Motorway Building (Compensation)

– in Westminster Hall at 4:00 pm on 14th December 2005.

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Photo of David Heyes David Heyes Labour, Ashton-under-Lyne 4:00 pm, 14th December 2005

I am grateful to have been granted this Adjournment debate on a matter that has had an impact on many hundreds of my constituents and, I suspect, many thousands of others throughout the country—people who live near newly constructed highways, and who should be entitled to financial compensation under the law.

In October 2000, the long-awaited and much-needed final section of the M60 motorway opened to complete the missing link in the Manchester outer ring road. The motorway runs right through the heart of my constituency, between junctions 22 and 23. The road has transformed communications on the eastern side of the Greater Manchester conurbation, and we are seeing some real economic regeneration benefits in such areas as Hollinwood junction and Ashton Moss.

The opening of the motorway came as a great relief to many of my constituents, some of whom had waited more than 40 years since plans were first published. During that time, the area suffered greatly from the effects of blight, and during the five-year construction period, people suffered even more from the consequent noise, dust, dirt and traffic disruption.

Most significantly, once the motorway was opened, people faced the further consequence of the loss of property values as a result of their proximity to the new road. It came as good news to thousands of local residents to discover that under part 1 of the Land Compensation Act 1973 they were at last to qualify for some financial compensation.

I should declare an interest as I live close to the new motorway. Potentially, like so many of my constituents, I shall be entitled to compensation under the 1973 Act. We became aware of our entitlement because of a widely circulated Highways Agency leaflet telling us about the scheme and what we needed to do to pursue a claim. The leaflet includes these words:

"If you have employed an agent and your claim is successful then the Highways Agency will also pay their reasonable costs, as agreed by the valuer".

For many people, the prospect of making a claim seemed daunting. However, in the run up to the motorway opening and immediately after, people in the affected area started to receive letters from firms of chartered surveyors offering to process their claims. All stated that because the Highways Agency would pay a fee to the agent, there would be no charge for the service. Understandably, most residents signed up with the agents, and I am aware of many who have received their compensation and are satisfied with the surveyors who acted on their behalf.

I first became aware in August of the problems that I want to outline, when a constituent complained to me about the chartered surveyor who was acting on his behalf. The surveyor wrote to him in April 2003, assuring him that

"there will be no cost to you for our services whatever the outcome."

The phrase was in bold type, and it was the only part of the letter emphasised in that way. A subsequent letter in May 2003 said that the agent was

"pleased to confirm that our costs will be paid by the compensating authority".

Both letters were written in reassuring and accessible language, and, understandably, my constituent felt comfortable engaging the professional services of a firm of chartered surveyors to pursue his claim free of charge.

I shall fast forward almost two years to January this year when my constituent received another letter from his agent advising that he was pleased to report that the compensating authority had made an offer of £1,000 to settle his claim. However, further in the letter came the bad news, and I shall read some key extracts. The surveyor's third letter says:

"You will recall that in previous correspondence we stated that the compensating authority are obliged to pay our reasonable costs."

In fact, in the first two letters, there was no mention of "reasonable costs", although it is used in the Highways Agency literature. The surveyor's letter continues:

"Unfortunately, we have not been able to agree our fee with the compensating authority for the work that we have carried out on your behalf. The reason for this is that the Highways Agency has withdrawn from a provisional agreement made with them and their valuation advisers last September."

The letter continues to allege that the Highways Agency had refused to meet the agents to discuss the issue, and offers the client three options. The first option is:

"To refer the matter to the Land Tribunal for determination. Although it is possible to make the application yourself we would recommend that you take appropriate legal advice as this can be a costly legal process and as with all such references the costs involved are not necessarily recoverable even if the reference is successful."

That is a change from the reassuring and simple language of the initial letters to a much more technical style. Strangely, that so-called option refers to determination; yet the beginning of the letter suggests that the Highways Agency has already made the offer of a settlement figure. Even stranger, elsewhere in the same letter the agent refers to

"significant risks involved in making such a reference" to the Land Tribunal, and cautions against that course of action.

The second option is for the client to wait until the fee negotiations are concluded. However, the agent warns that:

"Unfortunately not only is there little prospect of reaching agreement with the Highways Agency within the next few months, it may not be possible to reach agreement through negotiation and therefore the dispute may remain unresolved until it is determined through legal action."

