Letting Agents

John Healey Excerpts

Wednesday 27th February 2013 Westminster Hall

[John Healey (Wentworth and Dearne) (Lab)]

I came here to support my hon. Friend the Member for Rotherham (Sarah Champion) rather than to speak, which given the time, is probably just as well, but I am prompted to make three points. First, there is a problem and it is growing. Secondly, there is a solution and wide support. Thirdly, there is really no excuse for the Minister not to act.

First, the problem is clear. This is a field with no legal requirements or legal restraints for people setting up and running a letting agent or a managing agency. There is no legal requirement to belong to a trade association or to conform to standards of conduct; nor is there a legal requirement to offer some sort of redress scheme or safeguards for consumers. The stories of problems with up-front, unjustified, unfair fees are growing, as are the problems with misleading ads, and with repairs not being done or visits not even being made. My hon. Friend the Member for Sheffield Central (Paul Blomfield) mentioned the Citizens Advice research and the scale of dissatisfaction with letting agents. Which? has done a similar survey, showing that letting agents, out of 50 different consumer markets, came second bottom for dissatisfaction—below train companies and even insurance providers. Of course, the private rented sector, for the first time in half a century, is larger than that of public and social housing. Some 8.5 million people are renting privately, and 1 million families with kids are in private rented accommodation. This is a growing problem.

Secondly, on the solution, a regulatory framework is in place for estate agents; as suggested by the hon. Member for Southport (John Pugh), why not have it for letting agents and managing agents as well? Following the Rugg review in 2009, proposals are on the stocks, with wide support. The formal consultation that the previous Government held and published in February 2010 confirmed that the majority of respondents were behind a legal, mandatory framework of regulation for letting agents. The chair of the Residential Landlords Association told the Select Committee on Communities and Local Government in evidence this month:

“Landlords are just as likely to suffer from a criminal or fraudulent agent as a tenant is… All the legitimate agents are supporting legislation. We feel that that would be a good thing.”

There is cross-party support in this debate for action. Even the Office of Fair Trading has made recommendations, as my hon. Friend the Member for Rotherham has said, and it must be borne in mind that, with its restricted remit confining it principally to competition issues, it is normally constrained from offering a wide-ranging and full set of recommendations, but it has done so in this case.

Thirdly and finally, I say to the Minister that there is no excuse now for not acting. The need is clear; the support is there; and the proposals have been independently recommended by the Rugg review. Public consultation has been formally conducted on those proposals. The legislative vehicle—the Enterprise and Regulatory Reform Bill—is in the other place at the moment. A coherent change to the legislation has been proposed and debated in Committee. The debate on Report, when amendments are normally made in the other place, is about to take place. Five years ago, the Minister, when moving a clause to a Bill in this House, said:

“The new clause would bring residential lettings within the established legal framework.”––[Official Report, Consumers, Estate Agents and Redress Public Bill Committee, 24 April 2007; c. 192.]

He wanted to do that five years ago, and as Housing Minister, he now has the privilege and the position to do so. I hope that he will take that opportunity and confirm to us today in this debate that that is exactly what he intends to do.

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[Jack Dromey]

We moved decisively down the path for comprehensive regulation of the sector under the last Government.

[John Healey]

It is of course hard for me to answer for our colleague who would have been in position as Housing Minister or the Minister responsible at the time, but does my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) agree that it might have been that the case that was put at the time from the Opposition Front Bench was not persuasive enough? It certainly is now.

[Jack Dromey]

My right hon. Friend makes a very good point. What the Labour Government did was to establish the Rugg review. The Rugg review made comprehensive proposals, including in respect of regulation of letting agents. We moved decisively down that path.

The hon. Gentleman who is now the Housing Minister, unless he has undergone a damascene conversion and believes the opposite of what he said five years ago in opposition, will no doubt say when he responds, “Yes, this Government now intend to act,” because thus far there has been a lamentable failure to act, despite the chorus of voices calling for change. I am talking about tenants and landlords. The Labour party put forward a very powerful policy proposal, supported by the Association of Residential Letting Agents, the National Landlords Association, the Residential Landlords Association, the British Property Federation, the Royal Institution of Chartered Surveyors and many other players in the housing field, including registered social landlords, many of which now have private rented portfolios. They all back the proposals that we put forward, calling for change.

I pay tribute to the right hon. and hon. Members who have taken part in today’s debate, including the hon. Member for Southport (John Pugh), for the way in which they have spoken up. It is just like we saw in the Opposition day debate last month: there is a growing cross-party consensus that says, “This has to end.” In relation to how it ends, the hon. Gentleman was right when he said that the idea of a voluntary arrangement will not wash.

