to do so before the Bill is considered on Report, but if that is not feasible, I will have to say that I was unable resolve the issue at that stage. If I can do something, I would rather get it right than just try to curry favour with people. I reassure my hon. Friend the Member for Ealing, North that, having taken his point seriously, I will try to do something about it.

Photo of Steve Pound Steve Pound Labour, Ealing North

My right hon. Friend has an enviable reputation for rapid action, but he has surpassed even his own high standards today. I thank him most sincerely for that—on behalf of not myself, but my constituents and other hon. Members who have raised that concern. We will look with great interest to the statement that will be made on the Floor of the House; but in the meantime, I thank my right hon. Friend for his prompt and positive action.

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

I thank my hon. Friend for his kind remarks. I cannot definitely commit myself to dealing with the issue on Report, but I will try my best to do so. However, hon. Members should rest assured that, whether it is done on Report or at another time, I will come back with a substantive reply to the Committee, and if that has to be in writing, so be it. Given that the OFT has already done the work on the issue, I hope that we can consider it and find a way forward. I hope that the hon. Member for Solihull can accept my explanations and will withdraw her amendment, but I will wait to find out whether she is happy with what I have said.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

I am very interested and somewhat reassured by what the Minister has said. He talks about exceptions that would justify the retention of the word “may”. I am sufficiently reassured by him saying that the intention is that the word “shall” will be  used. I am extremely pleased that the debate has given an opportunity for the hon. Member for Ealing, North to air a concern that I am sure is common to all hon. Members. I, too, look forward to hearing the results of taking the issue forward. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

With this it will be convenient to take amendment No. 25, in schedule 6, page 62, line 31, after ‘work”)’, insert—

‘(b) developing and directly selling residential property to members of the public; or

(c) facilitating temporary periods of residence to members of the public at residential property not owned by those members of the public;’.

Photo of Susan Kramer Susan Kramer Shadow Secretary of State for Trade & Industry, Trade & Industry, Shadow Secretary of State, Liberal Democrat Spokesperson (Trade and Industry)

Thank you, Mr. Weir. My apologies to you and the other members of the Committee for not being present during this morning’s sitting.

Photo of Susan Kramer Susan Kramer Shadow Secretary of State for Trade & Industry, Trade & Industry, Shadow Secretary of State, Liberal Democrat Spokesperson (Trade and Industry)

I gather that I may have been sorely missed, because my hon. Friend the Member for Solihull was so effective. I am providing a little relief for her by moving the amendment. AmendmentsNos. 24 and 25 must be read together, otherwise neither makes any sense. They raise, once again, two issues that were touched upon under clause 2, and which willbe raised in relation to other amendments that will be proposed later in the discussion. They are crucial to the Bill’s character, to provide proper protection for consumers, and they address schedule 6.

Proposed new section 23A in schedule 6(2) currently reads:

“The Secretary of State may by order require persons who engage in estate agency work in relation to residential property (“relevant estate agency work”) to be members of an approved redress scheme for dealing with complaints.”

We would change that with these two amendments, so that it would read:

“The Secretary of State may by order require persons

(a) who engage in estate agency work in relation to residential property ;

(b) developing and directly selling residential property to members of the public.”

There would also be a paragraph (c), which I will go into in just a second.

Paragraph (b) clearly deals with developers who are selling either directly, off-plan, or whatever else, who are not covered under the existing language. We feel that that is a huge loophole and that developers are not held accountable under the same kind of redress requirements that apply to an independent estate agent. Indeed, there is nothing to say, because there are so many forms by which people can set themselves up to sell residential property, that a developer could not use individuals, such as those who could form, for example, a casual estate agency, to sell that property off-plan.

We think that there is a huge loophole and that this is a great opportunity to tackle it. More and more people are buying from developers, particularly as we rely more on new builds for opportunities to move.One has only to look out of the window in Londonto be aware of how widespread is the engagement of developers in producing new homes for the market. Not to have that covered by the Bill strikes me as an incredible failure.

Paragraph (c) is probably even more important. It would draw into the redress scheme those

“facilitating temporary periods of residence to members of the public at residential property not owned by those members of the public.”

Those are cumbersome words, but we all know that that is the language of letting. Again, that is an attempt to bring letting into the scheme. The Minister willbe aware that the letting industry is huge; it is worth £12 billion a year. I believe that the Minister accepted on Second Reading that those who rent are often among the most vulnerable in our communities. Under the Bill, they are offered the least protection. Again, I will not reiterate what we have discussed, but Shelter has examples of case studies of individuals being charged £300 just to get information on a potential let, when the only work put in by the agency was a phone call to either side. People are trapped and suffer real abuse. Many estate agents handle both sales and lettings, so, again, it is relevant for the Bill to cover both sides of what they do.

We are conscious that the Government are putting in place a temporary deposit protection scheme, but that does not cover many of the disputes that surround lettings in the broader sense. We also understand that, on Second Reading, the Minister said that a review was in hand. This is something that the Office of Fair Trading did not consider when it looked at the world of estate agents and it is something that was under review. It was said that, in a couple of years, something might come forward. It seems to me that this is obvious and straightforward. We know that there are sometimes20 years between Bills that address real estate issues, so why not use this opportunity to put in place language to protect the most vulnerable? These two amendments provide an opportunity to do that.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform) 4:15 pm, 24th April 2007

These two amendments appear to address concerns which a number of members of the Committee share about the scope of what is estate agency work and what is not. Mr. Weir will be aware that we, on these Benches, have tabled two substantive new clauses that address these issues, and which I trust we will have the opportunity to debate later. Therefore, I will not paddle through the arguments in their entirety now.

I endorse entirely the aspirations of the hon. Member for Richmond Park (Susan Kramer) in seeking to put forward these concerns. My worry is that the wording is somewhat unclear. Amendment No. 25, for example, refers to

“facilitating temporary periods of residence to members of the public at residential property not owned by those members of the public”.

I would not necessarily call that the language of residential lettings, although I think that I know where the hon. Lady is heading with it. The reference to “periods” in that context seems peculiar, and I think that it is the idea of leasehold interests that is intended. Therefore, my problem with the wording as it stands is that I am not clear whether it makes any sense, either in or out of context.