The third and final option offered to my constituent was:

"To make a contribution towards the difference between the amount which the Highways Agency are prepared to pay and the costs we have incurred. As a valued client we are not asking you to pay the full amount."

In this case, the amount requested was £50, although I am now aware of other cases where the amount was much greater.

My constituent found none of the options in that letter to be reasonable. However, he felt that he had no choice but to pay the additional fee, being left with the clear impression that he might never get the compensation if the Highways Agency and the agent did not reach an agreement. Faced with Hobson's choice—that is, no real choice at all—my constituent reluctantly paid up.

In March 2005 the Highways Agency wrote to my constituent, confirming the amount of compensation and asking him to complete and sign an acceptance form. They also advised that his agent would be paid £326.65 for representing him. This infuriated my constituent, who wrote to the agent on his own behalf, and on behalf of three neighbours, saying:

"After studying item three of your January letter . . . we wrongly assumed that we would have to pay this £50 fee before you would take further action on our behalf."

He also pointed out that neighbours who had refused to pay that extra fee were told that it would be waived, and that they received their settlement at the same time as people who did pay. He correctly states that he was never told that the Highways Agency would pay the agent the fee of £326.65, and therefore requested a refund of his own £50 fee, and those of his three neighbours—who are, incidentally, all elderly widows.

Let me emphasise the point. That means a charge of £376.65 for negotiating a claim valued at only £1,000. Even at that stage, my constituent did not feel the need to turn to his MP. By August, he had written a further two letters, but had had no response other than a holding letter in July, advising that the person he had written to was on leave and would respond on his return two weeks later. As of today, my constituent has still not had the courtesy of a response, and has certainly not had his £50 refunded.

I agree wholeheartedly with my constituent that the three choices offered to him were not really choices at all. As I said earlier, it just so happens that my own home is close to the M60 and I am likely to be eligible for compensation under the scheme. Like my constituent, I received the first two standard letters from the same firm of chartered surveyors, reassuring me that it would act on my behalf at no cost. As it is a member of the respected Royal Institution of Chartered Surveyors, I, like so many of my constituents, put my trust in it.

I, too, have since received the third letter offering me the same three options. I replied making it clear that I had no intention of paying the extra fee and that I would hold the firm to our original agreement. I also challenged that practice on behalf of my constituents. Unlike them, I did receive a response—in fact, a rather swift and lengthy one—from the senior partner in the firm. He told me that

"it is true that in some instances we have waived our request for a contribution".

He also said:

"If none of our clients paid a contribution we would not be in business today, however if the majority pay then we can occasionally afford to waive the contribution."

He offered to waive it in my own case. Needless to say, I would not contemplate accepting that offer while many of my constituents have felt obliged to pay. Indeed, I now have no intention of progressing my own claim until a satisfactory conclusion is reached on the matter.

Although there are several firms acting as agents in the M60 compensation process, I am aware of only two that have requested additional fees from clients. They are Thomson Broadbent of Wellingborough, which is acting on my behalf and that of my constituent, and, to a lesser extent, the Davies Partnership of Ledbury. That calls into question the claim that Thomson Broadbent would go out of business if it was not paid the additional fee by most of its clients. Other chartered surveyors are dispensing their duty to clients in good faith, consistent with their original offer of representation free of any charge to the client.

Since August, I have pursued a number of avenues in relation to this matter. I suspected that the few cases of which I had been made aware might be just the tip of the iceberg. I promoted the matter through some articles in the local press, which prompted dozens of calls from people who had had similar experiences. I now have a file containing details of about 100 people, many from my own constituency and others from neighbouring constituencies. I am grateful to my hon. Friend Andrew Gwynne for allowing me to include his constituents in the evidence that I have presented to the various agencies.

The same pattern emerges from most of those cases. Most are clients of Thomson Broadbent. All were originally promised that the agent would act free of charge. All were subsequently asked for an extra contribution, being offered that as one of three options. All had inferred that to pay up was the only way to receive compensation within a reasonable time scale. Some paid up and, like my constituent, later discovered that their surveyor was also paid a substantial fee by the Highways Agency. Others simply refused to pay. Many had realised that there was no correlation between whether they paid the fee and the timing of their claim being settled. All felt aggrieved to have been treated in that way by firms in which they had placed their trust.

