Housing and Planning Bill
Debate between Lord Palmer of Childs Hill and Baroness Hayter of Kentish Town
Baroness Hayter of Kentish Town (Lab)
My Lords, Amendment 84C is about client money protection. It would require every letting agent to have the money that they hold—belonging either to a tenant by way of advance rent or to a landlord as rent received or funds for repair or insurance—to be protected. In this way, even if a letting agent disappeared or went bankrupt, such money would be safe and available to the landlord. This client money protection is required of solicitors, other professionals, estate agents and, indeed, anyone else holding client money that belongs to others. It is what is needed for rents collected by letting agents on behalf of landlords. It is not the agent’s money and it should be held separately in a protected client account.
This is a big issue: there are hundreds of cases of letting agents taking money from tenants as holding fees, deposits, rent, service charges or even tax, but then pocketing the money. Sometimes, the long arm of the law catches up with them. Tim Glasson was jailed for 21 years for unlawfully and dishonestly keeping rent and deposits; Roy Jackson of Suffolk Letting stole £70,000 from landlords and Keiran Farrer stole £17,000 in rents and deposits, repaying neither the tenant nor the landlord. Similarly, Shirley Player was jailed for stealing £400,000 and Russell Baker was accused of taking £150,000 in deposits but not handing them on to either a tenant deposit scheme or the landlord.
This money is not going into the housing market. It deprives landlords of their income and tenants of their security. About 60% of landlords use letting agents to help to manage their property. Thus money for repairs and insurance, in addition to rents, is channelled through the agent’s bank account. This is not money for the agent’s services; it is due to be handed on to someone else.
The amendment would require the funds to be in a ring-fenced protected client account, in the same way as happens with solicitors. It is strongly supported by landlords as much as by tenants. It is backed by the National Landlords Association, RICS, the British Property Federation, the Association of Residential Managing Agents, the Association of Residential Letting Agents, the Property Ombudsman, Ombudsman Services, Crisis and Shelter. It was recommended by the CLG Select Committee in the other place.
Reputable letting agents strongly support the amendment. As David Cox, who leads their professional association ARLA, said, client money protection is,
“fundamental for tenants and landlords to ensure they have peace of mind should an agent go bust or take off with their funds”.
A director of a large firm, Kinleigh Folkard & Hayward, which protects landlords’ and tenants’ money under a client money protection scheme, said that,
“all too often, rogue agents who do not subscribe”,
to such a scheme,
“misappropriate landlord and tenant funds … It should be compulsory for all agents to subscribe to a client money protection scheme”.
Savills—well-known to everyone in this House—urges the Government,
“to make it compulsory for all letting agents to have client money protection”.
We are talking about vast amounts of money handled, but not owned, by letting agents: probably £2.7 billion at any one time, perhaps £700 million of which is unprotected. In deposits alone, renters typically hand over £600 each, with no guarantee of its safety.
Amendment 84C, which would require all letting and managing agents to have client money protection, is based on similar provisions in the Estate Agents Act 1979. Agents would have to maintain a segregated bank account for clients’ money, with written confirmation from the bank that all the money in that account belonged to the clients. It would mean, importantly, that the bank was not entitled to combine that client account with another account or to offset the money in that client account for any sum owed to the bank by the letting agent.
We tabled a similar amendment to the Consumer Rights Bill and it seemed that the Government were almost persuaded. They came up with a compromise amendment of their own, which required letting agents to display whether they had client money protection. However, it has not worked and it was never going to work. As far as tenants go, they cannot choose which letting agent to use; it is the landlord who chooses. For a tenant, if a particular letting agent is handling the property that they already rent, or which they want to rent, they cannot shop around to find another agent. Their only choice is not to rent that property. They have no consumer power to change behaviour in the market. It hardly works for the landlord either. Many are small and non-professional and do not really appreciate the importance of client money protection until, of course, it is too late.
The Government’s transparency amendment, which became part of the Consumer Rights Act 2015, is fairly useless because, even before that change, every letting agent who had client money protection already proudly boasted about it, but that did not drive the rogues to follow suit. As we predicted, the amendment made little difference. It did not help tenants, who could not shop around, and it did not help landlords, who could only check at the beginning, and not later, whether there was client money protection in place. The other problem is that even the law that was put through is being flouted. We have numerous examples of letting agents failing to display their charges and whether they have client money protection.
When we dealt with this before, the Minister for BIS, the noble Baroness, Lady Neville-Rolfe, claimed that client money protection could,
“make it difficult to encourage landlords to invest in properties”.—[Official Report, 3/11/14; col. GC 600.]
