Leasehold and Freehold Reform Bill

Lord Best Excerpts

Committee stage
Wednesday 1st May 2024 Lords Chamber

Moved by

[Lord Best]

94: After Clause 109, insert the following new Clause—
“The Regulator of Property Agents(1) The Secretary of State shall establish a body corporate known as the Regulator of Property Agents (“the Regulator”) to regulate property agents in respect of—(a) estate management of leasehold properties,(b) sale of leasehold properties, and(c) sale of freehold properties subject to estate management or service charges.(2) Regulations under this section—(a) must be laid within 24 months of the date of Royal Assent to this Act,(b) must be made by statutory instrument, and(c) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.(3) If, at the end of the period of 12 months beginning with the day on which this Act is passed, the power in subsection (1) is yet to be exercised, the Secretary of State must publish a report setting out the progress that has been made towards doing so.(4) The objectives of the Regulator are—(a) to protect the consumers of services provided by property agents, in respect of—(i) estate management of leasehold properties,(ii) sale of leasehold properties, and(iii) sale of freehold properties subject to estate management or service charges. (b) to set and uphold standards of competence and conduct for property agents in relation to the sale of leasehold properties and freehold properties subject to estate management or service charges.(5) “Property agent” means an individual or body of persons (whether incorporated or not) which carries out the roles of an estate agent as defined in Section 1 of the Estate Agents Act 1979 or of a property manager as defined in Sections 54 and 55 of the Housing and Planning Act 2016.(6) The Secretary of State may provide financial assistance (by way of grant, loan or guarantee, or in any other form) and make other payments for the establishment and maintenance of the Regulator.(7) The Regulator must establish a panel of persons called “the Advisory Panel”.(8) The Panel may provide information and advice to the Regulator about, and on matters connected with, the Regulator’s functions (whether or not it is requested to do so by the Regulator).(9) The Regulator must appoint the following persons to the Panel—(a) persons appearing to the Regulator to represent the interests of—(i) leaseholders of properties managed by property agents,(ii) freeholders of properties subject to estate management or service charges, and(iii) professional bodies and associations representing property agents who manage leasehold properties.(b) the Secretary of State.(10) The Regulator has powers as follows—(a) to monitor, assess, report, and intervene (as appropriate) in relation to the performance of property agents who manage leasehold properties;(b) to determine mandatory qualifications to ensure that those undertaking the activities of a property agent in England have, or are working towards, qualifications that demonstrate competency in respect of the sale or management of leasehold and freehold properties;(c) to enforce compliance with a mandatory and legally-enforceable Code of Practice for property agents selling or managing leasehold properties;(d) to provide guidance to property agents on the regulatory framework for the sale and management of leasehold and freehold properties;(e) to register all property agents complying with the requirements of the Regulator and to revoke the registration of property agents who persistently breach the regulatory framework;(f) to raise a registration fee and an annual fee to pay for the ongoing costs of the Regulator of Property Agents;(g) to review and make recommendations to the Secretary of State for the updating of the statutory guidance that sits alongside the regulatory framework for the sale and management of leasehold and freehold properties;(h) to delegate to designated bodies administrative and regulatory functions in respect of the sale and management of leasehold and freehold properties, as it deems appropriate.(11) The Property Ombudsman and other redress schemes, if any, covering property agents shall provide the Regulator with such information as the Regulator shall request.”Member’s explanatory statement
This amendment seeks to create a Regulator of Property Agents to regulate property agents in respect of estate management of leasehold properties, sale of leasehold properties, and sale of freehold properties subject to estate management or service charges.

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[Lord Best (CB)]

My Lords, Amendment 94 is in my name and those of the noble Lord, Lord Young of Cookham, and the noble Baronesses, Lady Hayter of Kentish Town and Lady Taylor of Stevenage, and I am very grateful for their support. Before I speak to the amendment, I want to add my appreciation of the life and shock at the loss of Lord Stunell. Andrew Stunell was a terrific advocate for better housing, as a notable Construction Minister in the coalition Government and an eloquent speaker on a range of Bills, not least the Bill we are debating today, which he analysed brilliantly just a month ago in this Chamber. He will be very greatly missed indeed.

Amendment 94 represents the grand finale in our Committee debates on the Bill. It would empower the Secretary of State to establish an independent statutory regulator of property agents who sell and manage leasehold property. It would introduce into law the recommendations from the Government’s own Regulation of Property Agents working group, which I had the honour to chair and which reported in July 2019. The twin objectives of the regulator would be to protect consumers and to raise standards. Although the working group recommended a regulator for all property agents covering estate agents, sales agents and letting agents as well as property agents handling leasehold property, the amendment relates only to the leasehold managing agents, to keep within the scope of the Bill. However, many property agents involved in leasehold sales and management also engage in sales of freehold properties and in the management of rented sector lettings, so would be covered. Moreover, a twin amendment in the Renters (Reform) Bill, due in this House shortly, could extend the regulators’ role to cover agents managing rented properties as well.

The need for regulation was spelled out graphically at Second Reading, and many of your Lordships have shared details of agents’ misconduct brought to their attention. The unsuitability of badly behaved agents ranges from simply not communicating with leaseholders to misleading them and taking advantage of their leaseholder status with exorbitant commissions, charges and fees, not least in retirement housing developments. Although there are some excellent agents providing a good service and value for money, there are also inept, incompetent and exploitative agents whose reprehensible behaviour cries out for proper regulation. The urgency for regulating the sector has now increased, following the passage of the Building Safety Act 2023. This legislation has meant managing agents of blocks of flats taking responsibility for spending substantial sums of leaseholders’ money and of taxpayers’ subsidies to cover remedial building works in blocks of flats. It is now more essential than ever that such responsibilities are exercised only by reputable and qualified professional agents.

