§ Order for Second Reading read.9.35 am
§ Mr. Anthony Coombs (Wyre Forest)
I beg to move, That the Bill be now read a Second time.
It gives me great pleasure to move the motion. I pay tribute to my hon. Friend the Member for Coventry, South-West (Mr. Butcher) in whose name the Bill originated. My hon. Friend takes a great interest in these matters. He has not been well recently, but I am sure that all hon. Members will send him their best wishes for a speedy recovery. I spoke to my hon. Friend's wife this morning and I was told that he is on the way to a full recovery and will be with us again soon.
The main aim of the Bill, of which I am the foster father, is the protection of consumers but it also aims to raise the standards and esteem of the estate agency profession. It is not an anti-estate agents Bill; it will assist the estate agency profession to achieve a higher and better public profile. One magazine dealing with the estate agency profession described it as the profession that we love to hate—rather like the Mick McManus of the professions. Anybody whose wrestling knowledge goes back far enough will know that Mick McManus had a very good side. He was extremely helpful to charities and was a distinguished antique collector. Much of the opprobrium that he suffered was totally unjustified.
The Bill aims at only the small minority of estate agents who give misleading or false information to the detriment of the public. I have received wide support from various organisations, including the Consumers Association, to which I pay tribute for the excellent way in which it has gone about consulting and assisting me and my hon. Friend the Member for Coventry, South-West in the preparation of the Bill. I pay tribute also to members of the estate agency profession, in particular the National Association of Estate Agents, the institute of valuers, the British Property Federation, the Royal Institution of Chartered Surveyors and the Law Society. Hon. Members are present on both sides of the House, which is a sign of the support that the Bill enjoys.
What does the Bill, with its seven clauses and one schedule, do? The aim is simple—to make it an offence punishable by a fine to make a false or misleading statement about a prescribed matter in the course of a business of residential estate agency. That would bring the sale of land through estate agency—land is defined as 1220 buildings and parts of buildings—into line with the sale of goods under the Trade Descriptions Act 1968. The penalties for transgressing under the Bill are, on summary conviction, a fine of £2,000 and, on conviction on indictment in the Crown court, an unlimited fine.
As land and buildings do not come under the Trade Descriptions Act, the present position is full of anomalies. I shall give just two examples. First, I am told that if one sells a free-standing, do-it-yourself gas installation kit and says that it is approved by British Gas when it is not, one can be convicted under the Act. But if that kit is already installed in a house, effectively one can say what one likes about it. One can say that it is approved by British Gas or anyone else. Even if that claim is false, one cannot be prosecuted.
Secondly, if a hotelier falsely advertises his hotel as being adjacent to a railway station, he can be prosecuted under the Trade Descriptions Act. But if an agent does exactly the same thing when advertising that hotel for sale as part of the sale particulars, he can get away scot free and mislead the public without being held responsible under the Act.
§ Mr. Roger Moate (Faversham)
Is not it likely that at some stage in the proceedings it will become evident to the purchaser that the hotel is or is not adjacent to the railway station?
§ Mr. Coombs
That is a perfectly valid point. I shall describe the costs and inconveniences and the distress that can be caused to purchasers as a result of sales of property not being covered by the Trade Descriptions Act. However, I agree that, except in Scotland, it is difficult to get into a position in which one has a contractual obligation to purchase something without being aware of misleading descriptions.
Significant costs and inconveniences are caused to purchasers as a result of property not being included under the Trade Descriptions Act. The Bill is designed to ensure that property is covered by the Act. Examples of such cost, inconvenience and stress caused by false and misleading statements abound. Some have been given to me by several organisations, both within and outside the property profession.
In 1988 a Mr. K. Ross of Petersfield found that the house that he wanted to buy, which had been described as comprising 1,141 sq. ft., comprised only 855 sq. ft. A gentleman from Reading found that the dimensions of the property in which he was interested had been inflated by over 15 per cent. The dimensions given were significantly misleading. A Mrs. M. Pennington wrote to the Consumers Association about a bungalow which she eventually bought. Not only were all the room dimensions given in the estate agent's particulars wrong by up to 2 ft., but, first, the property was said to have a bathroom with separate shower and WC when it had no bath but only a shower room and WC; secondly, the property was said to have full central heating when it had only storage heaters and then not in every room; thirdly, it was said to have a lagged cylinder and immersion heater when it had only an unlagged cylinder.
Mr. I. M. of north Staffordshire wrote to the Consumers Association giving the vendor's view. He was trying to sell a farmhouse. It was advertised as having a modernised kitchen when the farmhouse had no amenities whatever. More significantly and causing more difficulty, 1221 in five cases reported recently to the Consumers Association properties were described as freehold when in fact they were leasehold. In one case, a potential purchaser spent £431 on a survey on the basis of that information only to discover that the property was not freehold, as he wanted. Effectively he wasted his money.
Another example was given by someone who was told that a house had a National House Building Council guarantee. On the basis of that, he undertook two 500-mile round trips to see the property only to discover that there was no NHBC guarantee. Probably the most notorious case is from 1984—admittedly it is a little dated. It was brought to the attention of the world by the Consumers Association magazine Which? in November 1984. It was the notorious case of, "Now you see it, now you don't." A tower block of flats was blanked out of the picture in a set of particulars to give the impression that the house enjoyed a rural aspect when plainly it did not.
All those misleading descriptions give rise to costs. First, they cause inconvenience when people make journeys on the basis of a set of particulars and find that the house is significantly different from them. Secondly, people have surveys done on the basis of the information given, as I have described. Thirdly, some people justifiably use the dimensions in the sales particulars, because they are the only measurements readily available, to order carpets. If the measurements given are significantly out of kilter with reality, substantial waste can occur. Fourthly, and possibly most importantly, we should not forget that the purchase of a house is usually someone's most important purchase. The fact that they can find on occasions that particulars are misleading or false to a material degree leads to substantial worry and anxiety. That is the reason for this measure.
Some people may argue—it is an argument that I understand, although not one with which I agree, for obvious reasons—that caveat emptor should apply to house purchasers. In the main, except in Scotland, where the offer and purchase system leads to a greater commitment at an earlier stage, people do not buy houses purely on the basis of the descriptions in the estate agent's particulars, but, as the vast majority of property professionals act in a professional and accurate manner, I do not see any reason why house purchasers, alone among the vast majority of purchasers, should be denied the protection of consumer legislation, which outlaws false or misleading stastements to a material degree. For that reason, my hon. Friend the Member for Coventry, South-West, I hope with the support of both sides of the House, has introduced this Bill. I believe that the Bill will lead to better standards of presentation throughout the estate agency business and a better quality of information for consumers.
It is beyond peradventure that the Bill is not the only way of raising standards in the estate agency profession. Indeed, it deals with only one part of estate agents' activities—the production of accurate particulars and making representations about properties. The main statute dealing with estate agencies is the Estate Agents Act 1979, which was reviewed by the Office of Fair Trading in December 1988 to determine whether its provisions assisted in consumer protection. In a review of estate agency in June 1989, it was decided that consumer 1222 protection within the property business should be on a three-pronged basis. That view was confirmed in March 1990 in an Office of Fair Trading review of estate agency which outlined several problems in the estate agency profession.
The three-pronged approach begins with self-regulation by the industry. A licensing system for responsible practitioners of estate agency was dealt with in section 22 of the Estate Agents Act. I find much of that system philosophically attractive. We want to minimise Government intervention as far as possible and if it can be proved that a system of self-regulation would be effective in protecting the consumer it should be welcomed.
Some progress has been made in setting up a system of self-regulation within the profession. An ombudsman scheme has been set up by corporate estate agents which provides up to £1,000 for client compensation when its rules are breached. Unfortunately, that scheme is currently limited to larger members of the estate agency profession, mainly the subsidiaries of banks and building societies which, over the past four or five years, have bought into the profession, although possibly they wish that they had not done so. Therefore, the scheme cannot be said to be comprehensive.
I pay tribute to the National Association of Estate Agents, which is currently drawing up a list of qualifications for the profession, but even it would agree that its scheme is by no means comprehensive or nationwide. It does not include some of the smaller estate agents, some of whom—and I emphasise the word "some"—are guilty of the type of misdescriptions covered by the Bill.
It was small wonder that, in its report in March 1990, the Office of Fair Trading said in paragraph 5.5:Clearly there is no immediate prospect that participants in this highly fragmented industry can agree on the content and enforcement of a voluntary code and consumer redress scheme".So, although we welcome self-regulation, it is unlikely to be sufficiently comprehensive to assist the consumer in the way that we wish.
Another approach is to use the Estate Agents Act and the orders available under it. The Office of Fair Trading's report issued in March 1990 mentioned such matters as the disclosure of personal interest, the bidding-up of prices through misinformation and the tying-in of non-estate agency services with estate agency services—a practice which it would like to see more clearly regulated. From discussions with the Government, I understand that regulations under the Estate Agents Act are likely to be introduced in the not-too-distant future. I have no doubt that the Minister will have something to say about that. It must be said that any action taken on misdescriptions under the regulations of the Estate Agents Act is cumbersome and ineffective. As the Law Commission said, existing legislation on conveyancing does not impose an obligation to reveal defects in a property which would, in certain circumstances, be covered by the Bill. Such information would be likely to disadvantage consumers if it were not included.
I am pleased to see that the Office of Fair Trading and the Government are interested in the extension of the Trade Descriptions Act to estate agency. As the Royal Institute of Chartered Surveyors and the National Association of Estate Agents have said, it is important that the estate agency regulations, which I hope that the 1223 Government will introduce, and the Bill should be consistent. I shall discuss later the two issues of disclaimers and the inclusion of commercial property, on which it is especially important to ensure that there is some consistency.
Some people have asked whether the Bill will be a burden on responsible agents. I say most emphatically that it will not. Agents who act in a responsible, painstaking and accurate way will have nothing to fear and will be able to maintain their existing procedures, happy that they will not be affected.
Clause 1(6)(a) deals with statements that are false "to a material degree". That concept has been dealt with for some time by the Trade Descriptions Act. It will help to avoid circumstances in which there could possibly be argument about the accuracy of a statement and the element of subjectivity. Clause 1(6)(b) deals with misleading statements from which a reasonable person would draw a false inference.
Even if an agent finds himself liable to prosecution after having taken precautions—as I am sure that the majority do—he will have the defence of due diligence under clause 2(1). That follows a similar defence in the Consumer Protection Act 1987. It especially harks back to a judgment of Lord Diplock in a case involving Tesco supermarkets. He said that any company that sets up systems whereby its employees are assured of carrying out the law—whether for groceries or for estate agency—effectively protects itself from prosecution. In addition, provided that the estate agent has taken reasonable steps to verify information given to him by the vendor, he will be protected from prosecution. He will be unequivocally protected from a dishonest vendor. The burden of the Bill will be on the less responsible estate agent and the Bill will bolster the position of the responsible majority.
What information should be included in the prescribed matters which are dealt with in clause 1(1)? There was some argument about whether such matters should be set out in the Bill, but it was decided, in line with most present legislation, that the arguments for flexibility and for consistency with the new regulations were in favour of those matters being dealt with by order of the Secretary of State, subject to negative resolution of the House.
The Consumers Association and others have provided lists of the types of misdescriptions that they envisage being covered by the prescribed matters. They include location and address, aspect and proximity to amenities or places, facilities, tenure, accommodation, measurements and sizes. There are many of them, but obviously it will be for the Secretary of State to decide what is consistent with estate agency regulations.
I have been asked whether omissions of fact should be included. The answer is yes, but a statement has to be made before an omission can be seen by a reasonable person to be misleading. For example, if an estate agent says that a property is adjacent to a quiet road but fails to reveal—by omission—that there is a dual carriageway on the other side of the property, that would be regarded as misleading and could lead to a false impression being gained by the purchaser. If an agent says that a property is close to a motorway network, there is no need for him to say exactly how close. That would not be misleading.
It is important that the Bill should not reduce the amount of description that agents give on specific properties. I do not believe that the Bill will reduce the amount of particulars provided by estate agents. They are 1224 in the business of marketing properties; that calls for information and the more information they give, the better. I believe that the Bill will lead to more information being provided by estate agents and, in certain circumstances, that information will be more accurate and less misleading.
I have been asked whether the strictures in the Bill should encompass private sellers. Such sellers are not included in the Estate Agents Act 1979, with which we are trying to be as consistent as possible, nor are they included in the Trade Descriptions Act 1968 that covers actsin the course of trade".Estate agents are professionals and they deal with the public rather than with discrete transactions. One should be able to rely upon that expertise to ensure that they do not produce false or misleading particulars. However, if an agent was deceived deliberately by his vendor, there should be some redress. A vendor may, for instance, deceive the agent about the age or history of the property or about the ground rent and lease. Someone who subsequently relied upon any of those particulars may find that he is out of pocket when purchasing that property. Should that happen, however, I am told that it would be possible to make a case against the vendor rather than the agent under the Theft Act 1968 as the intention to deceive is clear.
It is also important to consider other issues that are not included in the Bill. During the consultation exercise we discussed disclaimers and there were varying views on them. Consumer groups wanted them to be outlawed altogether, but others, mainly in the estate agency profession, argued that they wanted the existing case law on disclaimers to be tightened. Obviously a balance must be struck. We should not allow general disclaimers that are so wide that they effectively negate the provisions of the Bill. In those circumstances, every estate agent would issue a disclaimer so that a person would be unable to rely on any of the information provided or, worse, would be unable to decide on which information he could rely. It should be possible, however, for an estate agent to provide information that he could not reasonably verify, which should be subject to a disclaimer. In that case the purchaser would be aware that certain information could not be reasonably verified. Reasonable disclaimers might include phrases such as "Believed to have been built in the early 18th century" or "This property appears to be in good structural order, but I have had no opportunity to make a structural survey."
On balance, we have decided to omit disclaimers from the Bill. I do not believe that disclaimers are included in the Trade Descriptions Act, but a body of case law on disclaimers has built up from that Act. Section 1(1)(b) of the Act provides a defence through a disclaimer when there areoffers to supply any goods to which a false trade description is applied".Lord Widgery has said that disclaimers must be "bold, precise and compelling". I take the word precise to mean specific. Therefore, it would not be reasonable to rely on wide disclaimers that might or might not cast doubt on the accuracy of property particulars.
It is important to note that disclaimers do not give a defence against a statement that someone knows to be false, be it the estate agent or the vendor. One cannot disclaim a fraudulent statement, for example, "Now you see it, now you don't". A disclaimer at the end of a list of 1225 particulars on a property that said that none of those particulars could be relied upon for their accuracy would not stand up in court.
People have also expressed concern about the scope of the Bill. Clause 1(6)(e) reflects section 1(1) of the Estate Agents Act and talks about statements givenin the course of an estate agency business".People have argued that the scope of the Bill might be widened to take in all those people who were responsible for the marketing of property. That would obviously include banks and building societies that do not use estate agents and that market a repossession on a private basis and produce particulars. Such businesses are not included in the Bill because they are not specifically conducting an estate agency business; the same goes for builders.
In many cases volume house builders do not rely on estate agents: they produce their own particulars. Unless the scope of the Bill is widened—I leave it to the sense of hon. Members to decide on that—two sets of particulars may be drawn up. The first may be issued by an estate agent and the consumer would be entitled to protection under the Bill. A builder might provide identical information, but a consumer would not be protected because the builder would not be actingin the course of an estate agency business.That incongruity needs to be investigated and I know that an early-day motion has been tabled on it.
