Property Misdescriptions Bill

HL Deb 20 May 1991 vol 529 cc82-92

7.47 p.m.

Baroness Carnegy of Lour

My Lords, I beg to move that this Bill be now read a second time.

This Private Member's Bill was originally promoted in another place by my honourable friend Mr. John Butcher, the Member of Parliament for Coventry South West. Unfortunately he became ill shortly after First Reading. I am happy to say that he is now well on the way to recovery. The Bill was then taken through all its stages in the other place by my honourable friend Mr. Anthony Coombs, the Member of Parliament for Wyre Forest.

So far the Bill's passage has been smooth. It has had all-Party support. The Government have not only backed the Bill but have made help available with drafting and advice. The aim of the Bill is to ensure that estate agents and others who market property take great care to avoid making false or misleading statements in the particulars supplied to potential purchasers. It makes such misdescriptions a criminal offence, with a fine on summary conviction of up to £2,000, and on conviction on indictment an unlimited fine. The penalties do not include imprisonment.

The Bill does not apply to vendors; that is to say, clients who engage estate agents to sell their property. It puts the onus on the estate agents to do their best to check that the facts given to them by vendors are correct. It is a Bill to protect consumers—that is to say, individuals buying a house or a small business such as a corner shop. It is also a Bill to encourage estate agents and others in the property market to set the high standards to which most aspire and which the public have a right to expect.

The Consumers' Association not only supports the Bill but has done a great deal of most useful work developing its content and in assisting my honourable friend and me during its passage so far. We are very grateful to them. It is significant that among others supporting the Bill are the National Association of Estate Agents, the Institute of Valuers, the Royal Institution of Chartered Surveyors, the Law Society, the Law Society of Scotland, the Institute of Trading Standards Administration and the National Consumer Council. This widespread acceptance of the Bill so far is I believe due to the fair balance which it strikes without placing too heavy a burden on the professionals, the majority of whose members already act responsibly and will find the Bill no problem. It will do a great service to people contemplating buying a property and give confidence in future that wilful and irresponsible misdescribing of property is a risk no agent is likely to take.

In effect, the Bill will close an important loophole in existing trade description legislation. The Trade Descriptions Act 1968 applies to goods and services, but not to sales of property. This means that at present a person has less protection against a false or misleading description when buying a house than when buying, say, a tin opener or a tube of toothpaste. Strangely, an estate agent can claim incorrectly that the central heating system in a particular house has been approved by British Gas and get away with it. Yet the same claim can be made by a salesman selling the same system in a do-it-yourself shop and that could lead to prosecution.

The Bill also fits in well with the government's own package of reforms to improve the property market arising from its review instigated in 1989. That has resulted in several new orders and regulations under the Estate Agents Act 1979, which extend the range of circumstances in which the Director of Fair Trading can ban an estate agent from trading. Those orders are due to come into effect this summer. The Government have also encouraged estate agents to improve their own self-regulation and they have begun to set up an industry-wide voluntary code of practice and an ombudsman to enforce it. The Government are, I understand, waiting to see what happens to this Bill before taking any further action on misdescription.

Members of Parliament in another place quoted many examples of the need for this Bill. There were reports of exaggerated room dimensions; leasehold properties described as freehold; a motorway described as a quiet road; a covered alley as a conservatory. There was a photograph in which a block of flats had been blocked out giving the impression that the house beside it stood alone in the countryside. Mr. Austin Mitchell made graphic reference to the "peculiar lyricism" of the language of some estate agents in describing property. Your Lordships could doubtless tell of examples from your own experience.

Although it can be said that no-one is likely to, or should, purchase a property without having it surveyed professionally, or at least checking thoroughly whether the agent's description is accurate, much time and trouble can be wasted and cost incurred in following-up a property which, had it been accurately described, would have been recognised as unsuitable in the first place.

