HC Deb 04 June 1965 vol 713 cc2192-207

2.20 p.m.

Mr. William Hamilton (Fife, West)

I suppose that the most intractable social problem facing us today is housing. This has been referred to in the previous debate. No political party has yet devised a satisfactory solution to it.

Mr. Speaker

Order. The hon. Gentleman must speak up.

Mr. Hamilton

A very unusual request.

The Tory Party in the last 13 years had a cruel prejudice against local authority building for renting purposes. The building industry in that period was let loose to build increasingly for the deeper purse. A stone's throw from where I live, in the Dulwich area, houses were going up for £15,000 to £20,000 each. This did not do very much to solve the kind of housing problem of the people I represent. This was the kind of policy which was pursued by the Tory Party and increasingly intensified over the last 13 years. So far as one can see, irrespective of whatever Government are in power there will be a mixture of private house-building for sale and building by public authorities for letting purposes.

Quite rightly, Parliament allows considerable freedom to local authorities in the formulation and implementation of their housing policies. In any event, if there are abuses in the public sector they can be ventilated adequately and publicised and the electorate, if they wish, can change the policies of the public authority of which they disapprove. This is not possible in the private sector. There the buyer and the seller are left to the tender mercies of private enterprise profit-making concerns. It is in this field that the consumer needs the greatest protection. I talk about the buyer and the seller as the consumer for this purpose. It is precisely here where the consumer gets the least protection. Indeed there is less protection in the buying or the selling of a house than there is in the buying of a loaf of bread.

The transaction of buying or selling a house is usually, for most people, the biggest single business transaction that they are ever likely to engage in, very often employing all their capital, down to the last penny. Because the consumer does not do it very often, maybe once or twice in his lifetime, he knows very little about the snags or traps that may be laid or the mistakes he can make. Due to a combination of circumstances such as full employment, which we have enjoyed more or less continuously since the end of the war, early marriages and an increased birthrate, a seller's market has been created since the war, especially in the big cities and conurbations.

As a consequence of that, there have been continuous increases in house prices and there seems to be no reason at all to suppose that this is going to come to an end in the immediate future. According to the bulletin on house prices issued by the Co-operative Parmanent Building Society in February, 1965, in the last five years from the final quarter of 1959 to the last quarter of 1964 the prices of existing houses, not new houses, increased by almost 50 per cent. The exact figures are 49 per cent. for the modern type and 48 per cent. for the older house.

In London the increase has been about 70 per cent. For modern houses it has been 74 per cent., and 69 per cent. for the older houses. It is in these lush pastures that the housing estate agents flourish. That they do flourish is evidenced by the fact that new agents appear like mushrooms all over the country, especially in towns and cities. Entry into this business is completely unregulated. No qualifications whatsoever are required. Any man or woman can set up as an estate agent. This is private enterprise at its naked worst. At Question Time in this House on 28th April I described it as … one of the biggest rackets in the land today."—[OFFICIAL REPORT, 28th April, 1965; Vol. 711, c. 449.] The hon. Gentleman the Member for Harrow, Central (Mr. Grant) got up to defend it.

Since then I have received considerable correspondence, some of which I intend to quote this afternoon. Predictably, most of the estate agents who wrote to me objected to my remarks, some of them in more violent terms than others. I want to quote one of the more violent and more prejudiced letters, from Folkard and Hayward of Baker Street which says: … despite the fact that the Government rejected the registration of properly qualified estate agents"— they did not do anything of the kind in fact— with the result that any layman can set himself up as an estate agent, in fact very few unqualified agents find that they can effect business at less than the scale of commission laid down by the professional bodies of the Royal Institution of Chartered Surveyors and the Chartered Auctioneers' and Estate Agents' Institute and their two kindred associations … the vast number of agents who are properly qualified offer to the members of the public who are sufficiently discerning to use their services, as opposed to the unqualified touts, a reliable service of great integrity. Then the political bias of this agent is laid bare: It is high time you directed your efforts towards ensuring that those members of the community who stand on their own feet by living under their own roof, that save the tremendous rate burden most largely arising as a result of having to subsidise, whatever their means, thousands of the privileged class that have been given the golden rent shake in the form of a council house.

Mr. William Hamling (Woolwich, West)

Will my hon. Friend tell the House what qualification an estate agent, as distinct from a valuer or surveyor, is supposed to have?

