Consumers, Estate Agents and Redress Bill [HL]

I shall speak to AmendmentNo. 123A, tabled by the noble Earl, Lord Caithness, the amendments to Schedule 6 tabled by the noble Baroness, Lady Wilcox, and the noble Lord, Lord De Mauley, and the two amendments tabled by my noble friend Lord Dubs. The first amendment seeks to extend Section 1 of the Estate Agents Act to cover lettings work. As noble Lords are aware, the provisions in the Bill are based on the OFT’s report on the estate agency market. The report did not look at lettings, rentals and property management, and hence does not provide an evidence base for extending redress to those sectors. In addition, the provisions amend the Estate Agents Act 1979 which applies only to those engaged in estate agency work. This is a defined term in the Act that does not extend to lettings work, rentals or property management. The Act would require a major overhaul to be fit for purpose to apply to agents engaged in lettings work and so on, and that is not the purpose of the current Bill. However, the Government have already taken steps to improve the regulation of the lettings sector. The Tenancy Deposit Protection Scheme, which will start on 6 April 2007, will require landlords of assured shorthold tenancies—the most common form of new tenancy—who take deposits to join a statutory tenants deposit scheme. Deposits will be safeguarded and tenants who keep their property in good condition will be entitled to get their deposits back. The scheme also provides independent mediation when disputes arise. It applies equally to agents doing lettings work where they take deposits on behalf of landlords. This will address one of the major causes of dispute in the lettings sector. I can assure noble Lords that the Government will continue to monitor the operation of the private rented sector and the property sector more generally to determine whether there is a market failure which should be addressed by future legislation. I turn now to the drafting amendments proposed by the noble Baroness, Lady Wilcox, and the noble Lord, Lord De Mauley. The first amendment seeks to make the power to make an order to require estate agents to belong to a redress scheme subject to the affirmative resolution procedure. I should like to reassure noble Lords about the content of this order. The policy intention is for the order to apply to all those engaged in estate agency work in the UK in connection with buying and selling residential property. There is no intention to apply this only to a narrow subsection of estate agents or types of complaint. The drafting of the new clause proposed in Amendment No. 123A simply gives the same flexibility as the Housing Act 2004 to deal with scope issues which may arise in the future. Subsection (3) gives essential flexibility to exclude frivolous or vexatious complaints, and to exclude complaints from commercial organisations buying residential property, as the policy intention of the redress provisions is to cover private individuals buying a home. On that basis we do not expect the order to contain anything controversial, and I am happy to reassure noble Lords on this point. If noble Lords disagree, the negative resolution procedure does of course allow the order to be debated if that is considered necessary. The Delegated Powers and Regulatory Reform Committee was content for the order to be subject to the negative procedure. In addition, making it subject to the affirmative procedure would make it out of step with the redress order under Part 2 of the Bill and with the Housing Act. There are good reasons to use the negative procedure here as it will give estate agents much more certainty about when the order will come into force. I hope that noble Lords will agree that it is helpful if those in the industry have a good idea of the timescale in which they must join a redress scheme. As both of the opposition parties have signalled their agreement to the principle of all estate agents dealing in residential property to be required to belong to a redress scheme, I hope that I have been able to give a reassurance on this point. Amendment No. 134 seeks to amend paragraph (1) of new Schedule 3. It states that: "““A redress scheme may be approved … by the OFT acting in accordance with paragraphs 2 to 8””." The purpose of these provisions as drafted is to confer a power on the OFT to approve schemes and to ensure that the OFT acts in accordance with the criteria listed in sub-paragraphs (2) to (8) when doing so. It is appropriate that only a power is conferred since, for example, the criteria listed in sub-paragraphs (2) to (8) are not satisfied or if the OFT feels that a further redress scheme, even one that met the other criteria, would cause confusion for consumers and/or estate agents. The office feels that it must be able to refuse to grant approval. On Amendment No. 135, the drafting of a code of practice was deliberate. The code was mentioned by the noble Lord, Lord Sheikh. There may be more than one code of practice which the ombudsman may use as the basis for complaints against estate agents. I am sure noble Lords would agree that it is right to retain the ability of an ombudsman to refer to more than one code of practice. There is the issue of best practice, rather than good practice. For the reasons that I outlined in our earlier discussion, I would be happy to consider this amendment further to see whether we can adopt it. Amendments Nos. 133 and 138, tabled by my noble friend Lord Dubs, who has considerable expertise in this area and who was a pioneer in previously sponsoring the Private Member’s Bill, the Estate Agents (Independent Redress Schemes) Bill, seek to strengthen the penalty charge arrangements in one of their applications. I applaud my noble friend’s intent. However, the rationale behind a penalty charge notice is to give an immediate punishment and an incentive to comply with the duty to belong to a redress scheme. Perhaps I may elaborate: there is a six-month time limit for issuing penalty charge notices, as enforcers need to take prompt action within a reasonable timescale. The point of the six-month period is that the penalty charge can be issued within that six month period, or in the case of a continuing breach, on the last day of that breach being committed. The six-month period is to encourage prompt action against any estate agents who are acting improperly. The current view of the Government is that a 12-month period would perhaps encourage a delay in taking effective action. However, the six-month rule does not mean that action cannot be taken later—it can be. My noble friend also asked whether those penalty charges could be imposed more than once. Yes they can, and there is the ultimate sanction of the estate agent being banned. That is why we currently feel that the six-month period is about right. The amount of the fine needs to strike a balance between being a significant sum and recognising that it can be imposed on the spot with very little due process involved. If the sum was much larger, we would have to consider whether it would be more appropriate for the penalty to be linked to a criminal offence enforced through the magistrates’ court. Furthermore, the ultimate penalty for not being a member is a heavy sanction—being banned from being an estate agent. The other point is that the size of the penalty charge and the length of time are both consistent with the Housing Act and strike the right balance; but it is of course a matter of judgment. I should also point out that the penalty charge regime related to information pack redress under the Housing Act 2004 is drawn up in similar terms.