The proposal seeks to amend this Bill rather than address the source of the definition of estate agency work, which lies in section 1 of the original Estate Agents Act 1979. An estate agent is defined as being a person who stands between the house purchaser and the vendor, and so the question is how the legislative definition can amend or complement that concept of estate agent as intermediary. I am not clear as to whether these amendments achieve that, which is why I have serious reservations about them. The aim is right, and I strongly support it. We have a 28-year-old definition that clearly needs to be modernised, but, sadly, the drafting falls short of the mark.

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

Before I deal with the amendments and my reasons for, unsurprisingly, rejecting them, I will deal with the two general points made as part of the overall case put by the hon. Member for Richmond Park.

The first general point was on letting agents, who are subject to different regulations from estate agents. They are governed by the Accommodation Agencies Act 1953, which makes it illegal for agents to charge prospective tenants for lists, addresses or details of properties that they have in their possession. I think that that was the point the hon. Lady was making. European legislation on unfair consumer contracts and unfair commercial practices also applies to this area. I will write to the hon. Lady and to hon. Members on how that will happen in practice.

On property developers who act as independent estate agents, any person doing estate agency work, as defined by section 1 of the 1979 Act, will be caught by the redress provisions. They do not have to call themselves estate agents; it is what they do that matters. That is an important point of clarification for thehon. Lady.

Amendments Nos. 24 and 25 seek to extend the redress provisions beyond estate agency work to include lettings work and the sale of new-build properties. To be fair, the hon. Lady is being consistent. Identical amendments were tabled by the Liberal Democrats in another place, and they received no support there—probably not just because of the Government’s position, which I will come to in a moment, but because, as the hon. Member for Hertford and Stortford (Mr. Prisk) said, even if one agrees with their principle, they are seriously flawed in structure.

As I said, letting agents are subject to different regulations from estate agents, namely the Accommodation Agencies Act 1953. The Government have already taken action to improve the rights of tenants. The tenancy deposit scheme that came into force at the beginning of April deals with one of the main causes of concern for tenants: their deposits being withheld unfairly by landlords or their agents. Landlords have the choice of three schemes, but they  must join one. For the first time, all tenants who keep their property in good condition will have the reassurance of knowing that they can get their deposit back. Tenants who have problems securing repayment will have access to a free dispute-resolution service under the deposit scheme.

In addition, the Government are acting to protect the most vulnerable members of society from exploitation. The Housing Act 2004 requires the mandatory licensing of high-risk houses in multiple occupation. Therefore, private landlords who manage homes in multiple occupation of three storeys or more, or occupied by five people or more who form more than one household, will require a licence from the local authority. Furthermore, the local authority will have the discretion to extend licensing to other categories of multiple occupation homes to address particular management problems that may exist in such properties. The Government are aware of the concerns of the quality standards of newly-built homes. That was one of the issues that was addressed by Kate Barker in a review of the issues underlying the supply of housing in the United Kingdom. Her report, published in 2004, recommended that the house building industry did not demonstrate increased levels of customer satisfaction. By 2007, the OFT should conduct a wide-ranging review of whether the market for new housing was working well for consumers.

It is extremely disappointing that the House Builders Federation has not responded to Kate Barker’s call to put in place a code of practice governing new house sales. I asked the OFT to look into the market. I have been reassured that it is aware of Parliament’s concerns, and of the debates that we had on Second Reading and since, and that it is keeping open the option of a market study, and currently assessing the industry’s response. If the OFT does not look at that, I give the Committee the assurance that we will.

I say to the hon. Members have spoken today that they need to look carefully at the issues on this matter, and assess whether further action is needed. I want those issues to be resolved, which is why I have prompted a Government review of the wide property market, after consulting the Minister for Housing and Planning, my hon. Friend the Member for Pontefract and Castleford. The review will look at regulation and redress across the whole property sector, including lettings. It does not make sense to look at one area in isolation. We need to look at the whole story to ensure that if we take measures in one place, that does not disadvantage the market in the long term for consumers. Simply extending the regulation in stages to agents and property developers without further thought is just plain sloppy. We should apply some intelligent thought to what is appropriate to each area, and co-ordinate it. On the plan to start the work in the summer, officials are in the process of drawing up terms of reference for the work, and are looking at the timescales. We need to target the review into areas where gaps remain in the redress provisions for consumers, although there are sure to be significant areas of consumer detriment. Debates in the House and in another place have already identified issues of particular concern, which will be addressed by the review, including all comments made about the Bill in another place and on the Floor of the House. I have  accepted that there is evidence of concern and have sought to meet that with the officials dealing with the review.

The Bill is not the place to make changes. Part 3 of the Bill amends the Estate Agents Act 1979, which does not cover lettings. Detailed work will need to be done to ensure that all the sections of the Estate Agents Act and secondary legislation made under the Act work better for letting agents and property developers. The Act’s scope is limited specifically to the buying and selling of land, which is clear from the fundamental definition contained within the Act, such as “interest in land” and the duties owed by estate agents, such as information to be given to clients.

Moreover, the Bill implements the recommendations made by the OFT in its report on the estate agency market in England and Wales. That report did not look at the lettings market, or at the market for new-build properties. We have no clear evidence base on which to take action at this stage. Although those markets are closely related, there are significant differences between them, and we need to take that into account in terms of any proposals that we bring forward to the House at a later date. It is also important that we consult properly with industry and stakeholders. I am sure that we agree that if the Government are to take action, it should be based on evidence and, hopefully, a common approach to dealing with the issues that the hon. Member for Richmond Park raised and with which I have total empathy and understanding. I am not trying to put off the date, or avoid the need to do something; I think that we should do it in a more effective and comprehensive way, and the Bill is not the place to do that. I hope, with those assurances, that the hon. Lady will withdraw her amendments. If she presses them to a vote, I will ask my colleagues to reject them.

Photo of Susan Kramer Susan Kramer Shadow Secretary of State for Trade & Industry, Trade & Industry, Shadow Secretary of State, Liberal Democrat Spokesperson (Trade and Industry)

First, I thank the Minister for the assurances that he has just given us, because he has very much strengthened the comments that he made on Second Reading, which is greatly appreciated. What we want to see is a solution to problems, rather than to engage into any kind of grandstanding on the issues. Although I concede that the words that are used in the amendment are rather inelegant, the solution is actually quite elegant. It would have brought those bodies into the redress scheme with relatively minimal effort. There is no use crying over spilt milk by saying that lettings and direct sales were not brought into the concept of the Act from the beginning, which would obviously have been the easiest course of action for everybody and brought about a remedy sooner.