How wrong could she be? It is exactly the security given to landlords by client money protection that will encourage them to invest, knowing that the rents paid over to the letting agent are safe and sound. This amendment is wanted by tenants and is particularly wanted by landlords; it is also strongly supported by reliable letting agents. I beg to move.
Lord Palmer of Childs Hill (LD)
My Lords, I support the amendment, to which my name is attached. I declare my interest as chairman of the advisory board of the Property Redress Scheme, which has been mentioned in passing.
It seems very little to ask, in legislating for housing, to require letting agents to have a protection scheme in place for moneys received by them in their course of business from tenants, prospective tenants and anyone who is renting or seeking a place to rent. It has been estimated—I always wonder how these estimates are arrived at—that letting agents hold about £2.7 billion in client funds, yet if the agent has not elected voluntarily to obtain cover, landlord and tenant can lose their money. If disaster strikes in the form of an agent going bust or running off with the loot, under this amendment the landlord and tenant would be covered. The amendment does not require government underwriting, so the Chancellor does not need to amend the Budget. The cover could be provided by the users; this would supplement any award under any one of the redress schemes. As the noble Baroness, Lady Hayter, has said, we are not asking for reinvention of the wheel. Section 16 of the Estate Agents Act 1979 already provides protection in the course of sale and purchase transactions.
Client money protection is of course operated by the travel industry. Travel agents in the UK are required by law to be a member of an independent client money protection scheme that uses ABTA or ATOL. Many of us may have had to use these in the past—I certainly have. When you pay for your travel, your payment to the agent is protected by ABTA or ATOL against the agent going bust or going walkabout with your holiday money. You claim against ABTA or ATOL rather than against the travel agent. This amendment asks that what is the norm for the travel industry, just for going on holiday, is also used for letting agents—for most people, the property that they own or seek to let is much more important—and that there should be compulsory protection for rents, deposits or moneys held, even moneys for repairs.
Consumer Rights Bill
Debate between Lord Palmer of Childs Hill and Baroness Hayter of Kentish Town
Baroness Hayter of Kentish Town
My Lords, Amendment 81D would require letting agents to have appropriate client money protection in place, which in itself would mean that they would need to have established client account audits and proper procedures. About £2.7 billion is held by letting agents at any one time, so this would be a rather important consumer protection.
Finally, Amendment 81C would extend the existing consumer protection measures for estate agents to letting agents. Most importantly, it would empower the CMA to close letting or managing agents that have acted improperly. It would therefore stop the present, rather stupid situation in which an estate agent banned today can set up as a letting agent tomorrow. This was something that the CLG Select Committee recommended. It wanted letting and managing agents to be subject to the same regulation as estate agents, and that is what this amendment would do.
I know that Ministers have suggested that there is in effect a sort of back-door banning at the moment, in that now that every letting agent must be a member of a redress scheme and if a poorly performing letting agent was turned down by all three recognised schemes, that would effectively debar the letting agent from operating. However, this misses two important facts. One is that the three redress schemes, though they will co-operate by not taking on an agent debarred by another of the three, can only act on complaints brought to them by landlords or tenants. As we know, many people dissatisfied with the service never complain. So these redress schemes only see the tip of the iceberg, as both the two established ones acknowledge. The third one is really yet to get going. So the intelligence for their veto on a business is pretty minimal. They do not have access to information from the police, trading standards or insolvency practitioners, so they are working on a tiny aspect of the whole scene.
There is a second problem. The state is effectively contracting out this enforcement to three private companies with no requirement that they abide by the regulator’s code, are properly qualified for this role or have ever been authorised to be front-line enforcers. They have been authorised by the CLG simply as adjudicators, not as law enforcement officers. Yet without this amendment they are the only organisations able to stop a rogue letting agent from trading. I beg to move.
Lord Palmer of Childs Hill (LD)
My Lords, I will talk to Amendment 81D and in doing so I declare an interest as a director of the Property Redress Scheme Advisory Council. I support what the noble Baroness, Lady Hayter, said, and want to add briefly to her detailed comments.