I have written to the Royal Institution of Chartered Surveyors asking it to investigate whether the actions of its members contravene its code of conduct and, if so, what it intends to do. I have given details of the 100 or so cases of which I am aware and I await its response. I hope that it will see that the dubious practice of some of its members reflects badly on the profession, and that its many reputable members risk being tarred with the same brush. However, I am not confident that any sanction that the institution might be minded to impose would be sufficient to prevent that practice from continuing in my constituency and elsewhere.

I have also written to the Office of Fair Trading. I received a reply last week and I was astounded to be told that there is no legislation that it can use to prevent the practice of requesting an extra fee after initially agreeing to act on a free-of-charge basis. After I received the letter, I contacted the OFT again and was assured by the deputy director of UK enforcement that that was the case. I question the validity of current fair trading legislation if the practice that I have described is not considered illegal, and the watchdog that should be able to challenge it seems to be so toothless.

I shall turn now to the role of the Highways Agency in the matter. I am not sure to what extent the actions of the agency may have brought about the difficulty in the first place. Moreover, I am not convinced that it has acted with sufficient determination to bring about a solution. I have written to, and met, senior managers from the Highways Agency. They dispute the allegation that they have withdrawn from an agreement.

From that meeting, and from correspondence with Thomson Broadbent, I now have a clearer understanding of the dispute between the Highways Agency and the agents. It appears that the fees for surveyors acting in compensation cases used to be paid in accordance with something called Ryde's scale, which was last reviewed in 1996, and before that was typically reviewed every six or seven years. However, in 2002 the Office of the Deputy Prime Minister announced that there would be no further review of the scale, which suggests that no fee increases have been agreed since 2002. If that is the case, I have some sympathy with surveyors, other than those who have chosen to offload the burden on to their clients. I am told that the scale was discontinued to encourage appropriate parties to seek to agree fees among themselves, and that the principal cause of the change was that Ryde's scale was generally too low. I am also told that the scale covered compulsory purchases, as well as part 1 compensation, but that the discontinuation of the scale has proved to be much more problematic in the case of part 1 compensation.

I hope that my hon. Friend the Minister will be able to tell me whether he believes that the Highways Agency has acted properly to resolve the dispute with the agents, or whether it is to some extent responsible for the delay in resolving it. I was encouraged to learn that consultants have recently been engaged by the Highways Agency in an attempt to navigate a way out of the current impasse. I would be interested to know how the negotiations are progressing and whether my hon. Friend the Minister will press the Highways Agency to find a resolution. If he agrees that the request for an extra fee is unacceptable, will he act to stop it? Will he press for the inclusion in any deal of a requirement that firms of surveyors should pay back any top-up fees that had needlessly been paid by my constituents?

I urge my hon. Friend to do everything in his power to encourage the parties to the dispute to find a solution that is fair to all, and particularly that my constituents get the compensation to which they are legally entitled—at no cost to them.

Photo of Derek Twigg Derek Twigg Parliamentary Under-Secretary (Department for Transport) 4:16 pm, 14th December 2005

I congratulate my hon. Friend David Heyes on securing this important debate on what I know is a significant issue for many of his constituents. I congratulate him also on his diligent work in bringing the matter to the attention of Ministers, and on the work that he has done—I know that he has engaged in a large amount of correspondence.

Through his correspondence with my hon. Friend the Minister of State, Department for Transport, my hon. Friend is aware that the Highways Agency is currently negotiating reasonable fees with agents representing claimants under part 1 of the Land Compensation Act 1973. That Act compensates those whose properties have been reduced in value by physical factors such as the noise, lighting or fumes that arise from the use of a new or improved road.

The agency fully recognises its statutory obligations to reimburse successful claimants for the reasonable fees of their agents. It remains committed to working with the agents to find a fair solution to the fee issue. I shall refer shortly to the positive steps that have been taken to reach an agreement, about which my hon. Friend has asked a number of questions.

Historically, Ryde's scale was the basis for the settlement of agents' fees. The scale was agreed jointly by the profession and the Government. As my hon. Friend said, it was abandoned in 2002 by the Office of the Deputy Prime Minister, in consultation with the Royal Institution of Chartered Surveyors, because it was viewed as being uncompetitive and out of step with the remuneration of other professions.

As my hon. Friend is aware, the Office of the Deputy Prime Minister has advised that there are no plans to reinstate Ryde's scale or to replace it. The ODPM stated in July 2002 that fees should normally be assessed on a reasonable basis, agreed between parties. Fixed scale fees were abandoned on 18 July 2002. However, in the absence of an agreed formula, the Highways Agency continued until March 2004 to settle claims on the basis of Ryde's scale without dispute.