Based on the Minister’s assurances, we shall not press the amendment to a Division. We look forward to the work that I understand will be started in the summer either under the auspices of the OFT or directly by the Government. I look forward even more eagerly to the action that will flow from it—not just a review but actual action to deal with potential abuses. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

I beg to move amendment No. 41, in schedule 6, page 65, line 7, leave out ‘may’ and insert ‘must’.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

With this it will be convenient to discuss amendment No. 42, in schedule 6, page 65,line 19, leave out ‘a’ and insert ‘the’.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

Amendment No. 41 is a fairly simple probing amendment that is intended to ensure that a code of practice has been approved by the OFT in accordance with the criteria set out. Will the Minister clarify the circumstances in which the OFT might wish not to approve a scheme?

Amendment No. 42 is a different matter altogether. The purpose behind it is to establish the case for a single code of practice. Consumers need clarity and simplicity whenever possible, particularly when they are seeking redress. We discussed that earlier in our deliberations. The more uncertainty or complexity, the fewer people will seek, let alone secure, reasonable redress for their grievances.

In discussing redress schemes and ombudsman schemes we have had a lot of discussion about whether there should be one scheme or more. The problem is that if there were one, it would mean scrapping several established schemes. There is already more than one ombudsman in the market, with one in England, one in Scotland and so on. However, what really matters to home buyers is that the principles upon which those schemes are based remain either very similar or preferably the same. That is the principle behind the amendment—to have one code of practice. There might be several ombudsman schemes, as there are now, but they would be based on one clear code. In those circumstances, consumers would be much better placed to understand what would happen and they would therefore have much greater confidence in the system.

The Government argued in another place that best practice could be achieved if several codes existed, but there is no reason why the best codes that are out in the public domain could not be drawn together in a single code. After all, the perspective to consider is not that of the agent, the legislator or the ombudsman. It should be that of the home buyer or home seller. Having several different codes of practice, and several different schemes drawing from them, could lead to considerable confusion and might lower, or at least not help, consumer confidence about how the redress schemes will work. Because we support the redress schemes, we want to ensure that the public have the maximum confidence and understanding of the basis upon which they operate and therefore exactly what they are entitled to expect.

To put my question to the Minister simply, how will consumers benefit from there being more than one code of practice?

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

First, I accept that the amendments are probing; indeed, they were tabled in Grand Committee in another place by Baroness Wilcox and Lord De Mauley. My noble Friend the Parliamentary Under-Secretary explained the effect of the amendments, and I shall do so again to set out the arguments for resisting them.

The OFT will not approve a scheme that does not meet the criteria set out in the Bill. It will also be able to publish guidance about how it will interpret those  criteria, so whether or not there is more than one scheme or code of practice, it is certain that schemes will be able to operate effectively only if they reach the standards required by the regulator.

I wish to explain why I do not support the intention behind the amendments—to require the Government to design a single code of practice that all redress schemes would use to judge the conduct of estate agents. I accept that the intended effect of such a code is to introduce compulsory minimum standards. We have already extensively debated more explicit attempts to introduce positive licensing, so I shall not coverthat ground again. Indeed, we covered a lot of it this morning, when we spoke a lot about what the standards would look like if a scheme was approved and about what they should cover.

I know that this is not the intention, but the amendments could weaken the Bill by creating uncertainty about which code was being referred to. The hon. Member for Hertford and Stortford might come back and say, “We want a single code so that there isn’t any uncertainty,” and he might think that the words in the amendments are plain, but I shall explain what I mean in a moment.

As drafted, the Bill allows an ombudsman to refer to a range of industry guidance documents in coming to a view about the grounds on which a complaint can be made and what standards of behaviour can reasonably be expected in the industry. In previous discussions, we said that the redress scheme covered not only serious complaints—even up to those that could require criminal prosecutions—but complaints about general issues, which might look small on the face of it, but which might involve issues that were very disruptive to the individual’s attempts to buy and sell property. Schemes have therefore been designed to take into account not only breaches of the law per se, but poor practice that arises when services are provided to the consumer. We are trying to maximise the opportunities for the ombudsman to look at the grounds for a complaint to see whether the consumer’s expectations of the estate agent they are complaining about are reasonable.

A number of industry bodies have their own codesof practice or similar documents. The ombudsmanfor estate agents, the National Association of Estate Agents and the Royal Institution of Chartered Surveyors, of which the hon. Member for Hertford and Stortford is, I think, a member, all have codes of practice or rules of conduct, which they expect their members to follow. We see no reason for an ombudsman to look only at one code or for the Government to tell industry which code estate agents should follow and which should fall by the wayside. It is for the regulator to determine such matters.

At the same time, estate agents know that they will risk claims being made against them if they fail to comply with good practice in a general sense and not just as prescribed in one document. That goes back to the point that I made in one of our debates about dealing not only with serious complaints, but with the estate agent’s general conduct towards the client. It is important to bear in mind that a general sense of good practice cannot be laid down in a single document,  because it goes across a whole array of activities carried out by estate agents and their staff.

It is also important to note that the present drafting future-proofs the Bill against future developments. We have had quite a lot of good debates, including this morning, about ensuring that legislation can cope in a fast-changing market place and that changes can be made to secure and maintain consumers’ rights. We are attempting to ensure that potential changes do not make the legislation redundant or out of date or prevent it from quickly transmitting changes in the marketplace to protect the consumer’s interests. Best practice will develop, and new guidance and codes will emerge over future years. It is therefore important not to tie the ombudsman’s hands to a document that will inevitably become out of date.

The Bill’s drafting contains some sophistication to deal with a varied approach to assessing complaints, but the amendments would remove that sophistication. Our approach builds on current practice in the industry, and will ensure, with the approval of high-quality schemes, that consumers have redress for complaints against estate agents who fail to comply with good practice in a general and a specific sense.

