Leasehold and Freehold Reform Bill

Lord Best Excerpts

2nd reading
Wednesday 27th March 2024 Lords Chamber

[Lord Best (CB)]

My Lords, the Bill before us contains some very welcome reforms but also some omissions. It is silent on one overarching issue: the need for a regulator of property agents.

Any reform of leasehold needs to consider the arrangements for the sale of leasehold property and for the ongoing management of leasehold flats. A good agent, providing an effective service at a fair price, can enhance the quality of life for the residents, and a bad agent, demonstrating poor service, incompetence or misconduct, can make life miserable for leaseholders. Sadly, there are all too many examples of mis-selling, exorbitant service charges, lack of transparency and accountability, and overpriced leasehold management. In a survey by the Property Institute, no less than 62% of those who have bought leasehold homes maintain that they were given misleading or insufficient information. I suspect that most of us speaking in this debate have been sent tales of abysmal management and excessive fees, as illustrated by the noble Baronesses, Lady Taylor and Lady Thornhill. Yet in most cases leaseholders cannot change their managing agent and escape this trap.

The role of a new regulator of property agents would be to encourage and support the good, raise standards, and drive out the bad. The regulator would require agents to be suitably qualified and to engage in continuous professional development. The regulator would require adherence to codes of practice, probably with one overarching code and then specific codes for each specialism within the sector. Only those individuals and firms meeting the regulator’s criteria would be given a licence to operate. The regulator would have powers to discipline those who breached the relevant code, including the power to withdraw their licence.

I declare my housing and property interests as on the register and would add that I chaired the Government’s Regulation of Property Agents Working Group, which presented its report to government back in July 2019. The working group comprised representatives of the sector and consumers, and it was unanimous in strongly recommending the establishment of a regulator of property agents—estate agents, lettings agents and managing agents, not least of retirement accommodation. Over recent weeks your Lordships’ Committee on Industry and Regulators, of which I am a member, has been revisiting the working group’s 2019 report. Its conclusions were put to Secretary of State Michael Gove last week, and received widespread publicity. The Select Committee endorsed in all respects the earlier report, adding some extra emphasis for engagement by a new regulator with the consumers—the tenants, buyers and leaseholders. The Lords committee noted the strongly held views of those representing the consumer, with powerful advocacy from Generation Rent and the Leasehold Knowledge Partnership, but there was also unanimity of view from the relevant professional bodies and industry stakeholders.

In the briefings for our debate today, regulation of the sector is the number one issue for both the Property Institute—previously the Association of Residential Managing Agents and the Institute of Residential Property Management—representing 6,000 property agents, and Propertymark, incorporating the National Association of Estate Agents and the Association of Residential Letting Agents, with some 18,000 member agents. That is the industry’s top ask, as we consider amendments to the Bill. Indeed, the urgency for regulatory reform has increased now that the Building Safety Act 2023 has meant managing agents handling huge sums of leaseholders’ and public money to ensure that remedial work is carried out. It is more important than ever that only reputable and qualified professional agents are in charge.

It seems curious that, with support from all sides, and the obvious popularity of raising standards and rooting out bad practice in this sector, the Government have failed to include the creation of a regulator of property agents among their reforms to the leasehold sector in the Bill. Is it not necessary? None of the Select Committee’s expert witnesses or the relevant consumer bodies has claimed that the industry does not need this change or that self-regulation is sufficient. The preparation of a voluntary code of practice by an industry group convened by the RICS and chaired by the noble Baroness, Lady Hayter of Kentish Town, has paved the way for a regulator to determine the content of a statutory code. But all parties are agreed that a regulator with independence from the sector and real teeth is essential.

Too late? No one can say that the proposals for a regulator have come too late to be included in the Bill: the Government have had the Regulation of Property Agents report, the RoPA report, for nearly five years.

Too costly? It cannot be argued that the cost would be unduly burdensome. For example, some £15 million a year could be raised by a levy of £3 per annum for every leasehold property under management, Clearly, this would not add significantly to overheads or deter new entrants to the sector.

An ombudsman instead? Could a more powerful ombudsman scheme achieve a similar outcome more simply than by creating a new regulator? A regulator and an ombudsman perform complementary but distinct roles, as demonstrated by the financial services sector and the social housing sector. The ombudsman—and a single ombudsman service is certainly to be preferred to the current situation with two competing redress schemes that can cause confusion—can respond only to complaints by individuals, and the ombudsman’s powers to insist on codes of practice and sanction offenders are necessarily limited. By contrast, a regulator has a wide brief; can specify required qualifications; can take account of information from many sources, for example, from neighbouring agents who notice abuses, from press reports, from whistleblowers within firms, et cetera; and can have the flexibility to act accordingly.

The property agency sector has a vital role to play in keeping people safe and well, providing a valued service for owners and landlords, as well as for leaseholders and tenants. Good agents ought to be held in high regard. Bringing the industry into a properly regulated framework would professionalise the whole sector and give it the status and prestige it deserves. I therefore say to the Minister that there is still time to introduce an enabling clause into the Bill to empower the Secretary of State to create a regulator of property agents. This would be greeted with acclaim by all parties involved, especially by the leaseholders suffering at the hands of badly performing agents. Let us put this key component into the Bill while we can: who knows when the opportunity will arise again?