When originally introduced the Bill applied only to residential property and that being sold by estate agents. As a result of the House of Commons Second Reading debate the Bill was amended in Committee and its scope extended. It now includes commercial property and applies to solicitors acting as estate agents and builders marketing houses that they have built or renovated, thus providing a level playing field for those engaged in marketing property. Wider protection is also provided for consumers. If noble Lords want to know more of the reasons for these changes I can elucidate in my reply to the debate. The Title and the Long Title of the Bill were amended accordingly. None of these changes was a source of controversy, the Committee stage taking only seven minutes.

I turn to the Bill as it now stands. Clause 1 contains the core provisions. The first subsection creates the principal offence of making in the course of an estate agency or property development business a false or misleading statement about certain prescribed matters. Subsection (2) provides for proceedings to be taken against an employee if he is responsible for the commission of an offence by his employer. Subsection (3) sets out the maximum penalties for an offence under this clause. Subsection (4) excludes certain civil law consequences of the offences.

Turning to subsection (5), noble Lords will see that paragraphs (a), (b) and (c) establish definitions and clarification of terms used in the clause. "False" is defined as "false to a material degree". This is the same as the definition in the Trade Descriptions Act and rules out prosecution for trivial errors. A statement is "misleading" if a reasonable person may be expected to infer from it that the statement is false. It should be noted that an omission can be an ingredient in an offence. That does not mean that an agent is bound to tell everything he knows about a property. This paragraph only applies if the information omitted renders a statement misleading. For example, a house may be described as being in a quiet cul-de-sac, but no mention is made of a motorway a few yards away on the other side; or, as happened near my own home recently, a cottage offered for sale was described as having a septic tank, but no mention was made that it was a septic tank shared by another cottage. If no road had been mentioned in the first instance, or no reference made to the septic tank in the second instance, the clause would not apply. The Bill does not require a description of everything about a property, but it does require that any statement that is made must be accurate. It aims, as one might say, to catch the half truths.

Paragraph (d) of subsection (5) empowers the Secretary of State to specify by order the prescribed matters mentioned in subsection (1). The kind of misdescriptions specified might, for example, include the proximity of a property to places, amenities or services; the nature of the title of a property; structural characteristics; the length of a lease; the existence and nature of any planning permission and such like. Assurances have been given that such an order would not be made without consulting interested organisations.

Paragraph (e) defines the term "an estate agency business". This definition is taken from the Estate Agents Act 1979. Solicitors are exempted in Section 1(2) (a) of that Act. This paragraph disapplies the exemption so that solicitors acting as estate agents are now covered by the Bill. Paragraph (f) defines the term "property development business". Subsection (6) defines an "interest in land" and that is the same as in the Estate Agents Act 1979.

Clause 2 of the Bill provides a defence of due diligence for a person charged with misdescription under Clause 1. This defence is identical to that in the Consumer Protection Act 1987 and similar to that in the Trade Descriptions Act 1968.

Clause 3 and the schedule to the Bill deal with enforcement, making it the responsibility of trading standards authorities, London borough councils, county councils, metropolitan boroughs, Scottish regional and island councils and the Department of Economic Development in Northern Ireland. In paragraphs 3 and 4 of the schedule, enforcement officers are given powers of entry, inspection and seizure, and in certain circumstances search warrants may be issued. These provisions differ from those in the Consumer Protection Act in only one respect, albeit a very important respect. Under paragraph 4(9) this Bill does not empower enforcement officers to enter private dwellings.

The schedule also creates offences of obstructing or refusing to co-operate with enforcement officers, of giving false information, of impersonating an enforcement officer, and of improperly disclosing information disclosed under the schedule.

Clause 4 is concerned with offences by bodies corporate and Scottish partnerships, establishing that directors, officers and partners are liable to conviction. Clause 5 sets a time limit for the prosecution of offences under the Bill. Clause 6 is about financial provision. The estimate based on complaints made in 1989 is that there might be some 900 complaints each year, and the cost is estimated in the Financial Memorandum to the Bill at £80,000 per annum at 1990–91 prices. Clause 7 extends the Bill to the whole of the United Kingdom.

I do not apologise for taking some little time in describing the Bill. I believe that, though strictly limited in scope, it is an important measure and should be of benefit to many people. I look forward to hearing what your Lordships have to say. I commend the Bill to the House.