With that explanation, I hope that the hon. Member for Hertford and Stortford can accept that we are trying genuinely to meet his objective of ensuring that we have certainty about the high standards in the codes of practice.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform) 4:30 pm, 24th April 2007

The Minister has put forward two central arguments. One is that it is better to have a general code or a range of different documentation against which business may or may not be held to account and that knowledge of such expectations about general conduct is more likely to raise standards. That may be the natural perspective from the Government’s point of view, and I understand the belief behind it—it may be proved to be true—but there is a difficulty. A lot of smaller businesses—most agencies, particularly the law-abiding ones that are trying to do the right thing, are smaller businesses—will be anxious to ensure that they are crystal clear about their obligations. If they cannot identify the things that they are required to achieve by consulting a single source, there is a weakness in the suggestion that they will know what their obligations are.

The difficulty is that there are two different perspectives. The one of Whitehall is understandable; it looks down at the market and says, “We want to encourage this general conduct and it is advantageous to have available to us the option of a range of different documents and rules.” However, I am keen to ensure that the majority of businesses in the market understand what is required of them. Preferably, they should be able to find that out from a single source—its information might come from a range of contributors—so that they know where they stand and what is expected of them. Then they will also know that if they are held to account they will be able to demonstrate what they have done correctly. The lack of clarity worries me.

The future-proofing element has some merit, given the way in which the Bill is drafted. I would have preferred to see in the first instance a set of schemes  that are based on the fact that there is currently a range of redress schemes, but which have the potential to be based on one. The legislation could make it possible to base the process on a common set of standards so that the industry knows where it stands and so does the house buyer or seller.

The Minister has done his best to put the Government’s view. I think that he and I have the same end aim, but I am not convinced that he has addressed my concerns, so I wish to press amendment No. 42 toa vote.

I beg to ask leave to withdraw amendment No. 41.

Amendment, by leave, withdrawn.

Amendment proposed: No. 42, in schedule 6, page 65, line 19, leave out ‘a’ and insert ‘the’.—[Mr. Prisk.]

Question put, That the amendment be made:—

The Committee divided: Ayes 6, Noes 9.

Division number 1 Nimrod Review — Statement — Schedule 6

Aye: 7 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

I beg to move amendment No. 26, in schedule 6, page 68, line 25, leave out ‘£1,000’ and insert ‘£10,000’.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

With this we may discuss the following: Amendment No. 27, in schedule 6, page 68, line 25, leave out ‘£1,000’ and insert ‘£3,000’.

Amendment No. 28, in schedule 6, page 70, line 31, at end add—

‘5 In section 3(8) (orders by Director General of Fair Trading) for “the statutory maximum” substitute “£10,000”.’.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

The amendment stands in my name and that of my hon. Friend the Member for Richmond Park. All the amendments here—certainly amendments Nos. 26 and 27—relate to the penalty for not being a member of a redress scheme.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

May I just correct the hon. Lady? In fact, amendment No. 28 does not relate to redress schemes; it relates to something else.

Photo of Steve Pound Steve Pound Labour, Ealing North

He has led you astray.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

The fault was entirely mine.

Amendment No. 26 seeks to increase the maximum fine from the Government’s suggested amount of £1,000 to £10,000. It is noteworthy and commendable that the Government have already moved from a £500 amount, which was originally suggested in another place. However, we are discussing the maximum fine that can be imposed; it is not the usual fine. We are seeking to put a benchmark so that, where there are companies serially infringing, occasion after occasion, the amount of the fine can escalate to ensure that it is effective in its intention, which is to guarantee that an organisation is part of a redress scheme.

We would like to ensure that, although the usual fine will not necessarily be £10,000, there will at least be the ability to raise the fine against vexatious organisations, to make sure that the fine really bites on those organisations.

Amendment No. 27, which was tabled by the Conservatives, seeks to raise the amount from £1,000 to £3,000. I must confess that I am slightly confused, because, as I understand it, the amount released to the press was £10,000. I am intrigued to know quite what has happened.

Photo of Susan Kramer Susan Kramer Shadow Secretary of State for Trade & Industry, Trade & Industry, Shadow Secretary of State, Liberal Democrat Spokesperson (Trade and Industry)

Perhaps my hon. Friend might like some clarification. I think that the press release from the Conservatives was about on-the-spot fines of £10,000 for non-membership of a redress scheme.

Photo of Tobias Ellwood Tobias Ellwood Opposition Whip (Commons)

On a point of order, Mr. Weir. We are here to discuss amendment No. 26, not to discuss a press release that the Conservatives may or may not have sent out.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

I think that it was a reasonable point to make in the course of a debate, as long as we do not dwell on it too long.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

I certainly would not dwell on such an issue. Suffice it to say that the Conservatives and the Liberal Democrats feel that the maximum fine is not sufficient and £1,000 will not do the job as a maximum fine when there is a serial offender.

I would like to speak briefly about amendmentNo. 28, which was also tabled by the Tories. It relates to the powers of the director general of the Office of Fair Trading to fine rogue estate agents. As I understand it, the statutory maximum fine at the moment is £5,000 and the amendment would raise it to £10,000. However, as I understand it, by putting a figure on the amount primary legislation would be needed to ensure that it keeps up with inflation.

Photo of Steve Pound Steve Pound Labour, Ealing North

I am grateful, as ever, to the hon. Lady. Could she just clarify a point for me quickly? I am tempted to support amendment No. 26. The  wording in the Bill says “not exceeding £1,000”. She is proposing to delete “£1,000” and insert “£10,000”. Thus, is she proposing that it should say “not exceeding £10,000”, on the basis that the fine could be six pence halfpenny, or £100, or any sum? Is she proposing the same wording, “not exceeding”?

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

I am grateful to the hon. Gentleman. I am pleased to clarify that, in amendment No. 26, that is the wording that we are seeking to include—“not exceeding £10,000”. That would give sufficient leeway for on-the-spot fines to relate to the seriousness of the offence, unlike amendment No. 28, which was tabled by the Conservatives. While we believe that it is important to have large possible fines for rogue estate agents, there may come a point when flexibility is required. As circumstances change and as inflation may or not increase, depending on which Government we end up with after the next general election, primary legislation may be needed to keep up with this. We are not minded to support amendment No. 28. We feel that £10,000 is the appropriate maximum amount which will give plenty of leeway to make an appropriate fine to levy on individual companies who are not members of the redress scheme.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform) 4:45 pm, 24th April 2007

The three amendments relate to fines, but in different circumstances. That is the point to bear in mind. One set of fines relates to breaches of the rules of the redress schemes, which come under this part of the Bill, and one fine—the £10,000 in amendmentNo. 28—relates to breaches under the OFT’s powers, which is a separate point. I hope that that clarifies the matter because it can be confusing.