I pay tribute to Ian Potter and the work of ARLA. For two decades, it has campaigned for regulation, but in the meantime it has also tried to raise standards in the sector. However, that is on a voluntary basis—the rogues do not sign up. That organisation sometimes takes action against its own members who have acted disreputably, but it has arrived, out of bitter experience, at the clear conclusion that a voluntary scheme will never work; regulation is essential. The case put forward by the Royal Institution of Chartered Surveyors of the potential benefit to the economy of £20 million further reinforces the case for change.

The case is overwhelming. No more evidence is required. An all-party consensus is emerging. The Government have said that they have an open mind on this issue. An open mind, however, is no longer good enough. I ask the hon. Member for Hertford and Stortford (Mr Prisk), who is now the Minister for Housing, to have the courage of his convictions five years ago and to tell the House today that this Government will at last move to regulate letting agents.

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[Mr Prisk]

People will be encouraged if that is confirmation that the Labour party, were it to be elected in some strange manner in a couple of years’ time, will have rent controls. We will see how that develops, but perhaps I should persist, because other hon. Members have raised questions.

Targeted, effective regulation that is carefully thought through, of a statutory nature or otherwise, has a role to play. That is why we have made a particular effort to crack down on rogue landlords, for example, in the case of beds in sheds, which is a dreadful scourge. Frankly, too little has been done in the past. It is an area where people are genuinely exploited and where we want to use the law. That, in a sense, comes to the second question.

Various people have asserted in this debate that letting agents are completely unregulated, but that is not true. That is a myth, which it is important to dispel. We should not be telling tenants that they have no controls and that there is nothing there to protect them and no one to turn to to help them challenge someone who is behaving badly. Whatever our political perspective might be, there is a genuine interest in getting the message right.

Letting agents are subject to regulation. It is important to flag that up. The hon. Member for Sheffield Central (Paul Blomfield) highlighted a specific issue around students and the fact that they were being told incorrect things about market conditions. The Consumer Protection from Unfair Trading Regulations 2008 offer protection against someone who is deliberately misleading and pulling the wool over people’s eyes, enabling individual tenants the opportunity to challenge them.

Also, the Unfair Terms in Consumer Contracts Regulations 1999 protect tenants from unfair conditions. Several hon. Members mentioned the way in which tenants can find themselves facing unfair restrictions on the way in which they can use a property. We have seen—several hon. Members have mentioned this—that trading standards bodies can and will prosecute letting agents. I mentioned a case in West Bromwich in a previous debate and we have heard about a case in Rotherham. In Oxford, a letting agent had to pay £300,000 in fines and costs for consumer protection-related and money-laundering offences after failing to return tenants’ deposits—which several hon. Members have mentioned—letting properties without the authority of their owners, and not passing on rent. So action can be taken. There was a similar case in Plymouth, where the letting agent was jailed for two years for spending client money on foreign holidays—again, that was mentioned by one hon. Member—and propping up his business. That individual may yet face further action to seize his assets. So, serious sanctions are in place, which our constituents can now use. It is important to flag that up.

[John Healey]

That is a statement of fact, not an argument against proper regulation. The overwhelming evidence mentioned by everybody in the debate is that what is in place at the moment is not successful, not sufficient and not satisfactory to protect tenants and landlords. A statement of fact about the general consumer protection that is in place is not sufficient.

[Mr Prisk]

It is important to recognise that we need a number of elements to deal with the different problems that have been raised. We need to make sure that we use existing consumer protection legislation now and that enforcement is put in place effectively. I want trading standards bodies to take action not just in the serious cases, such as those that I have flagged up, but in the less serious cases. We have a problem with enforcement. The right hon. Gentleman is right. We cannot mandate trading standards bodies to act in individual cases, but I am determined to encourage those national bodies to ensure that they tackle these issues right across the marketplace. It is not good enough at the moment. We want to make it stronger.

As the hon. Member for Rotherham said, many letting agents who provide services do so quite well and within the law. Several hon. Members have highlighted the Which? report, which showed that one in five tenants are dissatisfied with their agent. That is still too high, but I think that if it is one in five, people will realise that the vast majority—four out of five—seem satisfied with the service that they get. The Which? report is a pretty independent and extensive survey in that context. However, there remain too many agents whose service is poor and unacceptable. Several hon. Members, including the hon. Member for Birmingham, Erdington, mentioned the fact that this is the second lowest of consumer markets.

Our view has been that regulation should not be the first option. Although we recognise that there might be a case for it, the challenge is to make sure that existing law works properly. There is a temptation among all of us as politicians to believe that passing new legislation will deal with people who currently ignore existing regulation. I am sceptical that the changes we make, of a statutory nature or otherwise, will actually catch the rogues that Members of all parties have highlighted. That is the challenge. I am open to consideration. We are looking carefully at what the Office of Fair Trading has said. There are some strong and positive elements there. However, if we are to do this properly—if we are to catch the rogue agents and landlords who perfectly happily flout every other law—we need to make sure that if we change the rules and change the law, we do so in a way that will deal with the individuals in question.