Moved, That the Bill be now read a second time. —(Baroness Carnegy of Lour.)

8.2 p.

Baroness Fisher of Rednal

My Lords, I thank the noble Baroness, Lady Carnegy of Lour, for explaining in such detail the Bill and the background to it. As she rightly said, it deals with what one might call the flowery language and exaggeration used in selling property. We know that some estate agents have been notorious for their descriptions of houses and other properties. In making such descriptions they commit a general offence of making misleading statements in the course of their business.

The trading standards officers in the city of Birmingham recently conducted a survey into the prices of houses being advertised for sale by estate agents in the inner city. The survey revealed practices that were not covered by the noble Baroness in her introduction of the Bill and which have not been highlighted before. I refer to what estate agents call price reductions. The survey was conducted during February, March and April of this year. The advertisements monitored related to 2,050 properties. Of those 2,050 properties monitored, it was claimed that 208 had had their selling prices reduced at some point during the survey. Of those 208, 42 claimed reductions of almost a quarter of the selling price. The claims were false, in that the selling price had not been reduced, and in the case of 10 properties the price had actually been increased. The advertisements appeared in local newspapers. In total 11 separate estate agents were being monitored. They ranged from the national chains to locally based outlets.

An additional problem was discovered during the survey. It was found that many of the properties—in fact a large proportion of them—were advertised as new or that it was said that new instructions applied to the properties even though in some cases they had been advertised for more than three months. I am seeking information. I ask the noble Baroness whether her Bill will extend to cover such misdescriptions, which are obviously misleading and contrary to the consumer's interest, or whether the Bill seeks only to regulate what one might call the flowery descriptions of properties which estate agents on occasion use.

The Consumer Protection Act 1987 creates an offence of giving a misleading price indication for goods. Trading standards officers can institute proceedings, and do so in many instances, when the retail trade is advertising during sales a reduction in price when an item has not been sold at that price for the previous three months. Trading standards officers diligently ensure that the consumer is not misled about what we call retail sales in stores. The provisions of the Consumer Protection Act 1987 extend only to new properties and do not take into account what we call the second buyer. If trading standards officers find that estate agents are misleading people on the prices of new properties, they can do something about it. They cannot do anything in the case of second buyers.

I am sure the noble Baroness will agree with me that these practices are intended to make a property appear more attractive to an intending purchaser. I am concerned about this matter. I hope that it is the case that the provisions of the Bill will be sufficiently broad to encompass such misdescriptions. We are all well aware that for most people the purchase of a house is the largest single expenditure in their lives. As a result of the survey carried out by the trading standards officers in Birmingham, the local Evening Mail published a story on its front page under the banner headline "Houses for sale fiddle". If the noble Baroness could encompass in her Bill some of the points I have raised we could do away with such fiddles. I look forward to hearing the noble Baroness's comments. Perhaps an amendment will have to be put down at a later stage.

8.8 p.m.

The Earl of Winchilsea and Nottingham

My Lords, on these Benches we unreservedly welcome the Bill and we are grateful to the noble Baroness for introducing it. We feel, however, that it is long overdue. I have never been able to understand the reluctance of estate agents to adopt honesty of description. One flourishing estate agency, Roy Brooks, has built its reputation on two factors. I should like to quote briefly from a booklet compiled by Desmond Wilcox of some of its most famous advertisements for property in the London area.

Roy Brooks built his whole reputation on telling the truth, the whole truth and, often, the unwholesome truth. Perhaps the most famous of all his advertisements appeared in The Times for a property in Pimlico. It said: WANTED: Someone with taste, means and a stomach strong enough to buy this erstwhile house of ill-repute in Pimlico. It is untouched by the 20th Century as far as convenience for even the basic human decencies is concerned. Although it reeks of damp or worse, the plaster is coming off the walls and daylight peeps through a hole in the roof, it is still habitable judging by the bed of rags, fag ends and empty bottles in one corner. Plenty of scope for the socially aspiring to express their decorative taste and get their abode in 'The Glossy' and nothing to stop them putting Westminster on their notepaper. Ten rather unpleasant rooms with slimy back yard. £4,650 Freehold. Tarted up these houses make £15,000". Apart from giving us a nostalgic look at house prices in the early 1960s in Central London, I think that the policy is quite clear. Roy Brooks has built up an extremely successful business out of such blatant honesty. I applaud that, and I welcome the Bill without reservation.