A group of chartered surveyors then requested that the Highways Agency increase fees by 20 per cent. above those allowed for in Ryde's scale. The agents argued that Ryde's had not been reviewed for many years and their costs had risen considerably. The agency asked independent valuation contractors whether a 20 per cent. increase was justified, but they were of the view that the scale was sufficiently generous for the market and that fees had increased with the level of compensation and property values. They also advised that a reasonable settlement should reflect the economies of scale obtained by the agents in handling compensation claims.

The agency carried out further investigations to corroborate the findings of its valuers. It sought the views of others, including Transport for London, which was also of the opinion that Ryde's scale was generous.

My hon. Friend is aware, I am sure, that this is not a simple dispute to resolve. The agency and the claimants' agents are not contractually linked, and the solution goes well beyond the determination of individual claims. It has implications for all compensating authorities, and it will have an impact on thousands of part 1 claims—and on the public purse. As one of the larger compensating authorities, others look to the agency to set a benchmark on fees; accordingly, it has acted prudently and correctly throughout.

The agency has held numerous discussions with representatives of the major agents and has also talked to other compensating authorities and the RICS. As a result, in March 2005, the agency made a two-stage offer which, if it had been accepted, would have led to a settlement based on measured evidence of the time taken to negotiate a part 1 claim.

In response to this, the agents stated in April 2005 that it was impossible for them to keep accurate timesheets. The agency then proposed on 19 May 2005 that agents recommend an independent consultant to investigate the fee issue. The agents accepted this approach. However, on 17 August 2005 they reported that they had met with no success in finding a suitable person or organisation.

As my hon. Friend is aware, the agency is currently working to find a suitable consultant. I am pleased to say that it has selected a firm of consultants that has considerable and far-reaching experience in determining the fee levels through negotiation and dispute resolution. The appointment will be announced shortly. Throughout the process, the agency maintained a dialogue with the major agents and kept them fully informed.

During the study, the consultants all worked closely with the agency and the claimants' agents under the compensating authorities. The agency, for its part, will do its best to find a solution.

Photo of David Heyes David Heyes Labour, Ashton-under-Lyne

On that point, will my hon. Friend urge the parties to this process—which I am happy is now in train and I obviously welcome it—to look at the issue of people who have made these top-up payments to firms of surveyors and who, should a better scale of fees be agreed retrospectively, stand to lose out financially. Can some way be found of recompensing them for the money that they have paid out in good faith?

Photo of Derek Twigg Derek Twigg Parliamentary Under-Secretary (Department for Transport)

If agreement is reached on a higher fee, the agency will give sympathetic consideration to the reimbursement of those who have already paid an additional sum to their agents. The RICS was also asked to act as an arbiter but it has declined to be involved.

As I said, during the study the consultants will work closely with the agency and the claimants' agents and other compensating authorities. The agency, for its part, will do its best to find the solution. The consultant's report should be available in the new year and it is hoped that it will give all parties the clarity that they require.

I share my hon. Friend's concerns about the actions of individual agents who are requesting additional sums from the clients pending a general settlement of fees, following the abolition of Ryde's scale. It is for individual claimants and their agents to agree or waive this payment and it remains a private contractual matter in which the agency cannot intervene. The agency does not have the authority to prevent agents from acting in this unprofessional way towards its customers.

The agency has referred the matter to the RICS, which has declined to be involved in the general settlement of fees. I was advised that it does not consider that it is wrong for members to renegotiate the terms of a contract.

If claimants seek the agency's guidance, they are told that they are free to choose whoever they wish to represent them. Alternatively, clients are within their rights to deal directly with the Highways Agency and it will offer them every assistance. The agency already has a leaflet given to all claimants that explains the compensation process. A detailed booklet is currently being drafted, which will be made available to the public before new road schemes are opened to enable a more informed choice of an agent to be made.

I should like to reassure my hon. Friend that the Highways Agency is firmly committed to the resolution of this issue. Putting the specific question of fees to one side, the working relationship the agency enjoys with the agents has developed in the spirit of partnership. The agency will do all that it can to reach a solution that is acceptable to all parties.

j

If the Highways Agency is "firmly committed to the resolution of this issue" why, over two years later is it still not resolved ?

Submitted by jon carrington