The arguments on builders are not all one way. The National House Building Council has said that self-regulation can assist and that it can compensate purchasers. However, a Monopolies and Mergers Commission report is due to be published shortly on that council. The council's coverage of house builders may be restricted and, therefore, its code of practice may be less effective. I accept that there is a case for including house builders in the Bill, but, again, I await to hear the arguments that will be advanced by hon. Members today.
People have asked whether solicitors should be included in the Bill. They are specifically excluded from the Estate Agents Act with which we are attempting to be consistent. Section 1(2) of the Act excludesthings done—(a) in the course of his profession by a practising solicitor or a person employed by himIt specifically does not include solicitors who may act as estate agents. The Law Society has argued that one is not acting in the course of one's profession if a solicitor acts as an estate agent. It believes that solicitors may be included in the Bill. Perhaps the Bill should be more specific and I await comments from my colleagues about that.
I have also been asked about the inclusion of estate agents who market commercial property. Clause 13 excludes land that a reasonable person might expect to be usedin connection with a business".That may lead to anomalies, particularly in cases of mixed use where any particular relating to a shop would not be covered by the legislation, but particulars about the accommodation would be covered. It is argued that people involved in commercial property use expert agencies and therefore do not need protection. Equally, it can be argued that many wealthy house buyers do not use agents, so they 1226 do not need protection. However, many people involved in business start-ups cannot afford that sort of advice and possibly need protection.
The Trade Descriptions Act 1968 makes no distinction between the uses to which a good is to be put, as this measure would. Although I have received representations that commercial property should not be included—some people in the profession say that it would involve substantial costs and that there is no evidence of a particular problem—there is a strong case for including commercial property. Again, I await the views of the House.
Other areas covered in the Bill are straightforward and follow on from the Trade Descriptions Act or the Consumer Protection Act 1987, in particular prosecution time limits, clause 4, which deals with bodies corporate and Scottish partnerships, and most of the schedule which deals with who the enforcement authorities are and the powers of officers. Some comments have been made on the rights of entry. In the end, we decided that they should not be allowed for residential property, whether or not it is vacant. I anticipate from my consultations that the vast majority of hon. Members will agree.
This is a limited but sensible measure. It brings estate agents, but not other marketers of property, within the Trade Descriptions Act regime. As a result, it will offer additional protection to consumers against inconvenience, costs and worry caused in a minority of cases where misleading or false information to a substantial degree is given. It will enhance the reputation of responsible agents, who are in the majority, without putting any additional burdens on those who act responsibly and provide accurate information on behalf of the vendors, with whom they have a contractual relationship, and act with due responsibility towards the purchaser. The measure will lead to higher standards in the marketing of property through estate agencies. It may need refinement in Committee, and I have mentioned some areas on which I should be interested to hear colleagues' views, but as it stands it is a valuable measure. I thank my hon. Friend the Member for Coventry, South-West for giving me the opportunity to introduce it today-and I commend it to the House.
§ Mr. Lewis Stevens (Nuneaton)
I congratulate my hon. Friend the Member for Wyre Forest (Mr. Coombs) on presenting the Bill in the absence of my hon. Friend the Member for Coventry, South-West (Mr. Butcher). It is a worthwhile measure. The difficulty with the estate agency business is that in making such an important purchase people are not covered under the Trade Descriptions Act 1968 as one would expect. The main purpose of the Bill is to provide that cover.
We have grown used to the more colourful language of estate agents. It is not an issue which we would wish to cover in the Bill as it is not necessarily misleading. It is what one may describe as colourful. In your area of Sandwell, Madam Deputy Speaker—one I know well—I saw an advertisement for a house "on the waterfront", which we know means on the canal bank. We excuse that; it is not too important. Other examples in newspapers include descriptions such as, "The house has a unique location". It would be hard to find a property without a unique location. There are "unique developments". That is 1227 all part of the blurb of advertising and is not in question. What is in question is how accurate that information should be to the property purchaser. Often, it is misleading and sometimes deliberately.
People who are trying to buy a house find it disappointing when they find that it is not what they expected it to be from the details. As my hon. Friend said, it can be an expensive business; it can also be extremely frustrating. It can even lead to the point where it stops the purchase. Most people, and young people in particular, approach the task with enthusiasm when they try to buy a property for the first time. Other people may be changing properties, which frequently means that they can go slightly more up-market than previously, possibly to meet their needs as a family. It is relatively easy for them to be blinkered when looking at a house. Often when we look at a property with a view to purchase, we do not see accurately how it will function as a home. The information provided by estate agents is not only important in attracting people to view the property, but can have a considerable effect on the decision whether to purchase the property.
Some years ago I recall a young couple looking for their first home and seeing an advertisement that described a property as having been recently renovated throughout. When they went to look at it, they found that it had new windows and that a bathroom had been installed—previously it had none. Everything seemed fine. Initially they did not think of having a survey done on the rest of the house. The information was that the house had been renovated and it seemed good to them. They were excited at the prospect of having their first home. It was suggested to them, not by a building society or an estate agent, that they should have a more thorough survey. The survey found that, although much of the house had been renovated, a considerable amount of work needed to be done to the woodwork and floors. It would have cost the couple more than they could afford while they were purchasing the house on a mortgage. It was a tremendous disappointment. The vendor would not automatically reduce the price to a level that they could afford. The information sent to them did not adequately describe the condition of the house. It gave the impression that the house had been renovated throughout, so one would expect the wooden floors also to have been repaired satisfactorily.
My hon. Friend said that some matters were not covered in the Bill, in particular builders—no doubt he would put developers in the same category—who do their own marketing and selling. I believe that they should be brought within the scope of the Bill, perhaps by extending the long title. Many builders do their own marketing and some of their descriptions can be as misleading as any from an estate agent.
Of particular importance is the accuracy of factual information, such as the measurement of rooms, gardens, garages and the like. I recall some years ago, when I was considering changing houses, looking at a development and studying a pamphlet containing the measurements of the rooms. One quite narrow room was, according to the pamphlet, 10 ft 6 in wide, but when I viewed the room I had the impression that it was narrower than that. I borrowed a tape and, on measuring the room, discovered that it was 9 ft 9 in wide. My hon. Friend said that some measurements of floor area might be 15 per cent. out. The difference between the stated and actual measurement of 1228 that room was heading in that direction. The length of the room was probably inaccurately stated as well. There must be acceptable limits and, while one may not expect to talk in terms of half inches, one expects information given by an estate agent to be accurate within what one would consider to be reasonable tolerances.
In the same way, one should, allowing a reasonable tolerance, expect the measurements given by estate agents of the amount of ground to be reasonably accurate. The approximations used at times are quite an exaggeration. "Approximately a quarter of an acre of garden" can involve a big approximation which it might be difficult to justify.
I reiterate what my hon. Friend said about only a small minority of people in the estate agency business—even in the building and developing business—being at fault on a small number of occasions. However, for the individuals involved on those occasions who find that the information they are given is incorrect, there is great disappointment. That must apply to many products that are covered by the trade descriptions legislation. We expect most products to be satisfactory and when they prove not to be right, the problems that result are large. In the property market, when people are involved in such important purchases, it is more important than ever for them to have confidence that the description of the property is correct.
While I agree with my hon. Friend that purchasers of commercial property might be expected to have expertise and back-up to ensure that misleading information does not cause them to suffer unduly, he was right to add that many people buying or leasing commercial premises do not have such expertise and may not be in a strong financial position. Such people would rely, as ordinary purchasers would, on the advice and help from those acting as professionals. I hope that it will prove possible at a later stage, perhaps in the long title of the Bill, to include some, if not all, commercial properties. After all, there seems little difference in principle between information given for commercial properties and that given for domestic properties or details issued by builders and developers.
The provisions will be beneficial not only for those purchasing properties but for the estate agents' profession as a whole. In polls showing what the public think of various professions and jobs, I am not sure whether politicians or estate agents are at the bottom of the list. Estate agents have a poor reputation and, while much of it is not justified, it is clear that that is the perception of the public. The fact of having regulations to control and encourage the accuracy of information would give the ordinary purchaser greater confidence that the properties that they view will tie in closely with those advertised.
That must act as a boost to the profession, bearing in mind that most people wish to have a professional standard. Accountants and those in the legal world constantly tell us how proud they are of their profession. In other professions or jobs that may not quite have that status, people have standards and the public should know that those standards will be met.
My hon. Friend pointed to the need for employees of estate agents to have a responsibility under the Bill. Agents will have a degree of responsibility for their employees—although, according to my reading of the measure, the employees will themselves be liable—and the public will 1229 feel that the whole unit of an estate agent's business has a commitment to ensure that the information provided is as accurate as possible.
The Bill does not aim to penalise people merely for not having matters absolutely right. It says, in effect, "If it is a reasonable description, you have not done anything wrong. If there is something that you could not reasonably have been expected to know without having carried out a specialist check or without that information having been provided to you following such a check, you have not done anything wrong, and neither has your employee." By having regulations prescribing items that must meet some test of reasonableness, the effect on the estate agent's business will make all concerned more aware of the need to improve standards.
It is often said that there are a few cowboys in the profession. Enhanced standards and pressure on the cowboy will eventually result in his being eliminated from the business. That will help to protect the public, just as the Trade Descriptions Act protects them in other ways. The Bill will add to the confidence that they have in estate agents when making what is for most people their most important purchase. That will result in a better deal for everyone, including those in building, development and the marketing of properties.
§ Mr. Douglas French (Gloucester)
As a sponsor of the Bill, I wish at the outset to congratulate my hon. Friend the Member for Wyre Forest (Mr. Coombs) on the comprehensive and clear way in which he introduced it. I join him in sending best wishes to my hon. Friend the Member for Coventry, South-West (Mr. Butcher), the promoter of the Bill, and wish him a speedy recovery.
For my hon. Friend the Member for Coventry, South-West, the origins of the Bill go back to the time when he was a consumer affairs Minister. It is greatly to his credit that he has continued to take an interest in this important subject, which impinges on the life of virtually everybody who embarks on home ownership.
I have found it refreshing, in the many representations that have been made about the Bill, to find considerable agreement among professional bodies. The Bill is supported by the National Association of Estate Agents, the Royal Institution of Chartered Surveyors and the Incorporated Society of Valuers and Auctioneers. With some reservations, the Law Society supports its principle. The Consumers Association has played a leading part in preparing the detailed aspects of the measure.
It must be a long time since such a group of distinguished associations have found themselves in agreement on a matter of this type. The measure will confer considerable benefit on the average person who embarks on the house purchase process.
It is worth revealing the pedigree of the Bill, because it has not emerged from thin air but has come as a result of much careful thought. As my hon. Friend the Member for Wyre Forest said, the Bill is part of a so-called three-pronged approach on the subject—first, the orders that are currently being prepared under the Estate Agents Act 1979; secondly, the quest for self-regulation, which is being undertaken with varying degrees of enthusiasm by 1230 individual practitioners; and thirdly, the proposed extension of the Trade Descriptions Act 1968, which is, in essence, the purpose of the Bill.
My hon. Friend the Member for Coventry, South-West started to take an interest in the subject and his work was continued by my hon. Friend the Member for Mid-Worcestershire (Mr. Forth) when he became Minister for consumer affairs. He published a review of estate agency in June 1989, in which the Director General of Fair Trading, to whom I pay tribute for his considerable work on the subject, was invited to assist the industry in trying to agree a workable code of conduct and to consider how best to achieve the extension of the Trade Descriptions Act. That led the Office of Fair Trading to issue a consultative document in September 1989 and a final report in 1990—which were broadly accepted by the hon. Member for Mid-Worcestershire, still Minister for consumer affairs at that time—and the Department of Trade and Industry to publish draft orders in June 1990. Those draft orders received much constructive comment and criticism in an attempt to achieve the desired result. Some difficulty was undoubtedly experienced in expressing them satisfactorily, but the Department of Trade and Industry is, we understand, due to produce a final version soon. It is most important that the final version of those orders should coincide with the effects of the Bill and essential that the two measures be entirely compatible.
It may be asked why we need such a Bill when we have two other well-advanced prongs of approach. One reason is that the sanctions available to the Director General of Fair Trading are limited. He cannot impose fines and he certainly cannot impose prison sentences. It is felt that stronger sanctions are needed if we are to achieve the desired results—the stamping out of misleading and false descriptions of property. The three prongs, therefore, go together and the Bill is an essential component in ensuring the overall desired result.
For the benefit of people in the outside world who follow such matters, it is also worth emphasising that, as my hon. Friend the Member for Wyre Forest said, this is not an anti-estate agent Bill. The majority of estate agents support the broad measures in the Bill. They do not want their profession to be the butt of cheap jokes any more than other professions do and they welcome the moves that would establish higher standards and improved competence and ethical behaviour in the description of property. Like other professionals, they prefer to be taken seriously and most of them are prepared to conduct themselves seriously. That is why, led by the National Association of Estate Agents, they have endeavoured to introduce a proper measure of training for the profession. The NAEA recently launched the first national qualification in estate agency. In addition, the Association of Corporate Estate Agents played a leading part in establishing an estate agents' omsbudsman. Most estate agents feel that the Bill would help them receive the public's confidence and provide the service that they endeavour to give.
The essence of the Bill is the issue of false or misleading descriptions and the way in which those descriptions relate to the prescribed property. The definition of a prescribed property is left to the orders to be decided by the Secretary of State. The report from the Director General of Fair Trading set out some 20 headings under which misdescription could be deemed to have taken place. But it is a complex issue. For example, the description of a 1231 property that has already been sold could amount to a misleading or false statement about a property that has yet to be sold. Misdescriptions need not exclusively relate to the particular property being described. Clause 1(6)(c) refers to oral as well as written information. It would be a mistake to focus all one's attention on estate agents' written property particulars, as their spoken word also comes within the ambit of the Bill. For example, if the characteristics of the left-hand house of a pair of semi-detached houses are known, and that house has just been sold for £75,000, that provides a good basis for putting a price on the right-hand house if, to all intents and purposes, the two houses appear the same. However. if the characteristics of the left-hand house have been misdescribed, saying, for example, that the house had woodworm, dry rot and death watch beetle—which is why it fetched only £75,000—the same misdescription could be deployed to strengthen the price being asked for the right-hand house. One must not regard description in isolation, because the essence of estate agency is making comparisons between one property and another in order to arrive at a sensible asking price.
Such information about the condition of the house next door would not normally he found in written particulars. However, less ethical estate agents may purvey such information orally in an effort to persuade a prospective purchaser to complete a sale. That is why it is important that the Bill should embrace such practices.
The Bill's objective is to ensure that the particulars, whether given in writing or orally, are as accurate as possible. That may result in the written particulars being less comprehensive and detailed, but estate agents have still to endeavour to sell property. It will be left to their professional judgment to decide how much information to give to convey a correct, accurate and true story to the prospective purchaser. They will still have considerable scope for the colourful prose for which they are notorious and for which the late Roy Brooks made a considerable name for himself. As I understand it, under the Bill, descriptions such as "superbly decorated" or "beautifully decorated" probably remain acceptable as long as that is the judgment of the person writing them. But "newly decorated" would be different, because it denotes a matter of fact. If the property is manifestly not newly decorated, such a description would be an offence under the Bill.