8.11 p.m.

Lord Williams of Elvel

My Lords, the House is grateful to the noble Baroness, Lady Carnegy of Lour, for introducing the Bill. As is customary, I should say that I speak from this Dispatch Box in my personal capacity and not in the name of my party, as this is a Private Member's Bill. Like my noble friend Lady Fisher, I welcome the Bill. It seems to me, as the noble Baroness, Lady Carnegy of Lour, said, to close a serious loophole in trade description legislation. As such it is to be welcomed.

The majority of estate agents are undoubtedly good and honourable people and firms. However, one has to accept the fact that there is a minority which seem to pose as rip-off merchants and which are wholly determined, as the noble Earl said, to defraud their customers. It is essential to enforce honesty in the business. If—I emphasise the word "if"—it is necessary to make it a criminal offence (I am always doubtful about the criminalisation of offences) in order to ensure honesty in the profession, then I support that aim.

I have but three comments to make on the Bill as it stands. The Minister is perhaps the best person to answer the first point which concerns advice. I wonder whether anything in the Bill affects the ability of an estate agent's client to have recourse to civil remedies if the estate agent in question is convicted under the criminal principles of the Bill. In other words, if an estate agent is shown by the court to be quite clearly guilty of an offence under this legislation, does the client then have further recourse to the civil courts for damages? I hope that the Minister will reflect on that point when he replies.

The other thoughts that I have, which are by no means meant to be critical of the Bill, might be helpful if the Bill were to receive a Second Reading this evening and proceed to the Committee stage. The role of solicitors as either estate agents or conveyancers is very complicated. It is complicated in England and Wales and, as the noble Baroness, Lady Carnegy of Lour, pointed out, it is even more complicated in Scotland. Indeed, my understanding is that in Scotland the bulk of estate agency business is conducted by solicitors. However, that is not so in England and Wales. Therefore, I must pose the question: is it right that a solicitor, when acting as an estate agent, should be liable for penalties under the Bill whereas, when acting as a conveyancer, he may be excluded from the provisions? Indeed, he may even be the same person; but he could perhaps claim that he was only making misrepresentations as a conveyancer rather than as an estate agent. That seems to me to be a grey area which should be clarified.

My next point, which follows on from one made by my noble friend Lady Fisher, concerns prices. My noble friend quite rightly pointed out that the prices of new houses can be controlled, or at least monitored, under the Consumer Protection Act whereby action can be taken in the case of false representation. But, on resale, the house or property in question is excluded from that Act. I should therefore be interested to know whether there is any mechanism for remedying the mischief to which my noble friend quite rightly referred.

However, there is also a further mischief which may arise which does not appear to me to be covered under the Bill. I believe that many noble Lords know that some estate agents —I recognise that it is a minority —will try to talk up the price of a house by referring to the selling price of a neighbouring property. For example, if someone wants to buy a house in an estate and is told by the estate agent that the neighbouring house was sold the previous week for £150,000 and that therefore the house in question is certainly worth the same, that person would be inclined to believe such a claim. However, if it is then demonstrated that such a representation was wholly false and that the neighbouring house was in fact sold for £50,000, what remedy would there be for such a client under this Bill? In other words, is such a situation covered by the Bill? If it is not, perhaps it should be.

My final point relates to the difficulty of defining, "false to a material degree".

In the process of dealing with many Bills in the House we have discussed the meaning of the word "material". The answer has always come back—I suppose it is the only answer—that it is for the courts to decide what the word means. When we are dealing with what is probably the major investment of a lifetime for a family or a private individual it is extremely difficult to play around with words and to rely upon the courts. I say that because with present day litigation costs if a client wished to take an estate agent to court or to report an estate agent for a criminal prosecution under the Bill the expense might be considerable. It is most important to bear that factor in mind when trying to frame legislation, though I recognise that it is difficult to frame legislation which meets a particular problem.