Mr. Hamilton

Under present legislation, no qualifications are required. A man can enter the business without being qualified. My hon. Friend could enter it—I do not know why he does not—

Mr. Anthony Grant (Harrow, Central)

I know that the hon. Member for Fife, West (Mr. William Hamilton) wants to be quite fair. He is correct in saying that there is no statutory obligation to have qualifications, but we should not lose sight of the fact that a very great number of agents go through very rigorous examinations set by the Royal Institution of Chartered Surveyors, and others.

Mr. Hamilton

I do not want to be unfair, but the hon. Gentleman may agree with me when I say that the estate agents in general are all being a tarred with the same brush. Their image is not as good as possible, because a minority of them are unscrupulous—I do not know whether it is a minority or a majority, because I cannot prove it one way or the other. Later, however, I shall make some suggestions which I think are worth while. Public attention should be focused on the abuses that undoubtedly go on.

The National Association of Estate Agents asked me to quote cases. The letter said: I shall be interested to learn of any cases that may have been reported to you regarding overcharging by estate agents, or any other matter which would justify your calling this business a racket. I propose to do just that.

In certain cases, I shall not identify the writers as I do not have permission to do so, but a Mr. W. of London W.9 states: I have spent a fortnight seeking an unfurnished flat in London. All the house agents I have visited charge either 10 per cent. of the first year's rent or a month's rent. Thus for a flat rented at £500 a year, their fee would be either £50 or £41 odd. Whether they charge a student seeking a furnished 'bedsitter' at the same exorbitant rate, I cannot say. Their fees are out of all proportion to the services rendered". I have a letter from a Mr. W., who lives at Pagham Harbour, near Bognor Regis. He writes: For the last twenty years estate agents have experienced a boom. During almost the whole of that period there has been a 'sellers' market' and agents have become accustomed to expect high rates for little work … If a report on the property has to be done, the agent charges extra fees. He also gets extra fees for introducing the applicant to a prospective mortgagee—building society or otherwise. No legal work has to be done by the agent since a solicitor prepares the contract". Mr. W. also talks about misleading advertisements of houses, to which I shall also refer later.

One estate agent has given me permission to use his name. I suppose that he will not be very popular with the rest of the estate agents, but Mr. H. F. Bath, of Allan and Bath, Bournemouth, writes: In consequence of the publicity given to your allegation of the racket of estate agents' charges, which appeared in the Daily Express recently, I immediately wrote a letter to the Editor of the Daily Express which was duly published and in which I complained that there was a racket going on with regard to the charges, and I support your allegations wholeheartedly. Mr. Bath gives me a whole lot of further information, with which I shall not bother the House now.

The scale of charges is recommended—it is not statutory—by the Royal Institution of Chartered Surveyors and the Chartered Auctioneers' and Estate Agents' Institute. My point has always been that the recommended fees bear no relationship whatever to the work done. The charge is 5 per cent. on the first £500 of the sale price; 2½ per cent. on the next £4,500, and 1½ per cent. on the remainder of the price. That means that on a house selling at £2,000, the estate agent collects £62 10s.; on a £3,000 house—£87 10s.; on a £5,000 house—£137 10s.; on an £8,000 house—£182 10s., and on a £10,000 house, £212 10s. That is just for the selling of a house—

Mr. Hamling

Would not my hon. Friend agree that in contrast to or in association with the racket of lawyers' services for conveyancing, registration, and all that nonsense, these charges are not unreasonable?

Mr. Hamilton

I am aware that my hon. Friend tried to get one of these debates in order to deal with that very point. In fact, this was to have been a collective exercise to focus attention on the needless costs imposed on people seeking houses. My hon. Friend had hoped to deal with the legal side, and I am dealing with the house agent aspect. My hon. Friend did not succeed in getting a debate, but he has made his point.

In this context, I want to quote a letter from someone in Hailsham, Sussex. These are not Labour areas, but areas where people find great difficulty in getting houses. Before I read the letter, I want to point out that the fees vary a good deal from one part of the country to another. Generally speaking, the fees charged are very much higher in the South-East than elsewhere, because the discrepancy between demand and supply is that much greater in the South-East that advantage is taken of it.