More serious—my hon. Friend the Member for Nuneaton (Mr. Stevens) referred to this—is misdescription as it relates to amenities, such as "use of a swimming pool", if there is no such use. The phrase "on the No. 7 bus route" is a matter of fact. The property is on the No. 7 bus route or it is not. The description "Paddington, one hour" appears in many descriptions of country properties, but what does it mean? The unwritten words must be "by rail". The time taken for the journey will depend on the means of transport. It may take a longer time or a shorter time to travel by rail than by road.
If the Bill encourages estate agents to be more precise about such descriptions, it will help the consumer. Precisely the same problems relate to the description "two minutes from Tower bridge". Most of the properties in the docklands district are now described as being 'two minutes from Tower bridge', but it is never made clear by what means of transport the journey is to be accomplished.
Even more serious misdescriptions abound. There are many well-documented examples of misdescriptions where property is described as freehold when it is leasehold, or as 1232 having a warranty from the National House Building Council when it does not. Some properties are described as listed or in a conservation area when they are neither of those things. There used to be misdescription relating to the rateable value or rates paid on property. For the time being, that is suspended, but it might reappear. All those facts are capable of being verified. Those are the problems of misdescription which the Bill seeks to address.
The defences against making those misdescriptions are clearly set out in the Bill. If an agent can show that he made a genuine mistake based on information supplied to him and had made attempts to verify the accuracy of that information so that it was reasonable for him to write or say what he did, he has a defence. That provides estate agents with the necessary safety valve.
Clause 1(3) specifically excludes statements referring to land used solely for business use. Although I agree with virtually every other aspect of the Bill, I am disappointed that that means that it specifically excludes commercial property. It is illogical to do so and will lead to considerable practical difficulties if a change is not made.
For the Bill to be effective it must embrace all interests in land, for a number of good reasons. The first is common sense—there cannot be any justification to apply lower standards in one section of the property market than another. The straightforward reaction of an ordinary person to such a distinction would be to ask why two different sections of the property market, both involving purchases and sales, should be treated by different laws. The extension of that argument is that there is no sense to have rules applying to an agent's conduct when he sells one property, but not when he sells another. It would not he sensible or logical for a small, residential agent in a market town, who is occasionally called on to sell a hotel or shop suddenly to be allowed to let all his good practices of accurate description go by the board when selling commercial property.
§ Mr. John Marshall (Hendon, South)
Does my hon. Friend agree that if, as a result of the Bill, an estate agent suddenly becomes a completely different individual and does not misdescribe residential properties, the habit of misdescription may go out of the industry? The purchaser of a commercial property may be slightly more sophisticated than the purchaser of a studio flat. Most commercial properties will be worth hundreds of thousands if not millions of pounds and their purchasers will be slightly more sophisticated than individuals buying houses for £40,000 or £50,000.
§ Mr. French
That is the commercial property lobby's only argument, and it is invalid. It is propaganda put about by the very big commercial practices and property developers, who are completely oblivious to the fact that there are also small business men who purchase commercial properties and who are not backed by extensive valuers and top-class advisers, but use their own judgment. Such business men may well commission a survey—they would be prudent to do so—but that does not mean that they are obliged to bring in the services of a professional valuer or other professional to check all the details. Those business men should be able to purchase a small business property using the same approach as when purchasing residential property.
§ Mr. Alan Williams (Swansea, West)
I am sure that the hon. Gentleman would agree that, in many cases, the 1233 person buying the corner shop has the same access to information and knowledge of property quality as the ordinary house purchaser. An anomaly could arise if someone bought a shop with a flat above it and one set of laws applied to the flat and another to the shop.
§ Mr. French
I agree that mixed hereditaments produce considerable problems. If someone purchases a shop with a flat above and it is later decided, quite reasonably, to sell one part of that property but not the other, the agent for the vendor disposing of the flat would be caught by the Bill's provisions, but the agent disposing of the shop would not. I agree that that seems to be anomalous.
Another problem relates to change of use, particularly in districts known as—I think—"brass plate areas". Those are districts that were once predominantly residential in character but which, over a period, have gradually become dominated by offices. We have a prime example of that close to the House—the district in Kennington, where many of the former residential properties are now offices. In some cases, the change is reversed and districts that were once dominated by offices become mainly residential. Under the Bill, the rules governing the drawing up of descriptions of such properties would vary according to the latest decision on their use. That is manifestly absurd.
The reasons why commercial property should be included in a Bill of this sort go back a long way. A review of the Trade Descriptions Act was carried out in 1968, not in the context of estate agents but to determine whether the Act covered everything that it should. During that review it was argued that the Act should cover property in the broadest sense, including agricultural and building land and commercial properties such as shops and factories, as well as flats and houses.
Paragraph 2.4 of the report by the Director General of Fair Trading, produced in March 1990, said of earlier draft proposals:Surprisingly little comment was received on the application of the proposed measures to the commercial market.The back of the document lists the people who made representations when invited to do so in a consultation exercise; only a tiny proportion represented commercial property practices. The director general made a point of remarking in the review that the representations received from that tiny proportion broadly supported the inclusion of such property in any forthcoming legislation.
The publication of the draft orders and regulations under the Estate Agents Act 1979 are still awaited. We cannot be certain whether they will apply to commercial and residential property, but they should apply to both, because the orders ought to be in line with the primary legislation. The Estate Agents Act does not specifically exclude commercial property; indeed, in normal practice it is taken to include it. So the orders should follow the same procedure. If the orders made under the Bill are to mesh properly without causing public confusion they, too, should cover commercial property.
The accurate description of commercial property is in many ways more vital than the accurate description of residential property. One of the most important elements in the description of commercial property is the description of the area—the number of square feet—that it contains. The number of square feet is important to the 1234 user of the building, since it tells him how much space he will have, but for the investor in commercial property it is important for another reason. It is essential to know the area in a building if a sensible valuation is to be reached. If the final rental value of a property is to be determined by the area, that area must be a factor in determining the yield of the investment. Assuming that the area is more likely to be overstated than understated, wrong measurements will lead to a wrong calculation of the rental value—so the person to whom the property may subsequently be let will pay more than he would have if the calculation had been made correctly; or, if the property is re-measured, the property purchaser will obtain a lower rental than he had expected.
If a purchase price is based on a multiplier of 10 years' annual rent, the effect of over-measurement will be increased by a factor of 10. Valuations are, after all, largely based on comparisons. Recently there was a well-publicised example of two hugely different valuations applied to the sale of five London restaurants owned by Scotts. One firm of valuers put a value of £6.4 million on them; another professional practice valued them at £2.3 million—despite the fact that both followed the broad guidelines contained in the Royal Institution of Chartered Surveyors' red book. The RICS comment on the matter was that valuation is a matter of opinion. It can be argued that the value is what someone will pay for a property, but what he will pay for it is determined by what he thinks it will fetch in the rental market.
§ Mr. Moate
I would not disagree with my hon. Friend's conclusions, but does not that example show that applying the Trade Descriptions Act to deals of that sort is inappropriate? Any professional investor of this sort will have valuations and surveys done for him and will have his own professional advice. If a mistake is made he can sue his professional advisers if necessary, so the Bill would not have a significant role to play.
§ Mr. French
My hon. Friend's remarks follow the line of argument of my hon. Friend the Member for Hendon, South (Mr. Marshall). The difficulty with it is that we need to draw a line somewhere. My hon. Friend may say that the large commercial investors do not need this sort of Bill, but if he also accepts my point, that small business men need this type of protection, he will see the dilemma: the need to draw a line somewhere. I suggest that it would be virtually impossible to draw that line satisfactorily. So we have to decide whether the Bill should apply to commercial property and I believe that it should.
Another iniquitous practice in the commercial sector is drawing comparisons that are false. When describing the attributes of property A, the agent may say that property B has achieved a rental value of X pounds per square foot, whereupon it emerges that property B's rental level of X pounds has not been achieved but is merely the level that the agent is hoping to achieve for that property. This practice is rife in the commercial sector. Agents base comparisons on hope and expectation, not on hard facts. Such a practice should be caught by the Bill.
To return to the subject of measurement, it is pertinent to inquire how we should define a misdescription of measurement. My hon. Friend the Member for Nuneaton gave us a straightforward example, but the matter is a little more complex than that. In the commercial sector different types of property have traditionally been measured in 1235 different ways—a practice which needs to be clarified. The Royal Institution of Chartered Surveyors has a code of practice on how to measure, and practitioners who follow it will find it comprehensive. If followed carefully, the code makes it difficult to go wrong. Unfortunately, however, far too many practitioners do not follow the code of practice and are ignorant of its contents. That is evident from the frequency with which the RICS receives inquiries from people who wish to know more about the code of practice and who should know more about it.
I shall now deal with the internal measurement of commercial properties. The net amount of space will determine the value of the building and, according to the RICS code of practice, the measurement should not include lifts, stairways, Iandings and corridors. However, what about the corridor that is wide enough to take a desk? If it is to be meaningful, net internal area should mean net usable office space, but many agents do not adhere scrupulously to that definition.
When should a kitchen be included in the measurement of office accommodation, and what about a ceiling that is too low for a desk to be placed under it? Those matters are addressed by the RICS code of practice, but many practitioners who should know better do not take sufficient notice of it. One of the Bill's great advantages is that it will make practitioners who are often casual about these matters pay attention to a code of practice that is designed to produce clarity and accuracy of information.
There are problems about class B1 property covered by the Town and Country Planning (Use Classes) Order 1987. Class B1 means that the building may be used largely for office purposes, research and development or industrial use. It depends on the location and the user. The Office Agents Society deals largely with high-tech use of B1 properties and its practice is to measure net internal area. However, the traditional practice of the Industrial Agents Society, which deals more with the industrial side of the market, is to measure gross internal area. It is not a misdescription if what is being described is made clear, but we need to guard against people presenting a figure and describing it as net when it is gross.
The RICS code of practice also deals with irregular rooms in residential properties. Rooms with chimney breasts or L-shaped rooms are difficult to measure. The Bill may encourage estate agents not just to provide measurements but to supply plans and outline diagrams to show the shape and precise measurements of a room. The RICS code of practice contains guidance about what to do when measuring chimney breasts, projections, bay windows or other features that are to be found in the majority of houses. The code aims to ensure that accurate measurement is achieved and understood so that there is some form of common language.
My hon. Friends the Members for Wyre Forest and for Nuneaton asked whether the Bill should apply to builders. I believe that it should extend to builders. Some estate agents are worried that if builders are not covered by the Bill, estate agents will somehow be at a disadvantage. I do not think that that would be the case. Builders should be covered by the Bill, but, if they are not, estate agents could be at some advantage, not a disadvantage. That is because buyers will know that a purchase from an estate agent is based on reliable information. They could not have the same confidence in builders. If they were excluded from the provisions of the Bill, builders would be at a disadvantage and, for that reason, it would be better for them to be 1236 included. That applies especially to builders who sell houses off-plan. That happens a great deal, especially in the present market. Many purchasers can be misled by it and fall victim to false description.
The Law Society broadly accepts the thrust and purpose of the Bill, but agrees that it would be more appropriate for its provisions to be contained in the Socilitors Act 1933, which brings together provisions relating to the conduct of solicitors. I disagree with that argument. It is essential for solicitors in the estate agency business, of which there are about 250, to be covered in the Bill. I do not share the Law Society's faith in its ability to achieve the same results as the Bill. The history of the Law Society's regulating of affairs shows that all too often the interests of solicitors are placed above those of the client. That is evidenced by the number of complaints, many of which are admittedly unsubstantiated, but some are upheld, that are received every year by the solicitors' complaints bureau.
The Law Society has carried out much good work and achieved good results in some areas, but it has not been stringent enough in addressing some of the practices of its members. If we acceded to its argument that solicitors should not be included in the Bill, I have no reason to suppose that things would be any different. That would create two classes of people selling property. They would be subject to different sets of rules and that is undesirable. Solicitors in Scotland are in a rather different position. If that matter is not raised in this debate it will have to be carefully considered in Committee because Scottish solicitors have particular problems, although it is not my place to go into those now.
I strongly support the Bill, but it could be improved by the inclusion of the commercial sector, and such inclusion is essential. The Bill is not the last word on the regulation of estate agents and I look forward to further measures from the Department of Trade and Industry, especially on matters such as the bidding up of prices, which is a rife and iniquitous practice. We must stamp out claims of higher bids and I hope that orders will ensure that that is firmly dealt with. Pressuring buyers to take out other services is also iniquitous and unacceptable. The Bill makes a start by dealing with the misdescription of property. That is in the paramount interests of the consumer and will achieve higher standards in that small part of the estate agency profession which is not as ethical as it should be.
§ 11.9 am
§ Mr. Austin Mitchell (Great Grimsby)
I am happy to follow the hon. Member for Gloucester (Mr. French), who has just delivered what an estate agent might describe as a short speech.
I am proud to be a sponsor of this important but simple Bill, which will plug a gap in the legislation. That is a good role for private Members' Bills. The gap is in the Trade Descriptions Act 1968, which applies to goods and services but not to properties. A hotel, for instance, cannot advertise itself as being adjacent—which is a fairly flexible term—to a facility such as a railway station, a swimming bath or even the House of Commons if that is not true. A property, however, can be advertised as being adjacent to such facilities, whether it is true or not.
We should be able to rely on the particulars given by estate agents, just as we should be able to rely on the details of goods and services. Probably because of the gap 1237 in the legislation, a peculiar lyricism has developed among estate agents, most of whom seem to be Oxford or Cambridge English graduates, or to have attended the Goebbels college of doublespeak, sometimes attended by political parties and Ministers, if their catch-all statements are anything to go by. As a result, estate agents' descriptions are often unreliable. My feelings about my own property are particularly malevolent, but, when trying to sell a property, estate agents become lyrical. The Roy Brooks school of insulting properties seems to have died out; instead we read descriptions such as "quiet road", referring to a howling four-lane carriageway.
One of my constituents bought her property because of what had been described as a "rural aspect", unaware that planning permission had been granted for the building of 2,000 houses on the rural aspect to which she had been so attracted. In another case, a covered back passage was described as a conservatory. Of course, descriptions of property are often subjective, but in many instances there are objective criteria by which to judge misdescriptions.
The legislation could apply to location, address, aspect, proximity to facilities, tenure, nature and characteristics of the title, the amount of ground rent payable, community charge, structural characteristics, service charges, accommodation, measurements and size—an especially difficult area, which is often subject to misdescription—physical characteristics, fitness for purpose, strength, survey inspection, the person by whom the building or its components were manufactured, fixtures included or excluded from the sale, previous history and past treatment. Accurate descriptions are important in all those respects and the consumer must be able to rely on the information provided by the estate agent.
Misdescriptions waste an enormous amount of time, because the buyer must go and look at the property before he can identify a misdescription. It is also a deceit, because some matters cannot be checked. I am not a structural surveyor; if a property has been described as structurally sound, it is difficult for someone like me to find out whether it is true.
For all those reasons, the gap must be plugged. The Bill should not be seen as a blow against estate agents, with whom I have considerable sympathy: my wife is out of work, which gives me a kind of fellow feeling for anyone currently working in estate agency. The fact that politicians suffer from the same halitosis of the intellect makes my fellow feeling even greater. Estate agents are having a hard time; if the four horsemen of the Apocalypse passed the shop window, many of them would see that as a sign of good things approaching, given the Government's position on interest rates.
Estate agents are, in fact, sympathetic towards the Bill. The more enlightened sections of the business want to be regulated effectively. Effective regulation is already beginning: estate agents are seeing the need for reform. The Government's own proposals are fairly feeble. We should require qualifications and competence simply by enforcing the Estate Agents Act 1979. I was on the Standing Committee of that measure. The Committee stage was fairly attenuated because of the rush to finish it before an inevitable election, but it is important legislation. 1238 The present powers of the Office of Fair Trading serve only to explode the nuclear weapon of banning estate agents. We need a flexible scale of penalties, including fines.