Having said that, from my point of view I believe that the Bill closes what has hitherto been a loophole in the legislation. I very much hope that your Lordships will give it a Second Reading.

8.19 p.m.

Viscount Astor

My Lords, on behalf of the Government, I should like to congratulate my noble friend Lady Carnegy of Lour on the way she has presented the Bill this evening. In deciding to sponsor the Property Misdescriptions Bill, I believe that she has taken on an extremely useful and responsible task for which we all have cause to be grateful. As my noble friend pointed out, the Government have supported the Bill from the beginning. Moreover, as the Minister revealed during the debate on Third Reading in another place, the Government have provided full drafting services throughout the Bill's passage.

I shall be brief, but I should like to mention one other matter which the Bill leaves loose and untied. Clause 1, and therefore the whole Bill, applies only to statements about prescribed matters, and the prescription of those matters is left to the Secretary of State. When the Bill was being considered in another place, the Minister responsible gave an undertaking that interested organisations would be consulted before the necessary order was made to prescribe the relevant characteristics of property on which the Bill will bite. On behalf of the Government, I am happy to give the same undertaking to your Lordships' House. If the Bill receives your Lordships' approval and becomes law, it will not have practical effect until that order has been made. I can assure your Lordships, therefore, that no one will be affected by it until the Government have consulted interested organisations.

Lord Williams of Elvel

My Lords, perhaps the Minister will allow me to intervene. Is he implying that, provided your Lordships give the Bill a Second Reading, the Government will introduce a draft text of the ,order before we go into Committee?

Viscount Astor

My Lords, I cannot say on what date we shall introduce the draft order. I shall find out and write to the noble Lord. I can only repeat my assurance that no one will be affected by the Bill until the Government have consulted interested organisations on the list of property characteristics which are to be prescribed. I believe that this is a very worthwhile and welcome Bill. It will considerably improve the position of the property purchaser in both the residential and commercial markets. On the other hand, it will not place any significant burden on those who already conduct their businesses in an honourable and prudent way. Nor should it impose significant extra burdens on the enforcement authorities. I believe that it will improve public confidence in the business of buying and selling property, and that can only be good for the industry.

I shall deal now with the points made by the noble Lord, Lord Williams, about solicitors. Solicitors will be treated in the same way as others when acting in the course of an estate agency or property development business. However, they will not be affected when providing conveyancing services. The 1979 Act relates to estate agents, their practice and conduct. Solicitors do not need to be covered because they are separately regulated in those respects by their own statutory regime. However, the Bill creates a new criminal offence which it is right should apply equally to those who are competing with one another in the business of selling property. I hope that that explanation clears up the point.

The Bill does nothing to affect consumers' civil law position. It clearly defines what is meant by "conveyancing services". When doing that work, as I have said, solicitors and licensed conveyancers are subject to their professional and statutory regime. The Secretary of State will consider prices when consulting on the draft order. I have just received advice that the order will be drafted after the Bill has passed. My noble friend Lady Carnegy will answer the point raised by the noble Baroness, Lady Fisher.

Lord Williams of Elvel

My Lords, before the Minister sits down, he said that the order will be drafted after the Bill receives Royal Assent. Does he mean that the Bill is merely an enabling Bill no doubt an enabling Bill with a worthy purpose but that the Government will decide what powers and properties they will designate after the Bill has received Royal Assent? Are we asked to approve that procedure?

Viscount Astor

My Lords, I cannot add to what my honourable friend said in another place. The order will be drafted after the Bill is passed. We are consulting, and that is an important point. The Bill will have no practical effect until after the order has been made.

8.24 p.m.

