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Estate Agents (Independent Redress Scheme) Bill [HL]

My Lords, I beg to move that this Bill be now read a second time. At the outset, I should declare an interest. I am just about to sell a house and buy another, which should be made clear before I develop the argument about this Bill. There are an estimated 1.5 million residential property transactions each year. The total value involved is estimated at £232 billion. Buying or selling a property is the biggest financial transaction that many of us have to face. Yet it is highly stressful and buyers and sellers often feel very vulnerable when they embark on that process. The Estate Agents (Independent Redress Scheme) Bill will make a simple amendment to the Estate Agents Act 1979 to require all estate agents, whether they are members of a trade body or not, to sign up to an independent complaints procedure. It means that all home movers will be able to access redress without having to resort to court—a point which is very important. Obviously, going to court is open to people now, but it is a cumbersome, expensive process. Surely, we need something simpler and better than that. This will be a mandatory registration scheme, and any estate agent who behaves really unprofessionally would not be able to practise if he is found guilty of such unprofessional conduct. I should say now that I am grateful for the help and advice I have received in preparing this Bill, in particular the staff at Which?, who have gone out of their way to provide me with both support and information. While it is true that from 2007 every house put up for sale will need a home information pack, and a complaints system will be set up to cover this aspect of the buying and selling process—but only this aspect—my Bill would go much further because it is intended to cover all residential purchases and sales. It is interesting and amusing to consider which groups are the least trusted in Britain. Research published not long ago in the Daily Telegraph showed that estate agents are trusted by 16 per cent of the population. Red-top tabloid journalists are trusted by 14 per cent, while politicians rate slightly higher at 20 per cent, rising to 40 per cent depending on party—I shall not say which—and whether the politician is a Minister or the local MP. Let us face it: we politicians are not very popular, journalists are not popular and neither are estate agents. It is clear that we have to find a way forward from this difficulty, at least with regard to estate agents. During the passage of the Housing Bill through this House in 2004, the Government pledged to bring forward proposals that would extend the scope of independent redress schemes for those have cause to make a complaint against an estate agent, but nothing seems to have happened. I refer to an OFT report published in March 2004 which set out a number of recommendations for reforming the industry. In particular it recommended that a statutory redress mechanism should be set up if the industry could not deliver improvements through voluntary codes of practice. The consumer group Which? did not believe that the report went far enough, and nor do I. The industry was given two and a half years to sort itself out. It has failed to do so, even though many in the profession want to improve its image. I shall refer to people in the estate agent industry later in my remarks. Furthermore, the OFT’s latest plan for 2005–06 identifies the housing market, including estate agents, as a priority theme. It is interesting to note that the Government broadly endorsed the report from the OFT. Perhaps I may mention briefly how they responded to the proposals. One government response stated that a consultation document would be published on how the OFT proposals could be brought into effect, and to see what more could be done to strengthen the regulation of estate agents. So far as I know, that document has yet to materialise. The Government also said that they would use the Housing Act to provide a redress mechanism. They have confined themselves to the proposals as regards home information packs, to which I have already referred. They have not yet found parliamentary time for any further legislation in this area. A third suggestion was to work with stakeholders to develop methods to evaluate trends in consumer detriment in this market, along with making the case for an industry qualification and national quality standards for estate agents. I am not aware of any proposals to take this forward. Finally, the Government response stated that they would consult on amendments to the legislation, including measures to make estate agents’ dealings with consumers more transparent, and to give the OFT and local trading standards departments further tools to tackle unfair practices and better protect consumers. Again, neither I nor the staff at Which? are aware of any such consultation. It is perfectly clear that consumer confidence in any profession must depend on maintaining very high professional standards. That is agreed by estate agents and of course it applies to professionals generally. I turn now to the Ombudsman for Estate Agents. That organisation does provide some redress, but membership is not compulsory and therefore a large number of estate agents do not adhere to the scheme. In any case, anyone disciplined under it is not debarred from practising as an estate agent. By that I mean serious disciplinary measures. So there is no way of preventing anyone either becoming an estate agent or remaining in business as one even if they do not meet any professional standards. Currently the level of consumer dissatisfaction with estate agents is very high. I shall not take the time of the House by repeating the many statistics, but it is estimated that in 2004 some 5,500 complaints were brought before the Ombudsman for Estate Agents. In addition, probably about 5,000 other people complain to local trading standards officers about the service they receive from estate agents. So, if we assume that there are some 24,000 people employed in estate agencies in the UK, and if we combine the two sets of figures that I have quoted, this represents almost one complaint for every two estate agents—a very high level of complaint. The problems faced by consumers cover a wide range of what I call unprofessional behaviour. These include misdescription of property, although that is illegal; providing false information, such as saying that there is planning permission when there is not; financial losses to buyers through charging commission fees when they are not due or colluding with property developers; not informing a buyer whose offer has been accepted that the property has been put back on the market; pressurising a vendor to sell and to accept a lower offer so that someone who is possibly in collusion with the estate agent can buy it; and discrimination through not passing on an offer because a buyer has decided not to use the estate agent’s mortgage services. There are examples documented of all these practices. It is clearly unacceptable that consumers should be badly treated in such a way and have limited redress as at present. Research shows that fewer than half of those who had bought or sold a home were always happy with the services they received from estate agents. Experiences included 29 per cent who said they were not kept well informed during the process; 14 per cent who said the estate agent incorrectly described the property; and 12 per cent who said that the estate agent had put too much pressure on them. There was little difference in these figures between the experiences of buyers and sellers. All of these practices could lead to financial loss, as well as making an already stressful process even more so. Clearly this is not a desirable situation. But some estate agents in the industry have high professional standards. I have had conversations with and received briefings from the National Association of Estate Agents. It has some 10,000 members and probably covers about half the estate agents in Britain. I very much welcome the support it has given to the Bill. Other professional bodies in this area also support the Bill but I do not have that sufficiently well confirmed to be able to quote them. The NAEA maintains that it should be a mandatory requirement for anyone practising as an estate agent to belong to an organisation which has minimum entry standards, codes of conduct and a disciplinary system. That is also the aim of the Bill. It is ludicrous that I could set up as an estate agent tomorrow. I have no experience at all, I would not know how to do things properly, and yet there is nothing to stop me doing it. The NAEA was very helpful to me and gave me some advice. It advised me that my Bill should be extended to include lettings because there are also quite a number of complaints about rented property, not only purchased property. It clearly is not desirable to ask the House to support the Second Reading of a Bill while saying that I want to add something to it. On the other hand, there are so many precedents of governments of both parties introducing Bills and then introducing many amendments to them that I shall not be too embarrassed about doing so. I believe the House will accept that in good faith. The NAEA also advised me that if any of its members act unprofessionally they could in extreme cases be expelled, but that that would not stop the estate agent from continuing to practise. The NAEA also believes that agents should be regulated in a way similar to other bodies that operate in the house buying and selling process. There is regulation in regard to financial advisers, people advised in conveyancing and people involved in surveys—and yet the estate agents themselves are not regulated. That is surely a gap in protection for the consumer. If the Bill were to become law, millions of people would be better protected than they are at present. It is a modest but sensible step forward which I hope the Government will look upon sympathetically. I commend the Bill to the House. Moved, That the Bill be now read a second time.—(Lord Dubs.)