All that, however, is for the future. This Bill is complementary to the changes that are to come. I am sure that the Bill will be successful. I hope that the Government will support it. The Minister, being a member of the No Turning Back group—perhaps it is called the Will Ye No Come Back group nowadays—will almost certainly support it with gritted teeth because of his free-market principles. Let me point out to him that accurate information is an important part of the proper functioning of markets. A free marketeer can support the Bill as much as someone who believes in the proper regulation of markets.
§ The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Edward Leigh)
I have said many times, not least since I took over this job, that a free and successful market is a well-informed market.
§ Mr. Mitchell
I entirely agree.
As I say, I hope that the Government will welcome the Bill. The estate agents certainly welcome it and the Consumers Association, which played a part in its paternity, supports it strongly. I hope that the House will do so as well. I have one caveat, however. The Bill covers those who sell property as agents for others. As others have said, we really need a level playing field. The Bill should also apply to solicitors who sell property as estate agents. There are 250 or 300 in the country, and in Scotland it is a normal part of solicitors' business. I understand that the Law Society thinks that the position should be regulated, but that it should be covered by the solicitors' own legislation.
I hesitate to disagree with my new friends in the Law Society, having attained a degree of respectability by being entertained for lunch there, but it would be ludicrous to impose a different set of enforcement structures to apply to misinformation or misdescription provided by solicitors acting as estate agents from the procedures applied, through trading standards, to misdescriptions provided by estate agents. It would be absurd to go through two separate channels. The same is true of builders selling property, and the same lyrical misdescriptions are given when property is sold by businesses. The Bill should also apply to building societies and banks selling property that has been repossessed. I shall move amendments in Committee to try to extend the coverage to those bodies.
Let me draw the House's attention to my early-day motion 528, entitled "Estate Agents (Property Misdescriptions) Bill", which is strongly supported by the House, having been signed by 53 hon. Members in the three days that it has been on the Order Paper. It urges that the legislation should applyto all those concerned with the marketing of property in the course of a business so as to ensure a level playing field between them.That is an important principle which I would hope to incorporate in the Bill, but not in any way that endangered the Bill's passage. It is a protection which is necessary for the consumer.
I shall not speak at length because the Criminal Procedure (Insanity and Unfitness to Plead) Bill, which might disqualify me from speaking in a debate such as this, has my support and I hope that we shall be able to discuss it today.
1239 I do not want to spend time echoing agreement with the Bill that is before us. It represents another step in a long campaign to provide better protection for house buyers and to open up a more competitive and better regulated market for buying houses. It is a campaign in which Ken Weetch, the former Member for Ipswich, who in estate agents' terms has moved on to higher things, played an active part when he was in this place. We have the Estate Agents Act 1979, and I introduced a house buyers' Bill.
We owe it to those who are making the major purchase of their life to provide appropriate protection. The buying of a house can be an ordeal unless the purchasers have proper information and proper backing and the agencies through which they buy are properly regulated. The Bill goes some way further down the road of protection. The 1968 Act is flawed. This is not an epoch-making Bill. To use estate agents' language, the earth will not move if it is enacted. It represents another step along the road to protecting the consumer. I congratulate the hon. Member for Coventry, South-West (Mr. Butcher) on introducing it. I commiserate with him on his illness. I congratulate the hon. Member for Wyre Forest (Mr. Coombs) on moving it so ably in his absence. I wish the Bill every success.
§ Mr. Roger Moate (Faversham)
The hon. Member for Great Grimsby (Mr. Mitchell) will be pleased to hear that I do not intend to make a long speech. That is a Conservative pledge, not an estate agents' description, and therefore it will be implemented in full, as always.
The hon. Member for Great Grimsby talked about lyrical misdescriptions. I had the misfortune the other day to hear a Liberal Democrat party political broadcast. Like many others, I am prepared to face a general election as soon as may be, but the prospect of facing party political broadcasts of that sort week after week, and not only from the Liberal Democrats, with all those involved indulging in what might be politely called lyrical misdescriptions, fills me with enormous sympathy for the British public as well as for myself. If we could find some way of incorporating such misdescriptions within the Bill, it would have my support.
I congratulate my hon. Friend the Member for Wyre Forest (Mr. Coombs) on the impressive way in which he moved the Second Reading. I join others in wishing my hon. Friend the Member for Coventry, South-West (Mr. Butcher) a speedy recovery. It is partly because of those who are backing the Bill that I view it with some sympathy. I have to say that initially I was somewhat sceptical of the proposition that lies within the Bill, and that is scepticism that has some pedigree. I took part in the consideration of what became the Estate Agents Act 1979. The then Minister, the hon. Member for Norwood (Mr. Fraser), said:There was a time last year when I used to think that the worst five-letter word in the English language was the name of the hon. Member for Faversham (Mr. Moate)."—[Official Report, 30 January 1979; Vol. 961, c. 1391.]One of the reasons for that remark was that I have long been suspicious of and opposed to consumer legislation that, rather than protecting the consumer, does more to create closed shops. We have seen examples of that in various professions. I remain extremely suspicious of the provisions in the Estate Agents Act 1979 that provide at a later stage for minimum standards of entry, which in effect lead ultimately to the closed shop.
1240 We are all in favour of high minimum standards, but I am against proposals that make it difficult for enterprising individuals to enter a profession, to create a new competitive spirit and to break new ground. I am glad that since 1979 the selling of property has been opened up rather than restricted. I was pleased also that when the Director General of Fair Trading carried out his review he specifically disapproved of extending section 22 to include some sort of licensing procedure, and thereby to make it much harder for new entrepreneurs to come in and compete with the establishment. If we make standards too high and thereby create a closed shop, the consumer will be damaged. I am much in favour of penalising individuals, companies or practitioners who take the consumer for a ride, but how do we best protect the consumer?
I listened carefully to the speech of my hon. Friend the Member for Wyre Forest. I found myself in total agreement with the simple proposition that the Bill incorporates, which is that if the Trade Descriptions Act 1968 applies to a range of goods and services, why should the Bill not apply to small commercial properties? I accept the arguments that have been advanced in favour of that proposition. It is implausible to try to distinguish between the buyer of a small house or a small shop. In effect, the buyer is in the same position. Why should small commercial projects not be included in the scope of the Bill? The same logic can be applied to solicitors. If solicitors set out to be estate agents, why should they not be subject to the same rules as estate agents? Why, therefore, should they not be covered by the Bill?
I apply the same logic to builders and developers. I go this far because extending the Trade Descriptions Act to cover property is not an especially major step forward. In extending the logic of the law, I do not think that we would be inflicting a particularly onerous burden upon those who have high professional standards and conduct themselves in an ordinary way. I suggest that we should be logical and apply the Bill uniformly to both domestic and commercial properties.
Just this week there was a headline story in the Sittingbourne newspaper, the East Kent Gazette, about the possibility of lead pollution affecting certain large housing estates. It is my hope, and the expressed view of the local authority, that by the time the tests have been carried out it will be possible to establish that there is no health risk. No one wishes to raise alarmist fears or cause even more alarm than that which already exists on these estates. It is my hope and belief that once the tests have been conducted it will be demonstrated conclusively that the land is not contaminated and that there is no health risk. They are pleasant houses on pleasant estates. Residents are being advised, however, to have tests conducted on younger children because of the threat of lead pollution. For the time being, a serious blight hangs over many houses.
The fear has arisen because of the previous usage of the land. Perhaps up to 80 years ago it was used for tipping spoil from the brickworks. Subsequently, it became agricultural land. It has now been built on. This is perhaps a fairly extreme example, but often these days we are building on reclaimed land.
Surely the house purchaser is entitled to know what the previous usage of the land was. Surely he has an entitlement for that to be incorporated in a description that comes within the terms of the Bill. The purchaser of domestic property is entitled to protection on that score. Whether he receives it from the developer and original 1241 seller of the property, or as a consequence of legal searches, I do not know. However, he is entitled to that information.
My hon. Friend the Member for Coventry, South-West has said that house purchase is one of the most important and stressful events in a person's life and compares with marriage or divorce. Because that is so, one does not expect a buyer to depend entirely on an estate agent's descriptions. One does expect him to rely on the information discovered by his solicitor as a result of searches, and on that produced by survey, if there is one. There is no legal obligation to undertake a survey, but it is a foolish buyer who does not commission a survey when making such an important purchase.
If, as I suggest, a potential purchaser is entitled to information about the previous uses of the land concerned, he must obtain it either through searches or a survey. I return to the example of the developer who builds on a site for the first time, who must surely have more access than anyone else to such information. I urge property developers and builders to welcome the opportunity presented by the Bill to announce their intention to give purchasers all available information about previous land usage. If it contains anything of concern, the developer can take steps before trying to sell the houses to mitigate that concern or to overcome any problem that has been revealed. It is unacceptable for house purchasers to encounter at a much later stage worry, alarm, blight, and—perhaps even worse—an adverse effect on their health.
It may be argued that property developers are covered by the National House Building Council guarantee, but that is not always true. I should like to see consideration given to ways in which the NHBC certificate could incorporate guarantees covering problems of the kind that I described. Nevertheless, in the case that I cited, a number of the developers—and this is sadly true of other parts of the country are no longer in business, so it would be hard to seek redress from them.
There is a powerful argument for including builders and developers in the Bill. That might extend only modest protection, but I still think that it ought to be provided. I would not want to see such a measure serve as another step towards a closed shop and the elimination of competition. I fear that many who speak so reasonably today will seize the opportunity to keep out what used to be called the unqualified practitioner. I hope that that does not happen. By adopting a sensible trade description approach, we are doing the right thing by the consumer, but we ought not to go too far.
Earlier, I intervened on my hon. Friend the Member for Wyre Forest when he cited the example of a hotel situated close to a railway line. It was a bad example. Any purchaser, particularly the buyer of a hotel, would check out such fundamental considerations. It would be wrong for the public to imagine that the Bill will compensate them if they are the losers in such situations, because it will not. It is incumbent on purchasers to check the basic facts, and they will do so in 99 per cent. of cases. It would be a strange and naive person who took at face value everything that he was told by an estate agent—which must by its nature be a simplified and abbreviated advertisement.
1242 The Bill still will not compensate someone who loses a few hundred pounds—a serious loss—because he commissioned a valuation on the basis of false information. The Bill is designed to give powers only to prosecute an agent guilty of such an offence and not to secure compensation for any loss. The Bill simply makes a good effort to raise professional standards and to remind practitioners that it is their duty to be accurate, which is not a particularly onerous duty to observe. However, it will not serve to compensate my constituents, or anyone else who is misled and incurs a great deal of cost as a result. It cannot be otherwise, because presumably there is no legal contract between a prospective purchaser and an agent—so in the case of that client being misled, there is no recourse in civil law.
I would be sorry if, to use the words of the hon. Member for Great Grimsby, the more lyrical aspects of estate agents' advertisements were eliminated by the Bill. It is rather sad that the Roy Brooks cult of the 1950s and 1960s no longer has any followers. That estate agent was very successful by being as offensive as he possibly could about the properties that he was trying to sell. His advertisements were a splendid feature of life. One regularly turned to them in The Sunday Times, but we can no longer do that. Many of the more amusing examples of the estate agents' vernacular are part of our way of life. I hope that it will not prove necessary for advertisements to be so precise, meticulous and legalistic that that will prevent estate agents from being a little romantic.
We need to extend trade description provisions to ensure that the house-buyer gets what he thought he was getting, but, ultimately, we depend more on solicitors, valuers and surveyors than on estate agents. If we forget that, we shall be misleading our constituents and it is vital that we do not do so. The aspects that concern me are not addressed by the Bill, but are more likely to be covered by the regulations. We must ensure that estate agents who market other services or who, without the knowledge of the vendor, are making financial arrangements for the purchaser or who in some way conceal some other kind of financial deal are no longer permitted to do that. The information that the Law Society requires solicitors to obtain for their clients in respect of searches could also provide vital protection.
The Bill is a modest measure, but it is sensible, and my hon. Friends have argued for it very well. I do not want to go down the road of the closed shop, but I should like greater emphasis placed on the work done by solicitors in protecting house purchasers. I want to ensure that hidden financial details cannot act to the detriment of buyers or sellers. I hope that my hon. Friend the Under-Secretary of State, to whom I shall be writing about my constituency case, will re-examine the question of protecting buyers from the injury that could arise many years after land has been reclaimed.
§ Mr. Alan Williams (Swansea, West)
As one of the Bill's sponsors, I place on record my congratulations to the hon. Member for Wyre Forest (Mr. Coombs), who introduced the Bill this morning and to the hon. Member for Coventry, South-West (Mr. Butcher), who originally proposed the legislation but who has sadly been taken ill; I am sure that we all wish him a speedy recovery.
1243 As the hon. Member for Faversham (Mr. Moate) said, the Bill is modest in its objectives, but it is important none the less. The fact that it is a modest measure should in no way lead us to feel that it does not matter whether we add it to the statute book. It is better to advance in small steps to improve consumer protection than not to advance at all. As the hon. Member for Faversham said, buying a new property is one of the most stressful experiences of people's lives. Moreover, although it is something of a cliché to say it, with property booms it is becoming increasingly true that buying a house is the largest commercial activity and the largest purchase of most people's lives. There is an anomaly, however: one can buy a can opener for £2 or £3 and have the full protection of the law; one can spend £100,000, £200,000 or even—if one is lucky enough to have it—£300,000 on a property and one does not have that protection. That is clearly an anomaly and it needs to be eliminated.
The hon. Member for Faversham says that he does not want a closed shop. On this occasion, the hon. Gentleman and I are on the same side and I do not want to introduce an element of animosity, but it worries me that someone convicted of fraud could come out of prison on one day and become an estate agent handling enormous sums on behalf of the public the following day, with the public knowing nothing of his activities.
§ Mr. Moate
If that were the case, I should agree with the right hon. Gentleman, but it would not be possible for such a person to handle large sums, as that would be illegal. He might be able to proclaim himself an estate agent and assist in such transactions, but he would not be allowed in law to handle money or hold deposits on behalf of customers.
§ Mr. Williams
The hon. Gentleman is absolutely right to draw me up on that. I should have said that such a person would be in a position to induce other people to enter contracts for very substantial sums. I happily accept the hon. Gentleman's correction.
It seems absurd that we should not be including builders who sell on their own behalf. I hope that we shall do so in Committee. I know that the Bill deals principally with estate agents, but the marketplace is changing and in framing legislation, we must ensure that we match the rate of change. We shall be creating a new anomaly if we exclude from the Bill the person who has a 100 per cent. interest in disposing of a property while including a person with a 1.5 or 2 per cent. interest in helping to dispose of a property. At times the pressure on builders is enormous. I am not making a political point, but the industry is one of the most cyclical of all, as we have discovered throughout the post-war period. Builders are continually making fortunes and running into disaster. The pressures on them when they are selling can be massive. That is why it is absolutely right to include builders and solicitors. If there is one group that is in a privileged position over ordinary members of the public in a negotiation it is solicitors who are experts in the law. They should be subject to the same requirement if they decide to extend the use of their expertise into a marketing function.