There is rock-solid support for a regulator of property agents from the professional bodies and trade associations representing the sector: the RICS; Propertymark; and the Property Institute, which comprises the Institute of Residential Property Management and the Association of Residential Managing Agents. Those property agents who are acting honourably are undermined by the unprofessional conduct of too many. Of course, the organisations representing consumers, such as Citizens Advice and the Leasehold Knowledge Partnership, are extremely supportive of the proposals encapsulated in this amendment.

A regulator would establish requirements for relevant qualifications and continuous professional development and would require adherence to an overarching code of conduct and to subsidiary-specific codes covering the different components of property agency. The regulator would have a full range of enforcement powers, from requiring specific changes to levying fines or removing the licence for a firm or individual to operate. That would provide the same consumer protections as for social housing, with its social housing regulator and Housing Ombudsman, and as for the financial sector, with its Financial Conduct Authority and Financial Ombudsman Service.

As with accountants, lawyers or surveyors, property agents deserve to be respected as professionals with expertise and with the proper attributes that go with professional status. Why would the Government resist a measure that is likely to be extremely popular with millions of leaseholders, which is earnestly requested by those who would themselves be the subject of regulation, and which has been given so much support from this House, particularly following the strong encouragement from the cross-party scrutiny of your Lordships’ own Industry and Regulators Committee last month?

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[Baroness Scott of Bybrook (Con)]

I thank the noble Lord, Lord Best, for his Amendment 94, and for his and other noble Lords’ persistence in pushing for the creation of a new regulatory body to oversee property agents. I put on record my sincere thanks to him for his valuable work on regulation over very many years. I note that he is also a member of the Industry and Regulators Committee, which recently concluded that the case for regulation of the property agent sector still remains. Ministers will respond to the committee in due course.

However, as the noble Lord is acutely aware, the Secretary of State indicated in the other place that he did not consider that this was the right time or the right Bill to set up a new regulator for property agents. I know that he and other noble Lords will be disappointed, but perhaps not surprised, by this. However, the Government remain committed to driving up professionalism and standards among property agents. Leaseholders deserve a good service for the money they pay, whether from their landlord or their managing agent, where one is in place.

The noble Lord once again brought up, as he has many times with me, mandating professional qualifications. This was one of the areas that the Government asked the noble Lord’s working group to look into as part of its review. I assure him that that remains on the table.

At this point, I will respond to the interesting idea from my noble friend Lord Young of Cookham about the How to Lease guide. Interestingly, I spoke to officials about this idea not too many hours ago, building on the guide to renting. That is something that could be put in place. I will work further on it and talk to my noble friend more.

Industry plays an important role in driving up standards, and we welcome the ongoing work being undertaken by the industry and others to support this. This includes the efforts of the noble Baroness, Lady Hayter of Kentish Town, and her independent steering group in preparing an overarching code of conduct. I thank her for that. I know that the Government are very interested and looking at it in much more detail. This is an important development to ensure that all consumers are treated fairly and agents work to the same high standards. I echo what many noble Lords have said. We have some excellent agents in this country who do a fantastic job. The agents we are talking about are the rogue agents, who I know noble Lords are trying to ensure come up to the same high standards. I thank the noble Baroness for her work on this.

I should also stress that measures in this Bill, alongside existing protections and work being undertaken by the industry, seek to make managing agents more accountable to those who pay for their services. That includes making it easier for leaseholders to take on the management of their buildings themselves, where they can directly appoint or replace agents.

However, I recognise the strength of feeling expressed on this issue at Second Reading and today by a number of noble Lords, and the ambition of all noble Lords who spoke to drive up the standards of property agents. The noble Lord, Lord Truscott, the noble Baroness, Lady Bennett of Manor Castle, and others spoke about individual cases where managing agents have been either good, as we heard from the noble Lord, Lord Truscott, or extremely unacceptable.

I will continue to engage with the noble Lord, Lord Best, my noble friend Lord Young of Cookham and any others who would like me to on this issue during the remainder of the Bill’s passage. I know I already have a meeting in my diary with the noble Lord, Lord Best, in a week or so. With the assurance that we will keep working on this, and following what I have said, I hope the noble Lord will withdraw the amendment.

[Lord Best (CB)]

My Lords, I am very grateful to all noble Lords who have spoken—all of them in favour of the concept of a regulator of property agents. I think the case is now unavoidable. My especial thanks to the noble Baronesses, Lady Hayter and Lady Taylor, and the noble Lord, Lord Young of Cookham, for supporting this amendment, and to the noble Baroness, Lady Thornhill, who, if we were allowed one more name on the list, would have been there as well. It was great to hear illustrations from real life from the noble Lord, Lord Truscott, bringing a consumer perspective to the story. The noble Baroness, Lady Bennett, shared stories of cowboy agents. I am afraid they do exist, and we should be doing something about it.

The Minister offered me some consolation. We are going to meet again soon, and she recognises the strength of feeling that everybody has been expressing. I thank her for continuing to engage on the subject and I hope there is something we can salvage, before the Bill finally passes, that will at least make a start on this really important mission of creating a regulator to the benefit of the 5 million leaseholders out there. I beg leave to withdraw my amendment.

Amendment 94 withdrawn.