The letter I will now quote is from a gentleman who was brought to court by a well-known firm of estate agents for non-payment of advertising and out-of-pocket expenses incurred by the firm in an unsuccessful attempt to sell his property in the Midlands. The action failed—this gentleman won his case. He says: You may be interested to learn that estate agents in London and the South charge a scale fee (but different to the Midlands) if the sale is effected, they charge advertising only by special arrangement in exceptional circumstances. In the Midlands, however, 'It is the accepted practice of reputable house agents to charge their advertising and out-of-pocket expenses whether the house is sold or not—if the property is sold by them then these costs plus 2 per cent. commission on the value of the property (up to £10,000) is charged'. The writer goes on: I agree with you wholeheartedly that such people derive too great a return for very little effort, indeed under this system, the more inefficient the agent, then the higher the expenses charged to the vendor, this is very wrong and requires exposure on a national scale. When I made the charge in the House a few weeks ago, the hon. Member for Harrow, Central quite rightly said that no one is obliged to sell his house through an estate agent. If one tries to sell privately one finds that the agents go round and tout for business or they send an undercover agent to try to get the vendor to put his house into the hands of an estate agent. They advertise the bait of generous mortgages, sometimes quite falsely. They advertise 95 per cent. mortgages, and the young couple go along thinking that they will have to pay only 5 per cent. of the purchase price, only to find that they are hundreds of pounds short and that they are put to all sorts of expense, anxiety and disappointment as a consequence. Some of them try to give an impression that they have a tie-up with building societies. Some of them may have such a tie-up for all I know, but they certainly try to give this impression.

Many people see the use of the estate agent as the easy way, if not the only way, of buying or selling a house. If they are buying, the estate agent provides a very ready access to the prevailing market. I accept that at once. But it means an enormous duplication of effort and information. One has only to have experience of it—and I have had such experience—to know what it means. One goes to several agents and says, "Send me details of three-bedroomed semi-detached or detached houses", and one is then deluged with information, enormously duplicated, with six or seven agents all pushing the same information into one's letter box. It is argued by the estate agents that the fees must cover the abortive activities in which they engage, but this system ought to be examined if for no other reason than that it is grossly wasteful of manpower and time.

That brings me directly to the second complaint of false advertising. Nowhere is this so blatant as in the private housing market. The claims of the manufacturers of washing powders and detergents are models of accuracy, reticence and modesty compared with estate agents' advertising of houses. The seller of the house does not object if his house is described in the most outrageously glowing terms, and the estate agent who is keen to get the highest fee possible is a very willing partner in this duplicity. The terminology which they use has long been a music hall joke. "Rural aspect" very often means that it is miles from anywhere, with mud up to one's knees. "two minutes from shops and station" means anything up to half-a-mile or a mile an Olympic runner could not do it in the time. "A kitchenette" means that there is not enough room to swing a cat. "Quaint old-world cottage" means that it is a mystery how it stands up at all.

I quote a letter from Truro in this connection: I therefore hasten, before the big moment with Mr. Jay arrives.."— I have a Question down to my right hon. Friend the President of the Board of Trade— to add a few of my own recent experiences of this sort of thing. The lady who has written the letter explains what she found when she followed up advertisements. One advertisement reads, "comprising two bedrooms". She says, Up the stairs was a landing with a bed and a cupboard on it. Leading off this landing was one bedroom approximately 12 feet by 6 feet. The advertisement said "useful outbuildings". The lady says that these were a row of tumbledown corrugated iron sheds with leaking roofs and muddy earth floors. The advertisement said, "two greenhouses". She says, These were mock-up lean-to wooden frames covered with some sort of plastic sheeting. A moderately strong wind would have blown them down. The advertisement stated: the rear of the house is screened by a small wood". That sounds very romantic. The lady says: The house was built right against the foot of a steep bank, almost a cliff, going up some 60 or 70 feet, with a few stunted trees growing on it". Mains electricity and own water". What did that describe? A pump and a well down the lane used by everybody who required 'own water.' The lady said: I have also seen a property advertised as 'on the outskirts of St. Austell with splendid views over open country, as far as Bodmin Moor on a clear day.' This was plumb in the middle of the china clay workings, most of the views being of high mounds, almost hills, of clay and sand which accumulate in these areas. This is the kind of advertisement which estate agents use. They send a man round to the house and then they get their romantic script writers in their offices to do the work. People are involved in enormous expenditure of time and effort going round these houses and being progressively disillusioned as they try to marry the description with the realities. I will leave it at that. We all know the kind of abuse that this involves.