Amendment No. 27 would increase the limit for the fine for not being part of the redress scheme to £3,000. The Government propose that every estate agent, or everyone training an estate agent, must be part of such a scheme. The Government’s desire to require agents to belong to the scheme is very welcome. We strongly support it. However, the fine that was originally proposed was just £500. That is inadequate. In the other place it was increased to £1,000 following an amendment by Lord Dubs, a Labour peer. The Government accepted that after some debate.

Given that the average estate agent’s fee is now £3,000—obviously in London and the south-east it will be higher than that—we feel that the fine of £1,000 is still inadequate. It needs to be higher. If the Bill is to send the right signal to that minority who give estate agency a bad name and who flout the rules, it needs to focus their minds on the fact that if they breach the redress proposals they will be fined an amount that they will notice. That is why we propose a fine of £3,000.

What is the £10,000 about? Amendment No. 28 would impose a large, maximum fine for those people who have been found to have flouted the laws under section 3 of the Estates Agents Act 1979, which the Bill seeks to amend. As the hon. Member for Solihull pointed out, the fine is currently £5,000. Section 3 of the Act provides the OFT with the ability to prohibit someone from trading as an estate agent. The procedure that the director-general of the OFT follows  is quite clear and includes a number of investigation and warning points. It is therefore separate from the issue of redress schemes.

All hon. Members will be aware of some of the appalling cases of rogue estate agents who have cheated the public in a number of different ways over the years. They are, of course, a minority, but their activities have resulted in people being robbed of savings, being caused considerable heartache and, in many cases, being subject to serious financial loss. Recently the media have highlighted a number of different cases, and we saw them on “Panorama”. The Evening Standard has also been vigilant in highlighting a series of cases where people have been cheated and where practices have been completely unacceptable.

It is clear that the OFT’s powers need strengthening and that a clear signal must be sent that rogue agents will be barred and face financial penalties. As we know, the Government are proposing limited increases in the OFT’s and trading standards officers’ powers. That is fine, but it will not necessarily be noticed by the real rogues, given that, as I said, the average estate agent’s fee is £3,000.

Photo of Steve Pound Steve Pound Labour, Ealing North

I am rendered almost speechless by the distance that the Conservative party has moved from the laissez-faire days of yore. Does the hon. Gentleman anticipate tariff bands for varying offences, and if so, will he indicate where he feels that the tariff bands should be set?

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

I suspect that the hon. Gentleman knows that there are a range of fines. The maximum for a summary conviction stands at £5,000—I think that that is level 5 or 4. I would guess that the Minister has that emblazoned on his memory.

Photo of Steve Pound Steve Pound Labour, Ealing North

He will have in a minute.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

Yes, he will have it emblazoned in his hand in a minute.

The fines rise through a series of tiers. A £10,000 maximum fine would send a simple but clear message to the rogues. Decent agents have nothing to fear from this because—remember—the fine would come only when someone found to have broken the rules has been investigated by the OFT and barred from trading as an estate agent. We argue that point because the kind of person who becomes a rogue estate agent is, frankly, also the kind of person who, having been barred by the director-general of the OFT, will go on to be a rogue car dealer, plumber or whatever it may be.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

I would not wish to stretch the number of rogue vocations any further.

Although it is important that such an individual can be barred from estate agency, we must send them a clearer signal that deters them from coming into the business in the first place. Otherwise, they will come into it, nail or scam somebody, and then move on to something else. We need to send them a clear financial signal.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

The hon. Gentleman is talking about an individual who comes into estate agency and then enters a number of other industries. However, I remind him of the discussion that we had this morning: requiring people to be qualified and have the appropriate amount of insurance surely would act as a barrier to entry for someone purported to be a rogue estate agent. The scenario that he is talking about, therefore, would not occur so easily.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

I admire the hon. Lady’s optimism about the kind of people with whom we are dealing. They will happily get around the qualification procedures that we discussed. It is not an issue of confidence, but of ethics, as I said. I think, therefore, that we need to send them the clearest financial signal that if they are found guilty by the director-general, in the way that I have described, not only will they be barred from estate agency, but they will pay a fine that they will note. I hope that that would then prove to be a deterrent and encourage many of them not to trade in the industry. As I said, it is important that they be barred, which is the case under rules that the Government have in law. However, it is just as important that we hit them where it really hurts—the wallet.

Photo of Ben Wallace Ben Wallace Conservative, Lancaster and Wyre

I want clarification on the penalty notices. Will they have the same effect as we have seen elsewhere? One of the problems is often the record-keeping of the officers or those who give them out. Certainly, we have seen that in the police environment: people have been given them for shoplifting, but that has not always been recorded, so the details on some serial offenders have not been stored or logged and they have not been traced. Perhaps I missed it—I am sure that I have—but will schedule 6 provide that persons in receipt of a notice are logged with an authority or passed on to the OFT, so that they can be traced if, for example, they move from an area covered by a trading standard office in London and set up shop in Lancashire? That is important if people are to have faith in the penalty notice system.

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

This has been an interesting little debate. Mirror, mirror on the wall, who’s the toughest of them all? The Liberal Democrats and the Conservatives are vying over who really is the friend of the consumer and, as a consequence, saying that the Government are soft. Let us remind people that this is the first Government ever to take action in this sector. We have introduced redress, which, as it currently stands, is established for the scheme at up to £25,000; access and new powers for the OFT and for trading standards officers, including the ability to prevent companies and their employees from working in the sector; and the ability and capacity of the OFT working on the ground with trading standards officers to take immediate action when they receive a complaint. We are discussing a not inconsiderable resource for the consumer.

As the hon. Member for Hertford and Stortford said, one amendment deals with the failure to join a redress scheme, and another deals with banning orders and failure to comply with a banning order. Let us remember that a banning order is issued when someone  has committed a serious offence, perhaps even a criminal offence, and at that point action has already been taken. I shall return to why that is important.

Amendments Nos. 26 and 27 focus on the level of the penalty charge, but the charge is not the full enforcement story. We must not get penalty charges out of proportion. They are a trigger point for far tougher potential sanctions. Ultimately, estate agents face the prospect of being banned by the OFT, following an investigation, as a result of not belonging to a redress scheme. That is a very serious sanction, and, to most estate agents, that deterrent will be worth far more than £3,000 or £10,000. It will mean the total loss of their business, revenue and livelihood.

