Royal Institution of Chartered Surveyors: Property Act Receiverships

Debate between Kevin Brennan and Phillip Lee

Tuesday 18th April 2017 Westminster Hall

[Dr Lee]

Of course, in a difficult situation where all of someone’s funds have been exhausted, I recognise that litigation would be a problem. It would not be appropriate for me as a Minister to comment on an individual case, but I hear what the hon. Lady says and will take away her suggestions.

[Kevin Brennan]

The Minister mentioned Cardiff West, which is my constituency; my hon. Friend’s constituency is Cardiff Central. The point is not that we are discussing an individual case but that Members are trying to describe a systemic problem that exists in all our constituencies across the country. In many cases, as I outlined, constituents are unable to reveal in full in public what they have been through because of confidentiality agreements. As a Minister, does he not see the need for the Government to consider action along the lines suggested by my hon. Friend the Member for Cardiff Central (Jo Stevens) as a result of the systemic concern that Members are expressing?

[Dr Lee]

I thank the hon. Gentleman for his intervention. In the particular case that the hon. Member for Cardiff Central raised, a series of investigations have not uncovered any wrongdoing. The Government are listening in terms of the problem vis-à-vis small, medium and larger enterprises that other Members raised, and we will be taking that away, but as things stand, we have found no evidence of anything untoward being done by any of these organisations.

Private law actions are one type of remedy, but they do not preclude the question of whether there should also be regulation of other kinds. Receivership is not specifically regulated. It is not subject to insolvency regulation. Receivers are, however, generally members of professional organisations with regulatory functions, and they will be subject to the regulatory rules applied by their professional body.

Most receivers are likely to be members of the Royal Institution of Chartered Surveyors. RICS was established by royal charter in 1868 and is independent of Government. To protect consumers and to maintain and develop the standing of the profession at home and internationally, RICS sets professional standards for its members and takes disciplinary action against them for breaches of its rules. RICS’s regulatory regime is governed by an independent regulatory board, which has a majority of non-surveyor members. RICS has recently announced new rules to deal with conflicts of interest that will be introduced early next year. Other receivers belong to the Insolvency Practitioners Association, which also has regulatory powers.

Over the years, RICS and the IPA have both responded to concerns that there are general issues that need to be addressed in the field of receivership. In 1999, they entered into a memorandum of understanding relating to a voluntary registration scheme for receivers to provide a system of voluntary regulation against agreed standards. The memorandum was updated in 2012 and 2015.

Some 200 receivers are also members of the Association of Property and Fixed Charge Receivers, also known as the Non-Administrative Receivers Association. It is a relatively recently formed body. It aims to represent the interests of receivers and to promote better standards. Unlike RICS and the IPA, it is not a regulatory body. NARA, RICS and the IPA are jointly reviewing the professional practice standards underpinning the work of their members as receivers. The review is expected to include a public consultation, which will consider the degree of independence required from the lender and the borrower in receivership appointments. The new scheme should strengthen the self-regulatory regime.

Receivers are appointed only where a lender has concerns about the value of its loan. The borrower may not agree with the lender’s action, but should have been aware of the possibility that a receiver might be appointed in certain circumstances from the outset. One of the potential problems is that the receiver may face a conflict of interest. Conflicts arise in many areas of professional practice and are generally successfully dealt with in sensible and proportionate ways. Sometimes professional businesses have to turn down business opportunities because they are conflicted and the conflict cannot otherwise properly be managed. Sometimes of course the right action is not taken and legal and regulatory action may follow against those who got it wrong.

The hon. Member for Cardiff Central has identified cases where things may have gone wrong. I am not in a position to say whether there were unacceptable or improperly managed conflicts of interest that ought not to have been permitted to occur in Mr Shabir’s case. That is a matter for the courts and the appropriate authorities in the light of the law and relevant regulatory rules. We should also remember when considering Mr Shabir’s case and others like it that receivership has existed for many years and has during that time presumably worked well in many cases. The independent regulation of receivers through their professional bodies is also long-established and is subject to ongoing review with the objective of improving standards and better protecting consumers.

A number of points were made by hon. Members during the debate. I will respond to them as best I can, but insolvency, financial services regulation and the professional regulation of surveyors are not matters for which the Ministry of Justice is responsible. I will, however, ensure that the points raised on those topics by the hon. Member for Cardiff Central and other hon. Members during our debate are passed on to the appropriate Departments.

The hon. Member for Cardiff Central asked whether RICS has been doing its job. The Royal Institution of Chartered Surveyors has investigated the allegations made by Mr Shabir and has not found evidence of misconduct. It has also offered to speak with the hon. Lady to discuss her concerns, but says that it cannot reopen its investigation without new evidence. The Serious Fraud Office carried out an investigation and decided there was insufficient evidence to meet its criteria for prosecution.

The hon. Lady also asked why the Government have not acted against Lloyds. The Government believe that financial service providers must be properly regulated, but the case for more or different regulation must be made before the present system is changed. The Financial Conduct Authority is considering matters relevant to the regulation of the provision of financial services to small and medium-sized enterprises. The Government will consider the FCA report when it is published. It would not be appropriate for the Government to comment further while the process is ongoing.

The Opposition Front-Bench spokesman, the hon. Member for Sefton Central (Bill Esterson) asked a question about wider economic and regulatory issues. I will refer all the questions regarding the working of the economy to the Treasury for consideration. The FCA is still working on the issues raised in the Tomlinson report. As I have said already, it would not be appropriate to anticipate its investigations and the report.

In conclusion, I acknowledge the vigour and tenacity with which the hon. Member for Cardiff Central has campaigned on behalf of Mr Shabir and others. I appreciate the concerns she has raised and the very difficult situations that have been created for her constituent and others by the financial crisis of 2008-09. I cannot intervene in specific cases or commit the Government to any particular action to change the legal or regulatory framework relating to receivers. I can, however, promise that the Ministry of Justice will continue to keep the issues for which it is responsible relating to receivers under review and pass on concerns raised to other Government Departments as necessary.