The third complaint which I make relates to deposits requested by estate agents. Some shocking examples of this were quoted by the hon. Member for the Isle of Ely (Sir H. Legge-Bourke) when introducing his Estate Agents Bill on 22nd March, 1963. He quoted an article in the Sunday Pictorial of about that time which estimated that £1 million had been lost in 1962 by this means. Some hair-raising examples were given by the hon. Member who introduced the Bill on that occasion. The figure is probably greater today. This is three years after that debate took place. In any event, the evil still exists and will continue to exist in the jungle in this sector of private enterprise which is unchecked and unregulated.

That brings me to the last point. The Bill to which I referred was debated in March, 1963, and was talked out. It received support from both sides of the House, although there was a good deal of opposition to it. I was opposed to it on several grounds. First of all, it was much too complicated, and I believe is much too complicated, for a private Member to handle. Secondly, the Bill as drafted said nothing whatever about fees, and I think that fees are a considerable part of my objection and the objection of many other people outside the House. That Bill seemed to have been designed by a professional body to create a closed shop, a private monopoly, not designed to protect the public but designed to protect the profession.

What I suggest to my hon. Friend is fairly simple—namely, that local authorities should be permitted to conduct estate agency business in housing. They should be allowed and encouraged to keep registers of houses available for sale, and people who wish to buy houses should be able to go to the town hall or the local authority office and to get names and addresses of property and accurate descriptions of them made by local authority officers who have no particular axe to grind. This is not to say that estate agents should not continue to exist, but the Government should take action to reduce and standardise the fees, to establish a registration or licensing board of control with representatives from all the existing professions and institutions—

Mr. Speaker

Order. I think that the hon. Member is getting rather far into a discussion involving legislation, which is almost the only topic of which I can think which he may not discuss.

Mr. Hamilton

I am obliged, Mr. Speaker. I thought that I was getting very near the line. Perhaps I might make the other two points which I wish to make which I should like my hon. Friend to consider—the establishment of a much stricter code of conduct and ethics, which I believe would not necessitate legislation, and to require compulsory insurance of all estate agents against dishonesty or fraud.

As my hon. Friend the Member for Woolwich, West (Mr. Hamling) pointed out, this is only a relatively small part of the problem involved in the sale or purchase of a house. Solicitors' fees, mortgage interest charges, surveyors' fees and the rest all combine to make the burden of house purchase increasingly intolerable. It seems to me and to many other people that there are many stables to be cleaned out in this sector of our national life. To the extent that the Government do this job thoroughly and fairly, they will earn the gratitude of millions of our citizens. I should like from the Government a firm and categorical assurance that they will do precisely that.

2.50 p.m.

Mr. Anthony Grant (Harrow Central)

I shall be very brief. I listened with much amusement to the descriptions of advertisements given by the hon. Member for Fife, West (Mr. William Hamilton), but I remind him that these agents were acting solely for the seller and not for the buyer and that the buyer pays no commission at all. He is entitled to instruct an agent to represent him to cut through this procedure. I am certain that the hon. Member would not like to employ an agent who advertised, "Ramshackle hovel near Westminster for sale by Labour M.P. who will shortly be leaving the House".

Mr. Hamilton

That would not be accurate.

Mr. Grant

I, as a practising solicitor, know probably better than does the hon. Member that there are a small number of bad, dishonest and disreputable agents who are guilty of all the things about which he complained, such as touting, misleading advertisements—all practices condemned by the professional bodies which represent the vast majority of responsible agents. It should be noted that it is mostly the minority of bad agents who charge considerably higher commission than the scale laid down by the reputable bodies. There are many more good agents than there are bad, and in my experience very few of them have to sue for their commission. In my professional experience many of them have no complaints from their clients and their clients come back to them again.

Apart from a small increase in 1958, the commission has not been increased for about the last 50 years. Although it is on an ad valorem basis and rises with the value of the property we should not lose sight of the fact that overheads, including rent, rates, staff and motor cars and all the other essential features of an estate agent's business, have gone up rather more than the value of property, so that in that sense estate agents are not necessarily any better off. Moreover, the rate of commission in this country is rather less than it is abroad, including America and Europe.