A penalty charge is a quick and simple deterrent that gives local authority trading standards officers a quick and simple sanction against estate agents who arenot members of a redress scheme. It is important to remember that the £1,000 charge can be repeated again and again—it is not a one-off charge. It is an incentive, is it not? If someone wants to snub their nose at the consumer or at a law designed to clean up the activities of people in this sector, it will be a very expensive operation indeed. Not only will they have a financial loss again and again, but they could lose their capacity to operate as a business.

The penalty charge can be repeated every day, if necessary. Let me give an example. If someone makesa complaint to a trading standards officer, it is immediately logged. If it is found that the estate agent is not a member of a redress scheme, they will face a potential fine of £1,000. No doubt they will be informed that they are in breach of the law and that they should get themselves registered. If the trading standards officer checks the following day—they will be able to identify when the agent has registered—and the agent still has not registered, another £1,000 can be charged. The trading standards officer cannot vary the amount. They cannot say, “I will give you a second chance this time and fine you only £500.” That will not happen. The fine will be £1,000, £1,000, £1,000. It will be repeated and repeated, if necessary.

Hon. Members have not realised the potential ofthe fine. If a trading standards officer is faced with a blatant and continuing breach, he can inflict a considerable financial penalty, but, crucially, it is left to trading standards officers to use their judgment and discretion in the light of the circumstances.

It is expected that the penalty will be higher than the cost of membership of an approved scheme. Let me explain the process in a bit more detail. When an estate agent is found to be in breach of their duty to belong to an approved redress scheme, the trading standards officer may issue them with a penalty charge, currently laid out in the regulations at £1,000. Should the agent fail to join an approved scheme quickly, the trading standards officer can continue to issue penalty charges. At the same time, the trading standards officer will be under a duty—this goes back to the point that the hon. Member for Lancaster and Wyre rightly made about whether there is an audit trail; this is just as important—to inform the OFT about any estate agent who is not a member of a redress scheme. If an estate agent continues not to belong to a scheme, the OFT  will be able to consider the fitness of the estate agent to practise and will be able to issue a warning order, which could ultimately be followed by banning the agent from practising. In sufficiently serious cases, the OFT could bypass the warning order process and decide to go straight to banning the agent.

The Committee can begin to see the story; it is more than just a matter of £1,000. Any estate agent, individually or collectively, who decides not to comply is a loser from the moment it takes that decision, anda complete loser if it continues not to comply. In addition, under the Enterprise Act enforcers can take action such as seeking injunctions from the High Court against estate agents prohibiting infringements under the Estate Agents Act. Therefore, the penalty charge itself is only part of the process, which is why we should not over-exaggerate the importance of the figure, despite what I said about it being charged time and again, if necessary.

There are many advantages to having a quick and simple sanction, issued with minimum bureaucracy, but it also has limitations. The benefits offered by having a simple civil penalty process are greater than those offered by a penalty charge regime that has a range of fines with a higher maximum. Case law shows that where high fines can be levied individual circumstances should be taken into account to ensure that the fine imposed in a particular case is not excessive—a necessarily more bureaucratic and time-consuming process. It gives the opportunity for the rogue elements to string things out and continue in business until they come before a court. With a £1,000 fine they pay up—end of story. If they do not pay up, there is another £1,000 fine. Each time it happens the OFT is notified and it can order an immediate ban.

Photo of Ben Wallace Ben Wallace Conservative, Lancaster and Wyre 5:00 pm, 24th April 2007

I am grateful for the Minister’s clarification of the proposal. I am confident that we are on the road to solving the problem that I raised.

How broad can the OFT be in naming individuals? We are only too aware, often through watchdog programmes, that although the salesman may be caught out the directors of companies stay at arm’s length and may reappear in a new company. How far can the OFT go in banning individuals or issuing a penalty charge notice to ensure that those people who take advantage of new, young salesmen are caught and held to account?

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

When you are banned, you are banned. If someone works for estate agent A, they cannot just pop next door and work for estate B. They are banned for a specific purpose, because they are not fit. If the company is closed, it is because it is not fit. It is important to make that clear and that is why it is such a total loss if people decide to defy the law and refuse to put into place what is required by the enforcement officers—the OFT or the trading standards officer.

Photo of Ben Wallace Ben Wallace Conservative, Lancaster and Wyre

I understand what the Minister is saying with respect to individuals, but directors of companies is a broader matter. If we are to close down   on an industry abuse, directors, no matter how far removed, must have some corporate responsibility. If a company is closed down, do all the directors have a tag against their names? How far can that go?

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

As the Bill shows, if individuals are culpable they will have the full letter of the law against them, as will the organisation concerned. I return to a point that the hon. Gentleman made at a previous sitting, that other legislation comes into play if directors are operating a business in an unfit way. The hon. Gentleman does not want a junior member of staff to carry the can and I agree with him. There was a television programme a few months ago in which an estate agent—I will not mention any names, but I think we all know who it is—was exposed for very dodgy practices, which they will get done for under this Bill. The excuse was that one rogue employee was to blame, and he was sacked. In those circumstances the employee and the employer would have been liable for those breaches under this Bill and that is critical. We cannot have people using their power as an employer to make an employee carry out dodgy activities on their behalf and walk away from it.

To be fair, there will be occasions on which someone is operating in a way that is unacceptable and there is a breach, and the employer may not know about that. That is why both situations are covered. Action has to be evidence based. I hope that that explanation helps the hon. Member for Hertford and Stortford.

£3,000 is not a suitable amount for a trading standards officer to walk in off the street and levy against an estate agent, and £10,000 even less so. That sort of levy would appropriately by imposed only by a court or tribunal where the penalty charge could be varied. This penalty charge will be the same amount every time—£1,000. That is already at the high endof the civil penalties scale. No environmental civil penalties exceed £500, and £1,000 is considerably higher than the £500 referred to in the Housing Act 2004. The hon. Member for Hertford and Stortford is right. £5,000 is level 5 under the Magistrates’ Courts Act 1980, I have been reliably informed—not that I have had to face that myself, by the way.

Following careful consideration of the arguments, we have already accepted an amendment to the Bill to increase the maximum level to £1,000, as the hon. Member for Solihull said, but going any further would be unfair. Let us remember that the real sanction, after a proper and fair process has been conducted, is that an estate agent can be banned if found unfit following non-membership of a redress scheme.

