Enterprise and Regulatory Reform Bill

Lord Sharkey Excerpts

Wednesday 6th March 2013 Lords Chamber

Industry, the consumer groups, the OFT and three political parties want this. The amendment simply requires membership of a redress scheme, and empowering the OFT to remove letting agents in the same way as they can remove estate agents. In a recent meeting I heard Mark Prisk say that he was open to reason. I hope, therefore, that the Minister will be able to indicate that he has listened to reason, and that the Government are willing to require such a system of mandatory redress and help us rid ourselves of unscrupulous letting agents. I beg to move.

[Lord Sharkey]

My Lords, when we discussed this issue in Committee the Government gave four reasons for rejecting the proposal made by the noble Baroness, Lady Hayter. These reasons were as follows. First, bringing letting agents under regulation would increase costs for consumers and reduce the choice and availability of accommodation on offer to tenants. Secondly, letting agents are already subject to consumer protection legislation. Thirdly, consumers who are charged unreasonable fees can seek help from trading standards officers. Fourthly, around half of all agents belong to a voluntary scheme that sets standards and offers redress. None of these reasons stands up well to any kind of examination. The fact that half of all agents belong to a voluntary scheme is not a reason for failing to address the fact that half do not.

The fact that consumers who are charged unreasonable fees can seek help from trading standards officers is one of those facts that are true in theory but of no help in practice. Even if consumers knew about this recourse—and I am sure that they do not—it is well known that trading standards officers are overstretched and underresourced. This is an illusory comfort to ripped-off or abused consumers. That letting agents are already subject to consumer protection is another true, but comfortless, fact that relies, again, on action by trading standards officers—action that is unlikely to bring significant relief, if any at all.

However, the first reason the Minister gave in Committee for rejecting the amendment in the name of the noble Baroness, Lady Hayter, is the one on which the Government seemed then to rely most, and which at first glance appeared to have some merit—that is, that the amendment before us again would increase costs to consumers and reduce the choice and availability of accommodation on offer to tenants. This argument was challenged by the noble Lord, Lord Lucas, and the Minister subsequently wrote to the noble Lord to set out the evidence—or, rather, grounds—for this argument.

These grounds amounted to an estimate, as the noble Baroness, Lady Hayter, has already mentioned, of an additional annual cost to a letting agent of around £800. It is very hard to see that an additional cost of £800 would drive any letting agent out of business. The Government have produced no evidence of their assertion that it might do so. Even if it did—which is not only unproven but unlikely to be provable—it does not follow that rental properties would be taken off the market or that costs would be passed directly on to the tenant. The Government have produced no evidence to show that letting agents who are members of the voluntary scheme charge more than those who are not. In many cases, the reverse is likely to be the case.

Even if all the Government’s assertions in this area were true and evidenced, their position would amount to saying that they were content to have serious abuses in the marketplace because the abusers could not afford to pay to become non-abusers. This is not an attractive or coherent proposition and it is especially unattractive when one considers the analysis of cost benefit produced by RICS, among others, which gave evidence of a beneficial financial outcome for implementing the proposals. All in all, and exactly as in Committee, it is hard to understand why on earth the Government have opposed this measure. It stops significant abuse, it is easy to do, it has almost universal industry support and it has long-term financial benefits.

I strongly support the amendment in the name of the noble Baroness, Lady Hayter, and very much hope that the Government will be able to give it the sympathetic consideration it deserves.

[Baroness Howe of Idlicote]

My Lords, I too congratulate the noble Baroness, Lady Hayter, on her determination to pursue these important changes and am delighted to have added my name to the amendment.

The proposals provide for basic consumer protection measures for the lettings market, already governing estate agents. These days, many property businesses operate both as estate agents and letting agents. The divide between the two is, in many ways, artificial. We have, at present, the ludicrous situation whereby a member of the public who walks through the door of such a business wishing to buy a house will have access to accountability if they suffer poor practice. However, if they rent a house from the same business they will not. There is access to independent redress and client money protection for those buying a house but not for those renting one. This is quite illogical and is untenable at a time when more and more young families with children are renting privately, most of them through a letting agent. We cannot have letting agents leaving boilers unfixed, properties in a state of disrepair or running off with people’s money and facing no repercussions. When people do not get the service they pay for there should be consequences for the businesses involved. That is a simple consumer right. This is not an issue of party politics but of basic common sense, which is why this amendment enjoys cross-party support, as was clear in Grand Committee.

Letting agents themselves are asking Government for the measures that this amendment provides for. They know that much of the estimated 40% of the market that operates outside existing voluntary registration schemes is damaging the reputation of the entire profession. A survey by Shelter showed that only 20% of renters trust their letting agent, with 84% disagreeing that letting agents work in the interests of their tenants. It is vital for everybody—tenants, letting agents and landlords alike—that standards are raised. I have yet to hear a convincing argument against these proposals. The Government have claimed that requiring letting agents to meet certain professional standards will push up costs. However, research by the Royal Institution of Chartered Surveyors shows that this is not true. While there is a one-off cost, that figure is quickly recouped and there is a net benefit to the economy from these changes of £21 million over 10 years.