There is no need for anyone to use an agent, but it is usually found that by doing so a better price is obtained, anxiety is avoided and the citizen is relieved of many of the negotiating problems. That is precisely why the public feel that it is worth while to pay this commission and to use an agent, and the vast majority are completely satisfied.

I am surprised that the hon. Member did not mention that the greatest trouble, apart from touting and misleading advertisements, which members of the public suffer from disreputable agents is the fact that they are the sort of people who are condemned entirely by the nine professional bodies. I refer to the agent who gets an innocent person to sign a committing document without obtaining proper legal advice. This practice is condemned not only by the legal profession but by the reputable estate agents. The best advice to people who go to buy a house at an agent's office is to leave their fountain pens and pencils behind and not to sign anything. If an agent persuades people to sign a contract, one can almost certainly guarantee that he is one of those who do not belong to a professional body and who are condemned by such bodies and over whom statutory control would be useful.

We have all enjoyed the hilarious speech of the hon. Member, but he fell into the trap of condemning a large responsible and respectable body of people because of dishonesty and disreputability on the part of a small number. The hon. Member said that he had no figures, but I can tell him that between 1947 and 1957 there were about 18 convictions a year against estate agents for fraud. That is a remarkably small proportion. The matter should, therefore, be kept in perspective. It would be most misleading if this debate gave the impression that bad agents were anything but a small and much publicised minority. The vast majority are respectable, honest, responsible people rendering a valuable service to the public.

2.56 p.m.

The Joint Under-Secretary of State for the Home Department (Mr. George Thomas)

My hon. Friend the Member for Fife, West (Mr. William Hamilton) has earned for himself a reputation for being outspoken and courageous. Today, he has rendered a service by bringing to the attention of the House a matter which is of the utmost concern to every family in the land. People who never thought that they would want to sell their house sudenly find themselves requiring the service of professional people, and the question of the fees to be charged is one that for many reasons causes anxiety in the minds of those who are about to buy their own homes.

The hon. Member for Harrow, Central (Mr. Grant), to whom I am grateful for being so brief, rather concentrated his argument accordingly, but I do not agree that my hon. Friend had abused the whole profession. He indicated rather that he was speaking of a part of the profession and I had the feeling that he was calling for certain controls because a minority is able to abuse the existing position.

It is true that any man can put up a plate outside his house and call himself an estate agent without any knowledge of property; and that however dubious his record might be the police cannot interfere. He can establish himself as an estate agent. No one is more disturbed about this than the reputable estate agents themselves.

I suppose that all of us have from time to time received representations from the Chartered Institute, from the Chartered Land Agents' Society, or the Chartered Auctioneers and Estate Agents asking for action to be taken to prevent this abuse. As Mr. Speaker has reminded us, however, in this Adjournment debate we have to deal with things as they are, for legislation is out of the question. There is, therefore, very little that we can do.

My hon. Friend spoke about excessive fees. There is no statutory control over the fees that can be charged. People would be wise, when they enter into negotiations with any estate agent, to have an understanding at the beginning of what the fees are likely to be. As my hon. Friend has been told before, this question is now being considered by the Government as part of the general review of the cost of house purchase on which we are embarked. The Government seek to establish as best they can grounds for helping to reduce the cost of house purchase, but, first, we have to undertake this major review.

Sometimes it is suggested, and it seems to have been in the air today, that the fees to be charged should be related to the proportion of work done rather than to the price of the house and that, somehow, it is wrong for the fees to be related to whether a house costs £10,000 or £2,000. This could lead to difficulties, particularly for the sellers of small houses, upon whom a heavier burden would fall. There would be an element of uncertainty, even more than there is today, because no one would know what the fee would be likely to be at the end of the day, and nobody has yet been able to establish how we can calculate the amount of work that is done professionally by an estate agent in the selling of a house, what inquiries he undertakes and the other work in which he is involved.

I understand that estate agents make their charges only on completed transactions, but there are many abortive transactions. People come to make inquiries and an agent's office has to be kept open for them. Obviously, all this is added into the question of the fee that an agent ultimately charges.