I have never been over-enamoured of voluntary self-discipline within associations and professions because, sadly, I have concluded that, although many people enter into such voluntary arrangements in good faith and with good intent, far too many use them cosmetically to give an 1244 appearance of protection where there is none. In my view, estate agents come into that category. I do not accept the argument that because many of them conduct themselves well we do not need changes in the law. That argument is manifestly absurd. If someone said that because the majority of the public do not commit crimes, we do not need criminal law, we would all say that that was a fatuous argument, yet, all too often, that is the argument advanced in defending the entrenched positions of professions and trade groups which do not want the scrutiny of the law to be applied to their activities.
I wish the Bill well. I hope that it will have a successful Committee stage. Most of the points that have been made this morning—particularly by the hon. Member for Wyre Forest—will be very relevant to our discussions at a later stage. I congratulate hon. Members on trying to remedy a 23-year-old legislative anomaly and wish the Bill success.
§ Mr. Hugo Summerson (Walthamstow)
It is pleasant to be here on a Friday. Fridays are fun days for Back Benchers because we can get up and speak. Who needs Prime Minister's Question Time, statements on the Gulf or Second Readings of Government Bills when we can come here on a Friday and make ourselves heard?
I welcome the principle behind the Bill and congratulate my hon. Friends the Members for Wyre Forest (Mr. Coombs) and for Coventry, South-West (Mr. Butcher), whom we all wish a speedy recovery, on it.
Let me declare several interests. I am the chairman of a mortgage broking company and director of a property company—sadly, both jobs are unpaid. I am also a fellow of the Royal Institution of Chartered Surveyors and a member of the Royal Agricultural College.
The Bill would plug a gap in consumer protection and help to restore public confidence in estate agents. Many people would say that public confidence badly needs to be restored. The Bill should hold no fears for responsible and honest agents. Consumers' organisations and the public have shown a considerable interest in the Bill.
Under the law at present, estate agents who misdescribe property commit no offence, even if they do so deliberately. There is a contrast between their treatment and that of other traders, who breach the Trade Descriptions Act if they misdescribe goods. As has been said, buyers can suffer because solicitors' or surveyors' fees may be incurred before misdescription is discovered. Also, they may travel long distances and take time off work to view property. Why should they not if they are looking for another house or flat to be their next home?
The Director General of Fair Trading recommended that the Trade Descriptions Act 1968 should be extended to cover property. I understand that the Government have agreed to do that when parliamentary time is available. The Bill would broadly have the effect that the director general recommended in respect of property misdescriptions, but he also recommended that the offence should be one of strict liability and that neither a code of practice nor an order under the Estate Agents Act 1979 would be a sufficient alternative. An order by the Secretary of State would specify the attributes of property which would be covered by the Bill if they were misdescribed. The Director General of Fair Trading recommended a list of 25 such attributes, and Her Majesty's Government will consult before making an order.
1245 All that information came to me via a brief from the Government Whip's Office, which is why it did not sound very exciting. There appears to be a misconception in that information, which is why I gave it. That misconception is shared by the Consumers Association. I yield to no one in my admiration of the Consumers Association. Last year, my wife sent me out to buy a washing machine. She said, "Before you buy it, you must find the latest edition of Which? that reviewed washing machines and consult it". I duly did that, and a very good washing machine it is, too.
A briefing from the Consumers Association headedPeople tend to inspect properties before buying—so where's the problem?states:Although prospective purchasers inspect real property before purchase, the frustration, inconvenience, wasted journeys and expense caused by inaccurate particulars must not be under-estimated.Quite right, too. It goes on to state:More importantly, by no means all misdescriptions are discovered on inspection. Many physical aspects of a property, such as subsidence work, repair to woodwork, or roof repairs are difficult to inspect. In these situations, the facts are only revealed after the cost of a survey has been incurred. Similar problems can arise when dealing with non-physical aspects of a property—such as ground rents, maintenance charges, timber and other such guarantees, planning permission etc.—where the facts do not emerge until after searches are complete.The problem may be even larger in Scotland, where offers are binding once made, and purchasers do not have the period available to them between offer and exchange of contracts, during which property particulars can be checked.In effect, inaccurate property descriptions lead to the inefficient functioning of the market. They result in people not concentrating their searches on the properties most suited to their needs and often relying on information about aspects of the property which cannot be immediately inspected in deciding whether or not to make an offer.The misconception is that it is an estate agent's duty to put down in particulars every conceivable aspect of a property. That is not so, or an estate agent would have to conduct a full-scale structural survey of a property before drawing up his particulars. Estate agents are not surveyors. It is their job to present a property in the best possible light, but they cannot take on board various additional burdens. If they did, there would be further integration of the property conveyancing system. For many years, there has been a debate within the profession about whether there should be vendor surveys as part of a package, but that would simply take matters much too far.
§ Mr. French
Does my hon. Friend accept that the Bill does not require estate agents to state that information? It requires them to make sure that what they choose to state is accurate.
§ Mr. Summerson
Yes, of course. I shall refer later to the provisions of the Bill.
My hon. Friend the Member for Wyre Forest spoke about omissions. If an estate agent going around taking his measurements and so on cannot help but notice wide subsidence cracks, is it his job to state in the particulars that wide subsidence cracks exist?
I wish to refer to the views of the Royal Institution of Chartered Surveyors, which kindly sent me a copy of its letter dated 19 February to my hon. Friend the Member for Wyre Forest. It raised several points which I should like to put to the House. On clause 1(3), it said: 1246It is our understanding that under this sub-paragraph where the land in question is to be acquired for use solely as a business, then the provisions of the Bill are not intended to apply. The Bill would, however, apply to land having a mixed use, for example, a shop having a flat above it. We would welcome clarification that this is a correct interpretation.We inferred at our meeting with you that you were minded to ensure the scope of the Bill encompassed all forms of agency. However, I understand that due to time constraints in publishing the Bill, it was necessary to omit pure commercial agency at this stage, although it is intended to amend the Bill during its progress through the House to widen its scope to that extent.That subject has already been discussed this morning. I believe that the Bill should include commercial premises, as several hon. Members have already said.
It was stated that many commercial people are, of course, large operators. There has been reference to office buildings in the City of London and the panoply of professional advice that is available. But there are many small business men. Let us take as an example a greengrocer. He may be the world's uttermost expert on ugli fruit, but he will know nothing about leases or the condition of the structure of his property. How could he possibly know about those matters? If he is setting out from scratch in the business of purveying ugli fruit, he will undoubtedly want to keep his costs as low as possible. He will think, "I am not going to take professional advice on this or that. I will just hope for the best," because of all the other costs that he will incur in setting up his business. Commercial premises should be added to the scope of the Bill.
The RICS went on to comment on clause 1(6)(e). It said:We believe it is important that solicitors should be regulated by the provisions of this Bill. Whilst we accept that the Law Society's regulations provide a stringent code of practice within which solicitors arc required to operate, to exclude them from the Bill's provisions means they will escape those criminal sanctions which offer an effective deterrent.Additionally, as solicitors often employ non-qualified staff to run their estate agency practices, it is most important that they are subject to the full provisions of the Bill.Again, I agree with that. I see no reason why the scope of the Bill should not be extended to cover solicitors, particularly in Scotland, where most estate agency is carried out by solicitors.
On clause 5(1)(a) the RICS suggests thata period shorter than three years during which a prosecution could be brought would be appropriate in these circumstances.On clause 5(2) the RICS asks for clarification of the provision in that paragraph. On the schedules, the RICS said:It would appear that the references to 'goods' throughout the Schedule have been included as extracts from the Trade Descriptions Act 1968. However, it is inappropriate to refer to 'goods' in the context of real property, and we trust that, … some amendment should be made to take account of this.On schedule 4(1) the RICS asked for clarification of the definition of premises. It said:At Sub-Paragraph (a) 'premises' is defined as 'any place (including any vehicle, ship or aircraft) except premises used only as a dwelling'. For the avoidance of doubt, it is essential to clarify whether it is the agent's premises where business is conducted that is referred to or the premises which are the subject of the alleged misdescription.That is not clear at the moment.If the former is intended, it is most important that this is stated in unambiguous terms in order that the powers of officers of enforcement agencies are clear.On schedule 7, the RICS assumes 1247that the proposed regulation on disclosure, as set out here is intended to apply to the officers of the enforcement authorities. We would appreciate confirmation that this is the case.Clause 1(1) refers to false or misleading statements. Clause 1(6)(a) defines false as meaningfalse to a material degree".Problems of definition are very difficult. My hon. Friend the Member for Nuneaton (Mr. Stevens) spoke about a room which was 10 ft 6 in long but which had been inaccurately rendered as being only 9 ft 9 in long. That is all very well if the room is in a brand new house. There should then be no problem about getting the dimensions correct.
However, estate agents sometimes have to work in extremely difficult conditions. Let us take the example of a large rambling house in the depths of the countryside. The owner died some time ago and the executors have instructed a firm of agents to market the property. The agents go round to the house on a dull and unpleasant winter's day. They arrive to find that the electricity has been cut off and that the house is full of lumber. There is furniture all over the place—some rooms are stuffed full with furniture and rolled-up carpets. There are probably rats running about and cats demanding to be fed. It is also freezing cold.
§ Mr. Robert G. Hughes (Harrow, West)
Are not those circumstances in which some estate agents would describe a property as highly desirable and ready to move into?
§ Mr. Summerson
Some estate agents would go even further—they would probably set up as pet shop proprietors.
An estate agent may say that he is doing the best that he can but that all his modern electronic devices, which bounce a beam off one wall to another to measure room sizes, are bouncing beams off furniture or old curtains. In such circumstances, it is often impossible to give accurate measurements. If his measurements were held to befalse to a material degree",in accordance with the provisions, the estate agent would probably not have a suitable defence.
§ Mr. Stevens
Does my hon. Friend agree that under the Bill it would not be incumbent on the estate agent to put down the measurements? If he did not find it convenient to get the measurements right, he need not put them down.
§ Mr. Summerson
It is an estate agent's job to market property as effectively as he can. If an estate agent: were permitted to say that he had done the best that he could and said that the approximate size of a room was 9 ft 9 in by 10 ft 6 in and left it at that, I hope that that would be held to mean that he had done the best that he could in difficult circumstances. I understand that there is no prohibition on qualifying statements or on disclaimers, but estate agents' particulars might fall into even more disrepute if they were hedged about with qualifications and disclaimers. I fear that that is inevitable in some circumstances.
My hon. Friend the Member for Gloucester (Mr. French) spoke about whether a room could properly be described as newly decorated. What is "newly" and what is "decorated"? Those terms need to be defined. A room may have been decorated three months ago: is that newly 1248 decorated? It may have been decorated six or nine months ago; that is perhaps getting a little bit marginal, but who is to say?
The omission of particulars could be an offence under the Bill. My hon. Friend the Member for Wyre Forest cited a large omission relating to a motorway running by the side of a house, but what about a small omission, for example, failure to mention a cracked lavatory bowl? If an estate agent did not reveal that in the particulars on the property, would that be held against him? A more serious example could be omitting to reveal that an old property had lead pipes. Would failure to disclose that be held against the estate agent? Should it not be possible for the estate agent to defend himself by saying, "I am not a plumber. How on earth can I go round the house to find whether there are any lead pipes?" If part of the pipework had been replaced with copper or plastic but other lead pipes still existed, would an estate agent commit an offence if he did not reveal that?
Some years ago I bought a property in Marylebone, London. It was not until after I had purchased it and the environmental health officer came round that I was told that I had to put 2 ft of concrete in the basement. I asked why, and the environmental health officer told me that the House had been built on the site of a plague burial pit. Certainly in those days estate agents did not put that information in the particulars—if they had, they would never have sold the house, apart from anything else. Would an estate agent be liable under the Bill if he did not state that there was danger of death from bubonic plague if 2 ft of concrete was not laid in the basement?
What should an estate agent do if he goes round a property to take the measurements in the usual way? Normally that is done by an estate agent and his assistant and they comment beneath their breath on the property owner's taste and when they can get away for a cup of coffee. The estate agent has already made up his mind on the descriptions—for example, "A wealth of period features"—but what happens when he discovers by chance a wealth of active woodworm? Does the estate agent state in the particulars that the wealth of period features already houses woodworm or does he say that that is nothing to do with him? Would he not be caught by the Bill if he did not reveal that fact?
§ Mr. Moate
My hon. Friend has described the dilemma faced by the estate agent in such circumstances, but he should apply those circumstances to the purchaser. How can a purchaser discover that he needs 2 ft of concrete to protect himself from the leftovers of the great plague? How could my constituents discover about brickwork activity of 80 years ago and the dangers that that now posed because of poisoned soil? Surely we should consider the protection offered to the buyer.
§ Mr. Summerson
My hon. Friend is talking about the services of a chartered surveyor. I am not especially blowing my own trumpet, but he has given me a good opportunity.
§ Mr. Leigh
My hon. Friend has asked whether omissions will be covered by the Bill. An estate agent must first make a statement before he is liable. If an agent described a property as being in a quiet cul-de-sac without revealing that that quiet street would in six months be an access road to an estate of 2,000 new houses, he would be liable.
1249 An estate agent would not be liable if he made an innocent omission. Let us take the example of the bubonic plague burial pit. If an estate agent said that the house was in an historic spot well noted over the centuries for its healthy nature, he might be liable if he failed to reveal that, many centuries ago, it had been the site of a plague burial pit. He would not be liable if he did not make any admission as to the healthy nature of the site over the centuries.
§ Mr. Summerson
I am grateful to my hon Friend for that clarification. It would be absurd to say that, millions of years ago, dinosaurs roamed the land around here.
§ Mr. John Marshall
Perhaps my hon. Friend can tell us how he described the property when he sold it.
§ Mr. Summerson
There was no difficulty because we had hired cement mixers by the score to put 2 ft of concrete in the basement.
§ Mr. Summerson
Under the present law, I did not have to say that I had put 2 ft of concrete in the basement, therefore there was no further danger from the bubonic plague, but under the Bill I might have to do just that. Is that reasonable and sensible?
An estate agent should never mention the structural condition of the property. It is none of his business to do so, as things stand. Under this Bill he may have to mention it. If surveyors, including chartered surveyors, make mistakes from time to time in assessing the condition of a property, how much more often will an estate agent make mistakes? We are undoubtedly heading towards far more integration in the performance of buying and selling property, and to vendors' surveys. Whether the public wish it or not, the net result will be a sharp rise in the fees charged by estate agents. I can see nothing else for it. They may even rise to the level in the United States of America where they represent 10 per cent. of the value of the property. That is a far cry from the 2 to 3 per cent. charged by most estate agents in this country.
§ Mr. Summerson
My hon. Friend knows perfectly well that people do not have to use the services of an estate agent, if they choose not to. If he were to sell a house for £200,000 and found an agent who was prepared to do it for him for 2 per cent., the fee would be £4,000. On the other hand, if he chose to sell the property himself but made a hash of it and sold it for £10,000 less than an estate agent could have got for him, he would lose out considerably.