Amendment No. 28 is intended to increase to £10,000 the maximum fine that can be imposed by a magistrate on an estate agent who has breached a banning order. In my view, if the case is serious enough to warrant a £10,000 fine, it should be dealt with by the Crown court, where there is no limit on the fine that can be imposed. If we are talking about deterrence, that is where deterrence should lie. If the case is serious enough for a £10,000 fine to be imposed, it should go to the Crown court, because we are talking about a very serious breach with that level of fine.

The amendment is technically in the wrong place. I do not say that for clever dick purposes. It would fit better in clause 55, which relates to prohibition orders.  However, the amendment enables me to explain what we need to do. At the moment, if a person is considered unfit to act as an estate agent and is banned by the Office of Fair Trading from doing so but continues to practise, one of two things can happen. They can be convicted in a magistrates court and required to pay a fine not exceeding the statutory maximum, which is currently £5,000, so a £10,000 fine could not be imposed in those circumstances, because the law sets out that the maximum that can be levied is £5,000. In more serious cases, defendants are tried in the Crown court, where they are liable to pay an unlimited fine, so if we are really looking for a return in these cases, that is where they should go—the fine is unlimited.

Magistrates have the power to send a case to the Crown court for sentencing if, after hearing the evidence, they decide that the offence was so serious that a higher fine should be imposed than they have the power to inflict. We are covered in two ways. If a case goes to the magistrates court and the evidence is such that the magistrates decide that the level of fine that they have powers to levy is insufficient, they can send it to the Crown court for sentencing. In my view, the types of case that the hon. Member for Hertford and Stortford rightly highlighted should in any event go to the Crown court, where there is not a £10,000 fine, but an unlimited fine. The Government are not being soft on the issue—far from it.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

But in the nature of the legislation at the moment, that is not necessarily an option that is available.

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

It is. In all circumstances, it is. Let me explain what is changing. This takes us back to the debate that we had earlier about the new powers of access to records and the maintenance of records. Why is that so important? It provides an audit trail—an evidence trail—where it is difficult at the moment for that to happen. If people do not maintain the evidence and audit trail, that is a breach in itself. So I say to anyone who thinks that they will be clever enough not to keep the records so that they do not face a £5,000, £10,000 or unlimited fine, “Forget it, pal”, as they say where I come from. That is an offence in itself, which could lead to a banning order for them and their company. Any attempt to undermine the capacity to represent fairly both the consumer and the good businesses in this marketplace is doomed to failure, in my view.

I am glad that the amendments were tabled, in that, although I said at the beginning that there was a competition to see who was the toughest, in reality, if there is a toughness in this, I hope that I have explained that it comes from the Government in how we have set this out.

I thank hon. Members for their amendments, and, given the opportunity, I hope to explain that we are not operating a minimalist approach. The proposal is to put in context the overall strategy, structure and process to be used by the Office of Fair Trading on the one hand and trading standards officers on the other, and their interrelationship as regards issuing on-the-spot fines, as well as in their dealings with the magistrates court and higher courts, if required. If we put all those building blocks together, we will see that our position is significantly strengthened as regards dealing with rogue estate agents.

Moving on, section 53(8) of the Estate Agents Act—[Interruption.] I cannot read my notes. [Interruption.] I am sorry, it is section 3(8) of the Act. I heard a voice from God, and God is a female. [Laughter.] That will confuse the Liberal Democrats. I will be in trouble with the Church of England, the Catholic Church and everyone else.

Section 3(8) provides that an estate agent whofails to comply with a banning order can be convicted in the Crown court or the magistrates court, whichjust confirms what I have been saying for the past10 minutes. [Interruption.] It is good to have God on your side. I hope that my explanation helps to convince hon. Members for the Conservatives and Liberal Democrats that we are not going soft—far from it. The sanctions here are significant.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

This has been an extremely useful and wide-ranging debate and, before I go on to speak to our amendment, I wish to comment on the remarksof the hon. Member for Lancaster and Wyre. The Minister says that, eventually, a rogue estate agent can be banned, and that point is accepted. However, the hon. Gentleman raises a good question about who is covered by that ban. It is important that we have good, strong legislation in place to deal with directors who are serial offenders. That reminds me of work that we are considering at the moment to do with the serial liquidators of small businesses. Not only are they a pest to the industry, but they have caused the downfall of many of the small businesses that supply them and of their customers, who deserve protection. I hope that this will introduce a debate that we can take forwards.

The hon. Member for Hertford and Stortford has proposed his amendment for a £3,000 maximum penalty, and he rightly says that that represents one deal. For some deals done in south-east England, that may be less than is appropriate. The reason why my hon. Friend the Member for Richmond Park (Susan Kramer) and I put forward the figure of £10,000 is that we feel that such a sum would be a genuine sanction for a serial offender.

Photo of Steve Pound Steve Pound Labour, Ealing North

One thing emblazoned on all our minds is the parliamentary answer given by my rt. hon. Friend the Minister on 23 April to written question 131784 from the hon. Member for Richmond Park. The Minister stated:

“In 2006, the Office of Fair Trading (OFT) received 210 complaints about the conduct of estate agents.”—[Official Report, 23 April 2007; Vol. 459, c. 946W.]

He went on to say that 117 investigations were carried out, which led to three warning orders and five prohibition orders. Does the hon. Lady agree that what she is proposing may act as a deterrent as well as a sanction?

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

The hon. Member for Ealing, North makes another valuable point, and I agree. What surprises and interests me about the figures is how few complaints there are, given the prevalence of what certain hon. Members in this room and the general public would consider to be the misleading, inappropriate and downright illegal activities of some estate agents. I thank him for that.

The Minister said that this is a quick and simple sanction if an estate agent is not a member of a redress scheme. I totally endorse those words. However, I draw his attention to the wording of the Bill, which says that it is “not exceeding”, so there is no suggestion that £10,000 would be the standard fine; it is the maximum amount that could be levied. It gives flexibility so that, if a small estate agency has not got around to doing the job, you could levy a small fine; if you are dealing with a large estate agency in the south-east of England that is a serial offender, then you have the option to levy a higher fine.