My hon. Friend raised the question of deposits and referred to the hon. Member for the Isle of Ely (Sir H. Legge-Bourke), who had indicated that £1 million was lost in 1962 by those who had placed deposits. Again, from both sides of the House, hon. Members will know of people struggling to buy their homes who have fallen into the hands of unscrupulous people and have lost their deposit. I have tried to help such people myself in the City of Cardiff when this has occurred, not too often, but from time to time.

The misappropriation of funds is, of course, a criminal offence and could be dealt with in that way, but I cannot see how the sharp practice which unscrupulous agents might adopt could be corrected without legislation. There are no remedies open to the Home Office or to any other Government Department under the law as it stands.

I turn to the question of misleading advertisements. Like my hon. Friend, I find pleasure from time to time in reading advertisements of houses that I know. I recognise them because I know the address and not by the description which is given. I assure the House that my right hon. Friends the President of the Board of Trade and the Minister of Housing and Local Government are both embarked upon considering whether it would be appropriate to extend the scope of new legislation which is being prepared on trade descriptions to include houses and advertisements for houses.

The Advertising Standards Authority, which is the voluntary system of control within the advertising industry, is prepared to look into cases of misleading advertising of all kinds with the appropriate professional body. My hon. Friend reminded us that he has tabled a Question for answer later in the month on this subject. Some of these advertisements are so misleading that I believe that the public divide by three or four when they see advertisements. In any case, anyone would be foolish to enter upon a transaction without seeing for himself, although, as my hon. Friend said, it can lead to a lot of cost when people travel to view property upon which otherwise they would not have cared to waste their time.

My hon. Friend made the constructive suggestion that local authorities should conduct estate agencies themselves. At that point, Mr. Speaker, you drew our attention to the fact that legislation would be required. My hon. Friend suggested that local authorities might have a register of small houses for sale. This, I suppose, could be possible without legislation, though it is not very likely. My right hon. Friend the Minister of Housing and Local Government is at present considering this possibility. He is pursuing the matter with the local authority associations and with a number of local authorities themselves. He is considering the possibility of estab- lishing registers in selected areas on an experimental basis. It is possible that we shall find a new chapter in the business of estate agency if this experiment is entered upon and if it succeeds.

I remind the House that there are difficulties in this matter. Local authorities could not offer any guarantee to prospective buyers that properties on the register were not due for demolition or compulsory purchase. It might be all right on the day on which a prospective purchaser looked at the register, but if the local authority took a decision a little later on a clearance order question it would be greatly embarrassed by the register that had been in its possession and it would be open to much criticism.

Even if the register were with the local authority, it would still be necessary to employ a solicitor, the hon. Member for Harrow, Central will be pleased to hear, to make the necessary searching inquiries. If the vendor offered his property through the local authority register and through an estate agent at the same time, and even if the house were purchased due to an inspection of the register, the estate agent would still be able to claim his fee.

I agree with my hon. Friend that the purchase of a house is the biggest transaction that most people undertake in the whole of their lives. It ought to be a question where needless fears and anxieties of dishonesty do not arise. The plain truth is that there are people in large numbers all over the land who feel that things are not what they ought to be.

I conclude by saying that the professional organisations have tried for years to get the House to help them to put their house in order. Until the House is prepared to do that, there is no really satisfactory solution to this matter, but I can assure my hon. Friend that the Government are resolved to do their utmost, in their major review, now being undertaken, of the cost of house purchase, to ensure that fair play and fair prices are guaranteed.

Mr. Graham Page (Crosby)

I am sure that the House was a little amazed at the statement about local authorities entering into the estate agency business. I hope that the hon. Gentleman will assure the House that although there are many estate agents who are not qualified as members of the chartered bodies they do a great service to the public as estate agents and sellers of property. I hope that any scheme which the Government may have to put on the local authority the responsibility of carrying out estate agency will not interfere with the reasonable profession which people are carrying on.

Mr. Thomas

I am grateful to the hon. Member. I do not want to leave the wrong impression. I was not suggesting that local authorities will enter into the full estate agency business, but that my right hon. Friend the Minister of Housing and Local Government—and I watch these words carefully—is at present pursuing with the local authority associations and a number of local authorities the possibility of establishing a register of houses for sale.

That is the question which is now being considered seriously and I think that that was the request which my hon. Friend the Member for Fife, West was making.