The noble Baroness spoke about the £2.7 billion estimated to be held in clients’ funds. I might add that this was calculated by the industry as the amount that letting agents will be holding in tenants’ deposits and one month’s rent. That was how it was calculated; it seems a fairly sensible estimate. So, there is £2.7 billion in clients’ funds, some of which is at risk. There are already clients’ money protection schemes run by some of the organisations described by the noble Baroness. However, if the letting agent is not covered for client money protection both the landlords and the tenants stand to lose their money. If it is not one of the estate agents or one of these big organisation schemes, which are not compulsory other than for the members of that organisation, these tenants and landlords—it is both—would lose their money. The amendment is designed to protect both parties in the event that an agent goes bust or misappropriates the clients’ funds, as it covers any losses through the actions of the letting agent.
The consumer protection offered by this amendment would be financed by the industry itself and would not need the financial backing that the Government currently provide—I am not sure that the noble Baroness mentioned that point but I thought I should highlight it. At the moment it is a voluntary protection, and it works for a lot of the industry. There are forces in play which could protect the moneys owed to the landlord or tenant if something goes wrong with the letting agent. However, there are many letting agents which are not a part of such an organisation. There are two voluntary schemes that I know of, one of which was mentioned by the noble Baroness. All this amendment seeks to do is to protect the very people who are most at risk: a landlord or tenant using a letting agent which is not part of a larger organisation. This would turn a voluntary scheme into a compulsory scheme overseen in the way the noble Baroness described. If we ever got to a vote on this, I would support it.
Police Reform and Social Responsibility Bill
Debate between Lord Palmer of Childs Hill and Baroness Hayter of Kentish Town(13 years, 4 months ago)
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Lord Palmer of Childs Hill
My name is attached to the amendment and I thank the noble Baroness, Lady Finlay, for tabling it. I, too, attended Monday’s seminar. Also present was the Deputy Mayor of London, who was most appreciative of the scheme in that it would add to the ammunition which the authorities have in dealing with drunkenness.
I do not think that any other speaker has yet said that the issue is not about anti-drinking but is about anti-drunkenness. That is what sobriety means in this instance. I am still a councillor in the London Borough of Barnet where there is a lot of drunkenness on the streets. Not all of it is youth drunkenness, but it is drunkenness. We have tried various ways of stopping it. For instance, in the ward of Cricklewood that I represent, there is an anti-street-drinking order. That helps the police to enforce measures against drunkenness. We tried to apply the order in another area of my ward. The local authority has not supported that but the police have done so.
Although that is not specifically to do with the amendment in front of us, I mention it because I believe that those who enforce the law, whether magistrates or the police, must have as many armaments as possible to use with caution to ensure that our streets are safe and pleasant for society to live in. Too often, in the urban environment in which I live many people—not all of them young—are drunk on the streets and throw down their beer cans and bottles. Perhaps with this amendment we can help in some way. The noble Baroness, Lady Finlay, has done us a great service because whether or not the amendment is adopted, the Government have highlighted the fact that they are aware of the problem and have said that tests will be carried out. I thank the noble Baroness for bringing the matter before us.
Baroness Hayter of Kentish Town
My Lords, I add a few words in welcoming the amendment and urging the Government to respond positively to it. When I was a magistrate, I would have loved the possibility of this rehabilitation order to monitor ongoing alcohol consumption. As the noble Lord, Lord Palmer, suggested, it is one of a range of possibilities, but to have had this in one’s toolbox, as I gather the phrase is, would have been an enormous advantage.
As has been made clear, the amendment allows the magistrate this power only if alcohol caused or contributed to the offence—in answer to the noble Lord, Lord Imbert, I say that it is the magistrate who will take that decision—and if the offender has a propensity to misuse alcohol and is willing to comply with the requirement. As I argued in Committee, help with alcohol misuse should also be available but, as the noble Baroness, Lady Finlay, has said, we must consider the victims in assessing this possibility.
Most of what we now call domestic abuse, but when I was growing up we used to call wife-battering, is alcohol-fuelled. Violence on the streets, whether against property or against people, would undoubtedly be less without the addition of drunkenness. When are we going to do what the ordinary decent people who walk around our streets want us to do, which is to reduce alcohol-related disruption that affects their lives? That is the question that we have to answer.
As the previous speaker said, this is not anti-alcohol. Indeed, I should declare an interest that last night I was at the parliamentary beer dinner. I was very grateful that we had not reached this amendment by then. I am not against the consumption of alcohol but I am very much against the consumption of excessive amounts of it that then damages the people concerned or, in the light of this amendment, damages the life and well-being of others.
This is an enabling measure and does not require the courts to impose it. It is an opportunity for someone with the propensity to misuse alcohol in a way that damages others to have a period of sobriety—with help available, I hope—thus improving their own family lives as well as the well-being of others. I urge support for this.