Clause 2, headed "Due diligence defence", is the most extraordinary clause. Subsection (1) states:In proceedings against a person for an offence under section 1 above it shall be a defence for him to show that he took all reasonable steps and exercised all due diligence to avoid committing the offence.That is fine. If the Bill had left the matter there, I would have no objection, but it has to qualify it. All legislation must qualify itself. Subsection (2) states:A person shall not be entitled to rely on the defence provided by subsection (1) above by reason of his reliance on 1250 information given by another unless he shows that it was reasonable in all the circumstances for him to have relied on the information"—Again, if the provision stopped there, I would have no quarrel, but it continues—having regard in particular—I could hardly believe my eyes when I read that. When an estate agent goes round a property which Mr. and Mrs. Smith have asked him to sell and they tell him that the house has woodworm and damp-proof guarantees, that they have recently installed a gas boiler and so on, he will assume—most estate agents would—that they know what they are talking about and jot that down in the particulars. The clause provides that the agent must verify the information, so he must then ask Mr. and Mrs. Smith which company undertook the damp-proof and woodworm treatment. They will say, "Such-and-such a company" and the estate agent must get on to the company and ask whether it undertook the work and gave guarantees. Meanwhile, Mr. and Mrs. Smith are demanding "Why haven't you put the property on the market? Why all the delay"? The agent can only reply, "I have been on to the firm but have not yet had a reply." Mr. and Mrs. Smith, in the meantime, are not selling their property, all because., according to subsection (2)(b), the agent had to wonder
- (a) to the steps which he took, and those which might reasonably have been taken, for the purpose of verifying the information, and
- (b) to whether he had any reason to disbelieve the information."whether lie had any reason to disbelieve the information.How can the average agent have any reason to disbelieve information given to him by clients? We are talking about a professional relationship with a client, which is based on mutual trust. This is asking the agent to disbelieve all information given to him by his client. That will involve him probably in weeks of extra work checking what his client has told him.
The extraordinary clause 2 goes on:(3) Where in any proceedings against a person for an offence under section 1 above the defence provided by subsection (1) above involves an allegation that the commission of the offence was due—I do not know what "the diet of trial" means. Some legal language is remarkable and I do not know why a provision such as that could not have been written in plain English. I admit that I am not a lawyer. It goes on:
the person shall not, without the leave of the court, be entitled to rely on the defence unless he has served a notice under subsection (4) below on the person bringing the proceedings not less than seven clear days before the hearing of the proceedings or, in Scotland, the diet of trial.
- (a) to the act or default of another, or
- (b) to reliance on information given by another,(4) A notice under this subsection shall give such information identifying or assisting in the identification of the person who committed the act or default, or gave the information, as is in the possession of the person serving the notice at the time he serves it.I think I understand that. It means that if, say, the purchaser of a property three years or two years and nine months later takes the estate agent to court for misdescription, the agent has a defence; but he must serve noticeidentifying or assisting in the identification of the person who committed the act or defaultbeing his original clients. The agent can only say, "Mr. and Mrs. Smith moved to the west country". How on earth is 1251 the agent to know more than that? In the court it will probably sound as though he is trying deliberately to be unhelpful.
Believe it or not, I welcome the principles behind the Bill, which should be given a Second Reading, although a great deal more work will have to be done on it.
§ The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Edward Leigh)
I congratulate my hon. Friend the Member for Wyre Forest (Mr. Coombs) on the way in which he presented the Bill. The whole House will be sad that my hon. Friend the Member for Coventry, South-West (Mr. Butcher) cannot be with us, especially as he has taken a close interest in these matters. Indeed, he started the ball rolling on the Bill when he held my present position at the Department of Trade and Industry.
I thank also other hon. Members who have spoken in the debate—my hon. Friends the Members for Nuneaton (Mr. Stevens), for Gloucester (Mr. French) and for Walthamstow (Mr. Summerson), the hon. Member for Great Grimsby (Mr. Mitchell) and the right hon. Member for Swansea, West (Mr. Williams).
On behalf of the Government, I welcome the Bill—and I say that, I assure the hon. Member for Great Grimsby, not through gritted teeth. It would plug a gap in the laws that protect consumers and would, at the same time, do something to help restore public confidence in estate agents. It is a relatively modest measure, which should not be at all onerous to comply with or to enforce, and I fully believe that it should hold no difficulties or worries for the responsible estate agent.
Estate agents have, we must accept, long suffered from a bad press and a poor public image—a point made particularly by some of my hon. Friends. I see the purpose of the Bill as being as much to restore public confidence in estate agency as to protect purchasers of property, and I hope that the House will bear that theme in mind today.
We have had some interesting and illuminating contributions from hon. Members which demonstrate that there is a keen interest in the Bill. That interest is shared by a number of consumer associations. Indeed, I believe that they have assisted my hon. Friend the Member for Wyre Forest in his preparation for today. There has also been much interest in the press and generally. Many hon. Members who have spoken in the debate, the press, consumer groups and the Government have all looked forward to the Bill with enthusiasm and welcome it.
I shall recall some recent history on the subject, respond to my hon. Friend the Member for Wyre Forest and explain the Government's attitude to the Bill and how it will fit in with other estage agency measures currently being proposed by the Government. Although the Bill is relatively straightforward, it contains a number of complex provisions, as my hon. Friend the Member for Walthamstow made clear. We should, therefore, study it in some detail.
I said that I would refer to the recent history of the subject, and that is what I propose to do. I shall not, therefore, attempt to explain why the Trade Descriptions Act 1968 does not apply to statements about real property nor elaborate on the background to the Estate Agents Act 1979, although I shall refer to it again later. Suffice it to say that, in June 1989, my hon. Friend the Member for 1252 Mid-Worcestershire (Mr. Forth) the then Parliamentary Under-Secretary of State for Industry and Consumer Affairs, published the Department's review of estate agency business. He also asked the Director General of Fair Trading to discuss with the industry a code of practice and to review the question of extending the Trade Descriptions Act 1968 to misdescriptions of property.
As hon. Members will know, although in general terms the Trade Descriptions Act makes it an offence for a trader to misdescribe goods and services, it does not apply to real property. Thus, a car dealer, for instance who materially understates the mileage travelled by a car that he is selling or misdescribes its condition, commits a criminal offence. Similarly, a tour operator who knowingly or recklessly misdescribes a holiday hotel, for instance, also commits an offence.
However, an estate agent who misdescribes a house in respect of which he is seeking offers—even if the misdescription is serious and he does it deliberately, and even if the value of that property is, as several of my hon. Friends said, a major investment for the potential client—commits no offence under existing legislation. That is clearly a lacuna in the law, which is why the Government welcome the Bill and the attempt by the House to deal with the problem.
Many people have considered, quite rightly, that that hole in the law is an anomaly. That is why my predecessor asked the Director General of Fair Trading to review the matter. At the same time, he also said that he was considering using subordinate legislation under the Estate Agents Act 1979 to strengthen consumer protection in relation to estate agents. I shall refer to that in more detail later.
In response to my predecessor, the then Parliamentary Under-Secretary of State, the Director General of Fair Trading issued a consultation document in September 1989, inviting comments from a wide range of consumer groups. He also asked for views on the appropriateness of various remedies, both voluntary and statutory, that had been put forward in the past.
In March 1990, the Director General of Fair Trading published his firm recommendations following the response that he had received from his wide-ranging consultation. The responses ranged widely, as one might expect. Some people said that no action should be taken; others said that extensive legislation was needed, with a complete reform of the property transfer system. Because of time restraints and to allow other hon. Members to speak, I shall not recap on all the director general's recommendations now, but shall confine my remarks to the issue of property misdescription.
In his consultation document, the director general made the suggestion that the Trade Descriptions Act 1968 should be extended to cover property misdescriptions. In doing so, he also responded to two views that had been expressed on the subject. First, he said that he was inclined to reject the view that the availability of subordinate legislation under the 1979 Act made an extension of the Trade Descriptions Act unnecessary. Secondly, he said that he believed that misdescription of property should be an offence of strict liability, in line with the offence of misdescribing goods, under the existing Trade Descriptions Act. The director general's final recommendations in his report, after taking full account of the responses received, upheld both those conclusions.
1253 It is worth emphasising that the director general's firm recommendation was that those matters should be covered by the criminal law and not left to a voluntary code of practice or subordinate legislation under the 1979 Act. He also recommended, however, that an order under section 3(1)(d) of the 1979 Act could make interim provision against misdescription of property, pending the availability of parliamentary time for primary legislation.
In response to the director general, my hon. Friend the then Minister told the House in a written answer on 19 April 1990:It is therefore the Government's intention that, as soon as legislative time is available, the Trade Descriptions Act 1968 should be extended to cover misdescription of property."—[Official Report, 19 April 1990; Vol. 170. c. 1005.]I reaffirmed the Government's intentions on that matter in an oral answer on 23 January this year. I promised the House then that an order would be laid before it. However, it has not been possible to find the necessary parliamentary time for primary legislation, which is why the Government welcome the efforts of my hon. Friends the Members for Coventry, South-West and for Wyre Forest in bringing forward the Bill.
In the time available I shall deal with the comments raised during the debate. As revealed in the director general's consultation exercise, there is a wide range of views on the subject. At one end of the spectrum it is argued that nothing needs to be done. To those with that view I say, as I have said before, that confidence in estate agency needs to be at a high level—in the interests of not just potential purchasers of property, but the estate agent industry.
Whatever arguments were accepted in relation to the coverage of the Trade Descriptions Act years ago, it seems that it is extremely difficult in these days of high property values to argue that estate agents are in a significantly different position from those who work in other sectors that market goods and services—a point made by the right hon. Member for Swansea, West. In a lyrical speech, the hon. Member for Great Grimsby gave some of the estate agents' lyricisms, which have become notorious. It is right for my hon. Friend the Member for Coventry, South-West to seek to address that problem.
The fact that estate agents are not subject to criminal law when they misdescribe property does not inspire confidence in those who deal with them. There is no doubt that their unique position is anomalous and should not be maintained. Some people say that to arouse further suspicion among the general public, who already hold estate agents in something rather less than high regard, is wrong. I do not suggest that that attitude is justified, but few would deny that it exists. The best way to allay that suspicion seems to be to bring estate agents into the same sort of regime that applies to most other sales.
Estate agents are in a unique position. There is no reason why it should be allowed to continue, although it was set out a long time ago in the 1968 Act and the House should now act.
Some people would advocate a more draconian and detailed regime to deal with property misdescriptions—a point hinted at by Opposition Members. The Bill would bring misdescription by estate agents within the scope of the criminal law for the first time, which is a major step forward. The Bill follows a similar line to the one taken by 1254 the Trade Descriptions Act 1968 in relation to statements about goods, and that has stood the test of time remarkably well. This Bill ought to be sufficient for that purpose, but if it is not we are prepared to consider these matters.
Those who argue against the need for the Bill say that purchasers of property are already protected by the property purchase system and are not in the same position as the purchasers of goods. It is argued that they always have the benefit of professional advice before making any final commitment. There is something in that argument. I must tell my hon. Friend the Member for Faversham (Mr. Moate) that it is not our intention to regulate the industry out of existence. My hon. Friend made some sound comments about the need to ensure fairness and to provide customers with full information, but without going too far and without loading too many costs onto the industry—costs which will be passed on to the consumer. That point must always be borne in mind when dealing with consumer legislation.
Notwithstanding our wish to protect the consumer, we should always bear in mind the point made by my hon. Friend the Member for Faversham. His comments were most pertinent and we should always remember them when introducing legislation that purports to protect the consumer.
Few people complete a purchase of property without the advice of professional experts, but that does not mean that purchasers cannot suffer as a result of misdescriptions: far from it. To begin with, purchasers are not obliged to engage professional advice. It is possible to do one's own conveyancing and there is no requirement to obtain the benefit of the advice of a surveyor. Even if purchasers do obtain such advice it cannot be certain that misdescriptions will be discovered. It is therefore possible, although perhaps not likely—presumably this is why the House has not found the time to act on this in the past—that a purchaser could go through with the purchase of a property before a misdescription came to light. A more likely possibility is that a purchaser will engage a solicitor or surveyor and hence incur not inconsiderable expense before a misdescription is discovered.
At the lowest level a purchaser may incur expense and inconvenience travelling to view a property; he may have time off work, only to find that the house has been misdescribed. I have been told of someone who expressed great interest in a property and went to the expense of going to view it. He had seen a picture of the house, but it did not show the fact that right behind the house was a gasometer. The photo was taken at the time of day when the gasometer was down, so the purchaser was in a position to buy the house when he finally discovered that the view from it was obscured. My hon. Friends the Members for Wyre Forest and for Gloucester amused the House with similar examples which no doubt were not so amusing for the purchasers whose properties were misdescribed. Hon. Members will be familiar with the experience from their everyday lives.
I do not subscribe to the view that purchasers are already adequately protected. As many hon. Members have pointed out, the purchase of property is for most people their largest-ever expense. If it is done in the normal way, important safeguards are built into the system, but people can and do suffer economically and experience inconvenience as a result of misdescriptions, which is why it is right that the House should take action today.
1255 Hon. Members have talked of some of the things that can be misdescribed. My hon. Friend the Member for Walthamstow made a point of mentioning them in his detailed speech. He has a lot of personal knowledge and experience of these matters and the House is grateful to him for his comments.
I should like to draw the attention of the House to the provision in clause 1 of the Bill that would deal with this point and to clear up any doubts that hon. Members might have about the Government's intentions. If enacted, the Bill will have no practical effect until an order has been made by my right hon. Friend the Secretary of State. The order would specify the prescribed matters relating to land to which the provisions of the Bill would apply. The Secretary of State would he able to prescribe any matter relating to land and, as hon. Members will appreciate, Iand has a very wide meaning by virtue of the Interpretation Act 1978. Under that Actland includes buildings and other structures, Iand covered with water and any estate, interest, easement, servitude or right in or over land".However, in order for the Bill to apply, the statement would have to be made in the context of estate agency business, which is defined by reference to the Estate Agents Act 1979. Nevertheless, the phraseany matter relating to landgives considerable scope for the Secretary of State's discretion. Lest the House should have any concerns about this unspecific discretion, it may be helpful for me to give an indication of the Government's attitude on the matters that the legislation proposed by the Bill would cover. I hope that this will help my hon. Friend the Member for Walthamstow.
We are talking about location or address; aspect and proximity to places and amenities; facilities; proximity to and availability of any services; tenure; in the case of leasehold property the length of the lease, including any unexpired term; conformity or compliance with any standard, regulations, guarantee or scheme; accommodation; measurements and sizes; physical characteristics, including construction, appearance or fittings; fitness for purpose; fixtures, whether moveable or not, included in or excluded from sale; previous history, including the age, ownership and use of any building, fixture, component or thing; treatments, processing, repairs, improvements and the effects and results thereof; existence or nature of planning permission; and existence and extent of any listed buildings status.
That is a comprehensive list. I cannot say whether all those matters would be included in the final order., but, obviously, a fair degree of common sense must be used.
§ Mr. Alan Williams
The Minister is being informative and helpful. Several hon. Members spoke about builders and solicitors. The Bill's long title refers only to estate agents. Would the Minister welcome any endeavours to change the long title to include builders and solicitors?
§ Mr. Leigh
I am grateful to the right hon. Gentleman for raising that matter. I shall shortly come to it. I have read the early-day motion that has been signed by a considerable number of hon. Members. Of course I would not finish my speech without explaining the Government's attitude to commercial property and solicitors.
The list that I have read to the House details the items that the Secretary of State would consider when deciding the matters to be specified in an order under clause 1. No 1256 firm decisions have been taken on that and we intend to hold a consultation exercise. I have listened carefully to the debate and the Secretary of State will obviously listen carefully to representations by the industry and consumer groups before the list is published.