Baroness Carnegy of Lour

My Lords, I thank all noble Lords who have spoken in this short debate for the welcome they have given the Bill. I thank the noble Baroness, Lady Fisher, for the research she has done and the questions she asked about misdescriptions of the price of property. I believe that I am right when I say from my reading of the long Second and Third Reading debates that that point has not hitherto been raised. It is characteristic of the noble Baroness that she has foraged about and found that point. She is right that the public has protection when buying a new house for residential purposes. As she said, there have been cases where enforcement authorities have gone to court when it has been found that the procedure was incorrect. The problem which she has unearthed is that other property is not covered by existing legislation. It is likely that the Secretary of State will include that point when he drafts the prescribed matters. By bringing the matter to light the noble Baroness will encourage the Secretary of State to include it. The noble Lord, Lord Williams, amplified that point.

As to when the order will be drafted, the noble Lord is perhaps unduly impatient. The consultation has not been completed. The Bill has only just left another place. It has come here fairly rapidly. It will take time to get the consultation going and draw up the list. The point made by the noble Baroness is a good example of an issue that has come to light in this House which can be included in the draft. We cannot expect to have the draft order before the Bill leaves the House.

The noble Baroness asked about a house being described as new when it was not new. My understanding is that that point will be caught by the Bill. If I am informed otherwise after the debate, I shall let her know.

The noble Lord, Lord Williams, queried solicitors and the exclusion of conveyancing. He quizzed my noble friend the Minister on that point. When drawing up the Bill, the line had to be drawn somewhere. When the Bill was extended to solicitors undertaking estate agency work, there was a good deal of discussion with the Law Society and the Law Society of Scotland. They rightly claimed that their own internal professional regulations would deal with such matters. It is important that people engaged in estate agency work should operate on a level playing field. Builders selling houses they have built or renovated will not be engaged in conveyancing.

Conveyancing has been omitted from the Bill deliberately so as to draw the line somewhere. I accept what the noble Lord said. It seems to be a grey area. Wherever the line is drawn may result in a grey area. The more one examines the Bill, the more one sees the wisdom of the Bill stopping where it does. No doubt the Bill could be extended in due course if there proved to be a problem. I hope at this stage that noble Lords will not wish to extend the Bill to conveyancing.

The noble Lord, Lord Williams, is unhappy about the phrase: false to a material degree". There is only one answer which he himself gave. The point has to be defined by the judges. Case law is developing. At the moment the judges and the parliamentary draftsman feel that the definition is adequate. I hope that I have covered all the noble Lord's queries. Does he have another?

Lord Williams of Elvel

My Lords, I apologise to the noble Baroness for intervening. She has been courteous in covering all my points, as did the Minister. Before the noble Baroness asks us to decide on the Question, I wonder whether it is right to give a Bill a Second Reading with the implication that it will go through its Committee stage and leave your Lordships' House without any of us knowing the substance of what it will apply to. The noble Baroness may well feel that we could give the Bill a Second Reading. When she has to decide on the timing through the usual channels she may feel that it would be sensible for noble Lords to have a draft of the order before the House prior to the Bill being given its Third Reading.

Baroness Carnegy of Lour

My Lords, I understand what the noble Lord says. My own view is that many times when we legislate orders have to be drafted after the Bill leaves the House. This is not the first time by any means. There are many reasons for doing so, and many good reasons in this case. I am personally not too hopeful. I know that the noble Lord always raises the point when Bills go through, as do many of his colleagues. They are right to do so and to point out the problems.

Proper consultation is important. I want the Bill to become law and not to be lost because there is no time left for it. Many Private Members' Bills are going through and perhaps this one will be lost if we delay too long. Therefore, I am not too hopeful about the order. I do not know whether my noble friend wishes to say more on that aspect.

I have not mentioned the noble Earl, Lord Winchilsea and Nottingham, who kindly welcomed the Bill. He said that it was overdue. I agree. It is amazing that it has taken so long for this gap in consumer protection legislation to be filled. He gave examples of a firm which advertised its great honesty. It seemed to me that that was an example of lyricism of a different kind from that referred to by Mr. Austin Mitchell in another place. The noble Earl is quite right. Most firms do not need the Bill; they will find it no problem at all. However, there are firms as well as individuals who do need it and we all know of examples. I hope that your Lordships will give the Bill a Second Reading and a smooth passage and that it will become law before long.

On Question, Bill read a second time, and committed to a Committee of the Whole House.