Photo of Ian McCartney Ian McCartney Minister of State (Trade & Investment), Department of Trade and Industry, Minister of State (Trade & Investment), Foreign & Commonwealth Office 5:15 pm, 24th April 2007

Can the hon. Lady explain to me, as a consumer, why, if estate agency A treats me badly and is subject to the law—but unfortunately for me, this estate agency, unlike estate agency B, is a small business, even though it has been crooked and has done me in—because it is a small business, it would not suffer the detriment that business B would have suffered?

This is where you enter the complicated world of determining conduct on the basis of size when it should be determined according to compliance with the requirements of the redress scheme. You join the redress scheme not on the basis of whether you are a large or a small company; you join the redress scheme for the simple reason that, if something goes wrong, the consumer is protected. The level of protection should not be reduced if you use a small company. This would put good small companies out of business. Consumers would go to a large company in case something went wrong. This would cause a real block in the marketplace. Because a company is small, it does not follow that it is a bad company. However, when they do not comply, it is not the size that matters, it is the type of non-compliance. The rights of the consumer should not depend on the size of the company.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

The Minister makes an important point that it is not size that matters in this situation. In some circumstances, I certainly could not agree with him more. Throughout our discussion today, he has talked about the need for flexibility. I would certainly endorse that. In this circumstance, the need for flexibility is nowhere greater than where there is a range of different organisations; there are very large ones and very small ones. Therefore, let the punishment fit the crime and allow the person who is imposing this fine to have that flexibility. With that, Mr. Weir, my colleague and I wish to press this to a vote.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

I shall do my best to make no remarks about height, size, or anything else as long as this debate continues.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

Thank you very much. It is always nice to have the support of my hon. Friend. I say that in order to ensure that his comment appears on the record.

I moved amendments Nos. 27 and 28. I would liketo go back in order to address the arguments ofthe Minister. Amendment No. 27 relates to redress schemes. The principle is the same as that of the Liberal Democrat amendments. That is, while I fully   recognise that the £1,000 fine is a fixed figure and can be levied on a number of occasions and is therefore effective in that context, I do not think that it addresses the central point that, in the context of the deals that an agent does each day—the average is £3,000—£1,000 is a small figure to many of them. This is in the context of redress schemes. If, in a morning, an agency practice does six deals, that is £18,000. If there is a £1,000 fine, some agents—the rogues about whom we are concerned—will take a risk assessment in their own minds as to whether it is worth breaching the rule. I do not approve of that—I totally disapprove of it—but they will make that calculation. I therefore do not believe that £1,000 is enough for redress schemes. I am anxious that £10,000 is too much, but we want to get on to the issue of rogue agents with banning orders.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

The hon. Gentleman has just said that in a single morning an estate agent may well make £18,000, so if the maximum—again I emphasise that word—is only £3,000, does the hon. Gentleman not feel that that will still not be sufficient to concentrate the mind of a rogue estate agent?

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

We are dealing with redress schemes, and although I feel that £1,000 is probably too small, to leap to £10,000 for breaching a redress scheme notice seems disproportionate. As the Minister has made clear, it is a fixed point rather than a maximum. It would be a maximum under amendment No. 28.

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

The trading standards officers levy a penalty charge for every case dealt with, and the redress scheme is intended to be complied with across all customer bases. If there were six, 20 or 30 cases a levy could be imposed in respect of each of them, so it would be £1,000 multiplied by x number of cases. It would be a very expensive process for somebody who did not comply. The whole point is to ensure that they comply. Why? Because if something goes wrong, the redress scheme protects the consumer in all circumstances. That is why we want agents to comply, and the scheme provides a really good incentive. The hon. Member for Hertford and Stortford’s proposal would create the possibility of a charge of £3,000 multiplied by 30, and under the hon. Member for Solihull’s proposal it could be £10,000 multiplied by 30.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

That is an interesting intervention and mirrors one that was made in the House of Lords when the Government were defending a level of £500 before accepting a change to £1,000. I do not believe that that will be any more effective, because in most instances there will be one or two cases. There could be extraordinarily exceptional circumstances in which30 cases happen in a morning, but I think it unlikely.

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

The point that I am making is not insubstantial. The redress scheme will cover all the client base, so if an agent is not in it, his client base will not be covered.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

I remain of the view that the £1,000 fine will not achieve the function that we want, of making it crystal clear that there is a sharp financial deterrent. The figure of £1,000 will be in the rogues’ minds; the  fact that there are multiple opportunities will not. I feel that £1,000 is inadequate, and I shall press to a Division amendment No. 27 on raising that figure to £3,000.

Amendment No. 28 relates to banning orders. Again, deterrence is at the heart of the issue. The Minister rightly said that at the very end of the process there is the opportunity to go to the High Court, but the frequency with which that happens is pretty limited. I come back to the argument about deterrence. The director general of the Office of Fair Trading has the substantial power to stop one trading as an agent. That is an important power and one that we support.

We are considering here not the redress scheme but someone who has got to the point of having a banning order. As I mentioned earlier, I am concerned here about the kind of person who then pops up in other vocations—I can put it no more kindly than that—and is quite prepared to twist the rules. I am keen to deter such people from coming into the market in the first place. While the ability to remove them from an industry once they have broken the rules is important, it would be just as important and possibly more of a deterrent if we could say to them, “If you come into this industry and bend the rules and break the practices, not only will we bar you from this industry, we will fine you £10,000.” That would be an important message to send, and it is why I shall also press amendment No. 28 to a Division.

Question put:—That the amendment be made.

The Committee divided: Ayes 2, Noes 13.

Division number 3 Nimrod Review — Statement — Schedule 6

Aye: 2 MPs

No: 13 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Amendment proposed: No. 27, in schedule 6, page 68, line 25, leave out ‘£1,000’ and insert ‘£3,000’.—[Mr. Prisk.]

The Committee divided: Ayes 6, Noes 9.

Division number 4 Nimrod Review — Statement — Schedule 6

Aye: 6 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Amendment proposed: No. 28, in schedule 6, page 70, line 31, at end add—

‘5 In section 3(8) (orders by Director General of Fair Trading) for “the statutory maximum” substitute “£10,000”.’. —[Mr. Prisk.]

The Committee divided: Ayes 4, Noes 9.

Division number 5 Nimrod Review — Statement — Schedule 6

Aye: 4 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Schedule 6 agreed to.

Clauses 54 to 57 ordered to stand part of the Bill.

Clause 58 ordered to stand part of the Bill.