My hon. Friend the Member for Wyre Forest spoke about how the Bill could be extended. I suspect that that issue is of most interest to the House. My hon. Friend the Member for Coventry, South-West framed the Bill in a fairly narrow way and my hon. Friend the Member for Wyre Forest has simply taken it up as it stands. There is no reason why it should not be amended later. My hon. Friend the Member for Wyre Forest said that the Bill should be extended to cover commercial as well as residential property. In a cogent speech, my hon. Friend the Member for Gloucester also argued strongly in favour of that, as did my hon. Friends the Members for Faversham and for Walthamstow and Opposition Members. I have considerable sympathy for that idea. If we accept the principle that descriptions of property should not be false or misleading, it is somewhat illogical to draw a distinction that depends on the purpose for which the property is being offered, whether it is domestic or commercial.
Some may argue that the purchaser of commercial property is likely to be more sophisticated and expert than the buyer of a house and, therefore, more able to look after his own interests. That may be so in many cases, but it is not always the case. I think that it was my hon. Friend the Member for Walthamstow who cited the example of small grocers. It cannot be assumed that all potential purchasers of commercial property are very sophisticated in regard to the property market.
At the earlier stages of a small firm's development, decisions must be made that are crucial to the long-term success of the enterprise. The premises on which the business is to be conducted are often of the acutest concern to that business, which may be under considerable pressure and, as I have said, may not have the necessary expertise in commercial property transactions. It is extremely important that such vital decisions are not made by small businesses on the basis of inaccurate information. The aspiring self-employed builder, shopkeeper or car mechanic is at least as susceptible to detriment caused by property misdescription as is the house buyer—indeed, perhaps more so. I suggest to my hon. Friend the Member for Wyre Forest that there is a strong argument for descriptions of commercial property to be subject to the same requirements as descriptions of residential property.
A substantial amount of the commercial property on the market is sold not to small or medium-sized firms but to large corporations and businesses. In such cases, the buyer may well have the knowledge, the expertise arid perhaps even the resources to clarify and verify the information provided. It could be argued that such buyers, at least, do not need the protection offered by the Bill. I see some merit in that argument, but I am not entirely convinced by it. I think that it is possible to argue with equal conviction that descriptions should not be false or misleading, full stop. If the Bill, or any amendments to it, attempted to draw distinctions between small and large businesses—and representations to that effect have been made to us—we might find ourselves in all sorts of difficulties. I think that it is better to rest on the point of principle that the buyer—whether that buyer is an individual or a large or small business—has a right to 1257 information from the estate agent which is not misleading. That, surely, is logical and, if my hon. Friend the Member for Walthamstow tabled an amendment to that effect, we would not oppose it.
Estate agents involved in selling commercial property may say that it is more difficult for them to ensure that descriptions are accurate, as they have to rely largely on information supplied by the seller. That may well be true, but it does not mean that the estate agent will necessarily find himself in a more difficult position. The Bill provides defences which are common in laws of this nature—here we come to the "due diligence" argument to which my hon. Friend the Member for Walthamstow referred.
The Bill does not prohibit or restrict the use of qualifying statements to reflect the circumstances in which they are made. The courts would have to take such matters into consideration in the event of a prosecution. I have a little experience in these matters and I know that the courts approach such prosecutions with a fair amount of common sense. I hope that that reassures my hon. Friend.
I believe that the estate agent who acts reasonably and, above all, conscientiously has nothing to fear from the inclusion of commercial property. On the contrary, he may have more to gain from the increased confidence in the industry that would result from such an inclusion. As I said earlier, the Bill is designed to protect not only the consumer but the industry from the small minority who may indulge in misdescriptions. We shall have to see how my hon. Friend frames his amendment in Committee, but I do not think that there will be any problems and I am sure that we can make progress.
My hon. Friend the Member for Wyre Forest also suggested that builders of new houses, and others who are in the business of marketing property, should be subject to the Bill. I know that a number of other hon. Members, including some of the Bill's sponsors, share that view. The case for including in the Bill builders of new property seems to be a fairly persuasive one. Having said that, I would of course wish to acknowledge the improvements that have taken place in the building industry over recent years. Standards have improved enormously from the situation that appertained in the 1950s and 1960s. I think that we can generally accept that the industry has advanced to the high quality of construction that we have seen in recent years and which we really take for granted.
It has been suggested by some in the building industry that there is no need for legislation in this area, given the protection offered to purchasers of new homes by the National House Building Council and equivalent structural warranty schemes. In May 1990, the supply of structural warranty services in relation to new homes was referred by the Director General of Fair Trading to the Monopolies and Mergers Commission for investigation under the monopoly provisions of the Fair Trading Act 1973. The commission's report was delivered to my right hon. Friend the Secretary of State for Trade and industry on 14 December. It will be published in due course. In the circumstances, I do not think that it would be appropriate—the report has only recently been delivered to my right hon. Friend—for me to prejudge the conclusion of the report by commenting on the merits or operation of structural warranty services.
1258 Leaving aside the merits of such schemes, there are arguments as to why the Bill should extend to builders of new houses. First, structural warranty schemes will not cover as wide a range of characteristics as are envisaged being covered by the Bill. As my hon. Friend the Member for Faversham said, we cannot necessarily rely on a structural warranty when we are thinking of purchasing a property. The list that I read out covers a far wider area than the warranty.
The Bill would enable my right hon. Friend the Secretary of State to prescribe the matters relating to land that would be covered. I gave an indication of the sort of things that would be considered for that purpose when I referred to the report of the Director General of Fair Trading. In all the circumstances, I think that we need to look to the list if and when the Bill becomes an Act. I think that it can be assumed that the list will be wider than the structural warranty. Therefore, I can see considerable merit in what has been suggested.
The main argument seems to be one of equity—
§ Mr. Austin Mitchell
The problem that we face with builders and solicitors is that they do not come within the terms of the present long title, which refers tomisleading statements by persons carrying on estate agency business in connection with property transactions.My early-day motion 528, which has been signed by 53 hon. Members, suggests that the title should be widened to cover other aspects of the selling of houses. Will the Minister support a widening of the long title to include those aspects?
§ Mr. Leigh
I have already raised the matter with those who advise me. Apparently it is possible under the procedures of the House for the title to be changed—for example, it could become the Property Misdescriptions Bill. There is no problem about that. If it were wished to amend the Bill in that way to cover the matters that we are discussing, I should not oppose that change. We are talking about creating the famous but elusive level playing ground, if the House will forgive me for using that expression. It would be ridiculous if we were to be constrained by the long title. As I have said, I have been told—I hope that the Clerks will not disagree with me—that we can amend the long title.
The argument turns not on warranties and detailed difficulties but on equity. Would it be fair to the house buyer to have the protection of the law when buying a new house through an estate agent but not when buying direct from a builder, bearing in mind that, as likely as not, there would be NHBC or equivalent coverage in both instances? Would it be fair if the estate agent was subject to the provisions of criminal law when he who is, in effect, his direct competitor, the builder, was not? If we are to load the criminal law on to the estate agent, it would seem unfair if we did not also put it on to his main competitor, the builder. We have an open mind on that question. I shall have to see what amendments come from my hon. Friend the Member for Wyre Forest, but I listened closely to the comments that were made about builders, which were interesting, illuminating, and in many respects persuasive. No doubt my hon. Friend will seek advice before tabling his amendments.
The third area that my hon. Friend the Member for Wyre Forest indicated as offering potential for extending the coverage of the Bill particularly exercises the mind of the hon. Member for Great Grimsby, who has a long 1259 record of seeking to provide consumer protection. I well remember a Bill that he presented in my early days in the House and I respect his knowledge of such matters.
The Bill depends very much on the definition of estate agency work that appears in the Estate Agents Act 1979, which specifically excludes things done in the course of his profession by a practising solicitor or a person employed by him. It is generally accepted that it excludes solicitors from the effects of the 1979 Act when they are underlaking estate agency work.
There are valid arguments why that should be so. The 1979 Act established a detailed regime for controlling the conduct of estate agents, which gave the Director General of Fair Trading powers to prohibit an estate agent whom he considers unfit from doing estate agency work at all, or from doing certain types of such work. That point was made by the right hon. Member for Swansea, West, who questioned why someone who had just been discharged from prison could immediately undertake estate agency work. Agents are subject already to regulations imposed by the Director General of Fair Trading.
United Kingdom solicitors are subject to strict rules and discipline. It can be argued with some force that the profession's own internal rules, together with the powers of the independent, statutory discipline tribunals, are more rigorous in their effect than those imposed by the 1979 Act. That argument could be extended to suggest that the high standards enforced by the law societies and discipline tribunals justify the exclusion of solicitors from the Bill, but I am not sure that it is right to take the argument that far.
Many would say that when a criminal offence is created—as opposed to the kind of regulatory regime contained in the Estate Agents Act 1979—solicitors who act as estate agents in direct competition with others in the business should also be subject to the same statutory requirements. In some parts of Scotland at least, solicitors have the lion's share of estate agency business and in the rest of the country there is certainly potential for their share to grow and many solicitors hope that it will. It can be argued that if solicitors are to compete on equal terms with others in the market, and to be seen to be doing so on the level playing field to which the hon. Member for Great Grimsby referred, the same provisions in respect of criminal offences should apply to both sides.
I remain open minded about the question of solicitors. We are consulting the law societies and so far the solicitors' reaction has been positive. However, we want that consultation process to complete its course. Presumably it will be a week or two before the Committee stage, so there is time to complete that consultation before we next consider the Bill. Obviously we should like to know the views of the solicitors' representative bodies and to see the amendments that are to be tabled by my hon. Friend. Nevertheless, I remain entirely open minded about whether solicitors should be included in the terms of the Bill.
§ Mr. Alan Williams
I understand the need for consultation and I must admit to some procedural inadequacy on my part—though I suspect that it may extend to other right hon. and hon. Members—in respect of amending the long title. In preliminary discussions, it has been suggested that the long title may have to be amended before the Committee stage. If that is so, we shall not have the amount of time that the Minister suggested 1260 we might have. I am afraid that I have been rather remiss and have not taken the trouble to double check. Can the Minister give us any guidance? I can well understand that he may not be able to, in which case, will he take the matter into account in timing his consultation?
§ Mr. Leigh
I am not sure that one is allowed to talk about such matters at this stage, but I understand that there is quite a long queue and that it may be some time before the Bill can go into Committee. I do not want to give a definitive judgment off the top of my head, but, as far as I know, it is possible to amend the long title, which would make it perfectly possible to include solicitors, commercial property builders and the other groups in which hon. Members are interested.
We have been consulting fully with the solicitors and they also know that there is a time constraint. I want to return to my original point because some hon. Members may find it surprising. They may imagine that the representative bodies always adopt a very conservative attitude to these matters. Our experience is that they have been forthcoming and interested. They recognise the problems that have been alluded to by hon. Members who ask why solicitors should be in a special position. I remain fairly confident that we shall be able to achieve a degree of consensus. I know from my own experience of taking a private Member's Bill through the House last year that such Bills are very delicate flowers. If one is not careful, one can easily build up a wave of opposition and, as we all know, a perfectly justifiable Bill may be talked out with great ease.
I have great confidence in the diplomatic skills of my hon. Friend the Member for Wyre Forest. It is important that he should approach the matter in a diplomatic way. I am sure that if he does, he will be able to make progress. It is his Bill; it is not a Government Bill. I am sure that my hon. Friend will allay any concerns that the solicitors have. Then we shall have to see what happens. It is up to my hon. Friend. He is in charge of the Bill and he must ensure that he does not build up too much opposition to it.
It may help the House if I give my views on some of the implications of the Bill and on the way in which it would work in conjunction with the subordinate legislation that is proposed under the Estate Agents Act 1979. The hon. Member for Edinburgh, South (Mr. Griffiths) is in his place on the Opposition Front Bench. He may well wish to refer to these matters, as is his right. He may accuse the Government of being dilatory. If I were in his position, I might be tempted to do the same, but I am not and before the hon. Gentleman makes his comments I should explain what the Government have done and the constraints that have been placed on them.
I do not see the Bill as a regulatory measure. The criticism is often levelled at regulations that they can prove cumbersome or bureaucratic or act as an unfair burden on business—the point made by my hon. Friend the Member for Faversham. The Government are rightly concerned about such allegations. My Department has gone to some lengths to cut red tape, to deregulate and to encourage deregulation in other Departments wherever possible. That has been achieved as part and parcel of the Government's commitment to increase competition by the creation and opening up of larger markets. As I said to the hon. Member for Great Grimsby in an intervention, the Government are not supporting the Bill through gritted teeth. We regard the Bill not as a regulatory measure but 1261 as a modest measure to protect the consumer—always bearing in mind, of course, that the creation of large and successful markets gives the best protection to consumers because of the competitive nature of those markets. We should never lose sight of that.
It is important that descriptions of property should not be false or misleading and that is why the Government support the Bill. It would not overburden estate agents or others, but would merely underline existing good practice. Where there is obvious good practice and an obvious principle at stake it is no bad thing that they should be enshrined in legislation. The Bill is not regulatory but simply requires accuracy, honesty and prudence from those selling property. I do not think that the House should ask for anything more or anything less from estate agents.
On enforcement, I estimate that the burden on the public purse would be minimal. Enforcement would be the responsibility of local trading standards departments which are already involved with and experienced in the enforcement of a range of similar legislation. I envisage that enforcement will in general take the form of responding to complaints, carrying out investigations where appropriate, securing future compliance and, in the most serious cases—probably very rare—proceeding with prosecutions.
The schedule contains powers of entry and inspection which are standard for statutes of this nature. I am satisfied that the powers are reasonable in the circumstances and that safeguards are provided. There was some discussion about whether powers of entry should apply to private houses. My hon. Friend has wisely taken the view that powers of entry should not apply to private houses. If he had not done so, we might find the hon. Member for Brent, East (Mr. Livingstone) talking at great length about the civil liberties implications of entry into private houses.
I now put the Bill into its proper context. I referred briefly to the recommendation of the Director General of Fair Trading that an order should be made under the Estate Agents Act 1979, declaring that property misdescriptions should be an undesirable practice under that Act. The director general's report also recommended that certain other matters should be covered by such an order, such as forced sales of ancillary services, effective disclosure to the client of an estate agent's personal interests, as well as misdescription of property.
My Department has consulted widely on these matters. I inform the hon. Member for Edinburgh, South, who I suspect will accuse me of not acting fast enough, that we have consulted widely. There have been several differences of opinion. There has been a problem in applying the order to misdescriptions of property. Therefore, I shall proceed as quickly as possible with making subordinate legislation, but I shall leave out those aspects covering misdescription of property, because we hope that, when the Bill becomes an Act, those aspects will be covered.
I hope that I have answered all the points that have been made by right hon. and hon. Members. I welcome the Bill. It is a modest but important measure. It is widely welcomed by the House, the press and consumer groups. I wish it a fair wind and a steady passage to becoming an Act.
§ 1.1 pm
§ Mr. Nigel Griffiths (Edinburgh, South)
I congratulate the hon. Member for Coventry, South-West (Mr. Butcher) on his good fortune in securing a high place in the ballot and on his good judgment in promoting the Bill, which was prepared by the Consumers Association. I repeat the good wishes that I expressed to the House on 23 January for a speedy recovery from his recent illness.
We have heard informative speeches from the hon. Members for Wyre Forest (Mr. Coombs), for Nuneaton (Mr. Stevens), for Gloucester (Mr. French), my hon. Friend the Member for Great Grimsby (Mr. Mitchell), the hon. Member for Faversham (Mr. Moate), my right hon. Friend the Member for Swansea, West (Mr. Williams) and the hon. Member for Walthamstow (Mr. Summerson).
The measures are long overdue—in fact, 12 years overdue. It is a sad reflection on the Government's concern for home owners that Ministers have not implemented the excellent provisions of the Estate Agents Act 1979 of the previous Labour Government or introduced regulations or legislation of their own. During the housing boom years, when millions of home buyers felt vulnerable to misrepresentation and sharp practice by a minority of unprofessional estate agents, the Government did nothing to implement section 3 of the 1979 Act, which lists undesirable practices, or to enact section 18, which provides for full disclosure of contract terms, or section 22 to eliminate incompetence, in spite of representations from estate agents to implement the legislation and drive out some of the rogue agents.
For Ministers the free market mechanism can do no wrong. Their failure to enact the consumer protection measures in the Estate Agents Act gave the green light to unscrupulous agents who measured inches and added feet and even rooms to properties that they were responsible for selling.
It is not that Ministers were ignorant of those matters. In a speech to estate agents in 1988, the then Minister, the right hon. Member for Braintree (Mr. Newton), referred to complaints about estate agents becoming a flood. It seemed that he could delay no longer the overdue implementation of all sections of the 1979 Act.
The Minister suggested earlier that he might be open to the criticism of being dilatory. He made me feel rather like a priest listening to a guilt-ridden confession. His word was "dilatory", but mine is "negligent". He has neglected tens of thousands of home owners. He and his predecessors could have implemented all the sections of the 1979 Act. But, no, in 1988, a year before he chose to start his historical tour, the Minister and his predecessor had a different tactic. It was the ministerial press release outlining the Government's position on malpractice in estate agencies. The first press release in November 1988 was cautious. It was headed:Code of practice for estate agents may be needed, says Minister.He must have been the only person in the country at the time who had any doubts about the matter. A code of practice was the minimum that was needed, and even then it was hopelessly inadequate to tackle the malpractice.
Speaking at a conference on estate agency regulation and financial services on 14 November 1988, the then Minister, the right hon. Member for Braintree, revealed that his Department had conductedan examination of estate agency mattersand had held 1263an extensive programme of meetings which are not yet complete.But in December the Minister said that what was clearly needed was a code of practice.
By June 1989, the then Minister responsible for consumer affairs, the hon. Member for Mid-Worcestershire (Mr. Forth), had no code of practice, but he announced what he modestly called "tough new measures". He had asked the Director General of Fair Trading to draw up a code of practice with the industry. Government measures do not come tougher than that! In the seven months since the right hon. Member for Braintree announced the need for a code of practice up to June 1989, Ministers appeared to have forgotten to get anyone to act. The hon. Member for Mid-Worcestershire boasted in June 1989 about the consultations that he had been conducting since July 1988.
Yet another year passed and on 19 June 1990 the Government's plans were unveiled. The Minister called for comments on draft legislation. More talk, no action. But action was promised this time. In his press release of 19 June 1990, the Minister stated thatdraft orders and regulations under the Estate Agents Act … will be laid before Parliament in the Autumn.Why were they not laid before Parliament, and where are they?
In July the Minister gave us his undertaking that at last, after years of inaction when the public were left prey to the most unscrupulous practices, legislation would be laid before Parliament last autumn and that the new legislation and orders would come into force by 1 January 1991.
Like so many other statements trumpeted in the press by the Government, the Minister's statement was full of sound and fury, yet signified nothing. There were no orders, no legislation—nothing. It is no wonder that when I asked the Minister on behalf of millions of house buyers on 23 January why the Government had not honoured their pledge to have legislation in force by the first day of 1991, he did not have a clue. The Minister responsible for consumer affairs did not know the difference between the Estate Agents Act 1979 and the Trade Descriptions Act 1968 in respect of this matter. His answer showed that he did not really care.The Government's policy is clear; to keep talking but do very little very slowly.Those are not my words but those of Mr. John Hayes, the secretary general of the Law Society. It is clear that Conservative Ministers have learnt a great deal from certain sections of the more dubious estate agents.Ministers have picked up skills closely mirroring those of some agents—extravagant promises followed by a disappointing result.
It is not that the Government do not have time, as the Minister claimed earlier: they do not have the will. We have the lightest legislative programme for a long time, yet even this Government cannot find the time to introduce the necessary orders or regulations to enact this vital measure of consumer protection. Instead it is left to a private Member's luck in a ballot to ensure that vital protection for home buyers is introduced. It will surprise no one if the Bill meets with a nasty accident on its way through Committee to the statute book.
We support the Bill in spite of its limited and modest objectives. The Royal Institution of Chartered Surveyors is keen to see its scope extended to business premises and, with the support of the Bill's promoter, we shall seek to move amendments in Committee to that effect. We also 1264 wish to examine the role of solicitors to ensure that they adhere to the standards that the Bill laudably seeks to lay down for estate agents. The Institute of Trading Standards Administration has made it clear that it supports the Bill. The chairman of its quality standards committee, Mr. John Evans, said:We believe that the Bill … is long overdue.The Incorporated Society of Valuers and Auctioneers fully supports the Bill's objectives.
Some people have argued that the slump in the housing market has had a chastening effect on the activities of rogue estate agents. However, one part of the market has picked up during the recession and is booming—the part that specialises in repossessions. Two weeks ago the Council of Mortgage Lenders announced a tripling of the number of people who lost their homes last year because they could not keep up their mortgage payments. That is an embarrassment for the Government, but for each evicted family it is a tragedy.
A London estate agent, Norman Mazure, who works with the chain of estate agents Stickley and Kent, expects to handle more than 3,500 repossessed properties this year. There is no guarantee that the sale achieved by the estate agent will cover the outstanding debt, so, as well as losing their homes, former home owners are left with a large debt.
I hope that the Minister will consider alleviating the burden on such victims of the Government's high interest rates in the present recession. The measures outlined in the Bill are doubly necessary in such times. We welcome the work carried out by banks and building societies for defaulting clients to reschedule debts, but they must do more to help those who cannot cope with mortgage debt. The Government must do more to support the citizens advice bureaux and other organisations that provide advice on mortgage and other debts.
The Bill is about consumer interests. It has become the ministerial responsibility of the hon. Member for Gainsborough and Horncastle (Mr. Leigh). We are entitled to know how safe it is in his hands. When he made his first contribution in the House on the Consumer Guarantees Bill, he spoke not for his contituents, but for business. On Third Reading, he really got into his stride. He wanted to speak not about the Consumer Guarantees Bill but—as he told the House—about a constitutional point. He is too modest. He wanted to cover the Road Traffic Bill—not the one being discussed this week, but the one presented in February 1930. He wanted to ensure that his filibuster was not confined to road matters. He wanted to tell the House about the Mineral Workings Act 1951. In a contribution to the debate on the Consumer Guarantees Bill, which covered five columns in Hansard—from column 797 to column 801—he did not manage once to utter the word "consumer", which is so hateful to him, save for having to mention once the Consumer Guarantees Bill. We can now see his reward.
We have a Minister with responsibility for consumer affairs who forced two needless votes on the Third Reading of the Consumer Guarantees Bill but could not find one Tory willing to follow him into the No Lobby. He turned to "Erskine May" and waxed long on the contents of page 507, revealing his clear desire to frustrate a Bill dealing with the extension of consumer interests, rather than his ability to get to grips with the complexity of the law. He sat down only after having consumed valuable time.
1265 The House is entitled to know whether the Minister with responsibility for consumer affairs is continuing his antics in his ministerial office by frustrating measures such as this which, we were assured, would be on the statute book by the first day of this year. As a general election could well bring the progress of this Bill to a standstill or dispose of it altogether, it seems likely that the Government's real wish—to continue to allow estate agents to regulate themselves—will be granted to the detriment of home owners. However, we have a different agenda. As my right hon. Friend the Member for Swansea, West (Mr. Williams) said, we wish to ensure that the broad principles and rules are applied to solicitors as well as to builders.
The Bill, although welcome, will not tackle some of the key abuses—for example, the use of untrained and unqualified people who set up and run estate agencies, the non-disclosure of personal interests or commissions, or the fact that estate agents can also act as tied agents of an insurance company. To be effective, the Bill must be supplemented by the proper enactment of certain sections of the Estate Agents Act. Sections 16 and 17 of it provide for insurance cover for clients' money for bonding and indemnity and section 19 regulates pre-contract deposits. I have already dealt with the provisions of sections 3, 18 and 22.
We aim to eliminate malpractice and unfair contract terms where sole selling rights entitle the estate agent to commission even if the owner sells privately. We aim to eliminate misleading advertising where "in need of some redecoration" means rebuilding required. We aim to eliminate serious complaints relating to size and specification and material facts such as planning permission. We want to eliminate manipulated prices and invented bids when vendors are persuaded to accept the lower of two bids. We also want to control the type of financial advice that is offered and to end the practice whereby people take out life assurance that is excessive to their requirements. We also want to prevent estate agents from negotiating home and building insurance that is not to the best advantage of the new home owner.
Labour has simple demands—the full implementation of section 3 of the Estate Agents Act, which lists undesirable practices; of section 18, which provides for the full disclosure of contract terms; and of section 22, which would eliminate incompetent agents. We want a statutory, not voluntary, code of practice that is binding on all agents, not just those who are members of professional associations.
The Minister has missed a golden opportunity to present to the House the real agenda on estate agency—the one that the Government have been delaying since 1988 and the one that they promised the House would be in place by 1 January this year. It must now wait for the next Labour Government.
§ Mr. Anthony Coombs
We have had an interesting, stimulating and, in the latter stages, combative debate on this important matter. When I speak to my hon. Friend the Member for Coventry, South-West (Mr. Butcher) at the 1266 weekend I shall be able to tell him that we had widespread, if not unanimous, support for the principles behind his Bill. I am sure that he will be delighted.
The right hon. Member for Swansea, West (Mr. Williams) put it best when he said that this Bill would put right a 23-year anomaly whereby consumers are protected when they buy a tin opener, but not when they make the biggest, most important and possibly the most stressful purchase of their lives.
I admit that I am not the natural parent of the Bill, but I am a proud foster parent. As with most foster parents, the Bill is not entirely cast in my image, because I was denied the pleasure of conception. There are parts of the Bill that need to be strengthened and it would be appropriate if I said how I hope that the Bill will be strengthened in the light of this debate.
In common with other hon. Members, I believe that this is a limited, not draconian, measure. It will bolster the standing of responsible estate agents. It is not part of a continuing progression of regulations that will lead to inhibiting competition within the estate agency industry. My hon. Friend the Member for Faversham (Mr. Moate) and the Minister said that they did not want to regulate the industry out of existence and I am sure that they will be heartened by what I have said.
My hon. Friends the Members for Nuneaton (Mr. Stevens) and for Gloucester (Mr. French), the right hon. Member for Swansea, West and the hon. Member for Great Grimsby (Mr. Mitchell), in particular, said that there did not appear to be any logic behind the omission of builders from the Bill. A builder who has a 100 per cent. interest in a property and who is selling it on a commercial basis is not liable, in a criminal sense, for any statements that he may make about that property, but an agent who may have 1.5 per cent. interest in the property only is liable for his statements. That anomaly should be addressed in Committee by amendments that would include builders as marketers of property. My hon. Friend the Member for Faversham rightly pointed out that builders could make definitive and accurate statements about the structure, the condition of the land, easements and so on to a greater extent than agents, so they should have less to fear from being included in the Bill.
I was pleased to hear the hon. Member for Edinburgh, South (Mr. Griffiths) say that the Opposition would support amendments to bring commercial property within the scope of the Bill. Clearly that is logical. My hon. Friend the Member for Gloucester gave the best example when he said that in a small town one agent might deal with both commercial and residential property and that the Bill would cover one set of particulars but not the other. That is patently nonsense. I was pleased to hear that the Minister thought that there were strong arguments and that he had considerable sympathy for including commercial property.
I must set my stall out, like the fruiterer whom my hon. Friend the Member for Walthamstow (Mr. Summerson) mentioned, and say that there is no justification for making a distinction between small and large businesses. One would have to decide whether it was the buyer or seller who was small or large or the properties and exactly how that would be measured. As my hon. Friend the Member for Gloucester said, if commercial property is to be included, it must be in toto. We must not fiddle around with an unworkable definition.
1267 The hon. Member for Great Grimsby made a strong case for including solicitors and my hon. Friend the Member for Gloucester pointed out that about 300 solicitors act as estate agents. From my discussions with the Law Society I am sure that it will be constructive about this. It realises that it has a duty to the public to ensure that a customer who comes in off the street should not have to identify whether the property shop is being run by a solicitor or A. N. Other, and thereby be disadvantaged. I am sure that the Law Society and, I hope, its Scottish colleagues will be sympathetic and constructive.
My hon. Friend the Member for Walthamstow made several points about the Royal Institution of Chartered Surveyors. I have already written to it specifically in response to the matters that it raised. He asked whether the investigating officers' powers in the schedule were confined to the premises of estate agents. I can confirm that that is the intention. He asked why we stuck to the term "goods", as in the Trade Descriptions Act, rather than "documents", which may seem more appropriate for estate agents' particulars. I am told that it is because several estate agents give significant descriptions for items of property in their shops which are not documents and must be physically moved. Therefore, it is better to refer to "goods" so that they can be used as evidence of property misdescriptions if necessary.
My hon. Friend said that he feared that agents might carry a large burden as they were not surveyors or architects, but might be held responsible for statements for which they should not be responsible, for example, on structural quality.
The Bill does not say that agents are obliged to mention everything. They would not have a duty to reveal wide subsidence cracks—a matter which my hon. Friend the Member for Walthamstow raised—though I hope, in terms of their professional instincts, that they would do so. However, if they did not, then, subject to some other remarks that I shall make, they would not be held criminally liable. They would fall foul of false or misleading statements only if they concerned a prescribed matter, if the statements were made without a disclaimer or if no reasonable steps could be seen to have been taken by the agent to verify the information.
1268 As for Mrs. Smith's woodworm guarantee, reasonable steps would, in my view—from the point of view of any professional person, an estate agent or anybody else—include telling Mrs. Smith, "You say that you have a woodworm guarantee. May I at least see the certificate?" If she could not show the certificate, I should have thought that most responsible people would agree that the estate agent had no business referring to the guarantee in the particulars.
It is crucial to understand that an agent can be held criminally liable for omissions only if they are triggered by a statement on a prescribed matter. So, as the Minister said, if an agent talked about the healthy environment of a house but did not mention bubonic plague, he would probably be guilty of a misleading omission and, under the Bill, have committed a criminal act. Equally, if he said, "This house is in excellent structural condition" but did not mention the woodworm, he could be guilty because he would have been responsible for a misleading or false statement. But if he did not mention those matters, the omission clause would not be triggered because no statement on a prescribed matter would have been made.
It will be my intention—by inference, as hon. Members will appreciate—to move that the scope of the Bill be widened so that it can take in banks, building societies, builders, solicitors and others who are engaged in the marketing of property but who are not estate agents as defined in the Estate Agents Act. That should meet the level playing field point to which the Minister referred and be in the interests of all concerned with the subject.
This is a limited Bill. It will be good for consumers. Most of all—I have particularly in mind the excellent speech of my hon. Friend the Member for Gloucester—by insisting that estate agents are more accurate and, therefore, comply with the codes of practice, for instance, of the Royal Institution of Chartered Surveyors in terms of the way in which they describe property, the measure will improve the reputation of the profession and the esteem in which it is held in the eyes of the public.
§ Question put and agreed to.
§ Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 61 (Committal of Bills).