My Lords, I welcome the noble Baroness, as I think that this is the first time that we have done this. For me, this is a great delight because, as I am sure that she will not need reminding, it implements the amendment that I managed to secure, against the Government’s wishes, in the House. Needless to say, therefore, I warmly welcome the order. However, I want to make some comments and pose some questions to the Minister. I understand that my questions landed her on desk a little late and that some of the answers may have to be by letter.
First, the scheme will work only if all landlords and tenants become aware of their right to take any unresolved complaints against letting or property management agents to an ombudsman. What plans are there to raise such awareness? Will these include requiring every agent to publicise the relevant ombudsperson on their headed notepaper, website or whatever?
Secondly, in other retail areas, the consumer can shop around between providers, so normally transparency of fees is of great assistance. However, this of course is a different industry, where that does not apply to tenants, 60% of whom find their home via an agent. The tenant can choose only between properties; they do not select the agent. It is the landlord who selects the agent. What plans do the Government have to encourage landlords to shop around and thus drive up standards? Tenants simply cannot do that.
It is obviously too much to expect that the redress scheme itself will raise standards. It will certainly not be able to do it unless local authorities enforce the awards—although we are delighted with the incentive that the Government have made available, which I think local authorities will grab with both hands. In addition, standards will not rise unless there is some sort of feedback loop to ensure that bad practice is stamped out rather than continually requiring the consumer to suffer and then make individual complaints.
The Government may well say that they will oversee the redress schemes to make sure that they are effective, but I am more interested in how we oversee the sector to see that the lessons from those redress systems are brought together. Somebody should have responsibility for seeing what the common problems being complained about are and driving up standards in that way. It is, as we know, an industry infamous for instances of bad practice. According to Shelter, one in four people have been charged unfair fees. Reference checks can cost as little £10, which is very nice, but as much as £275, while renewal fees can cost up to £200. This is in a sector of 9 million tenants, where rents have increased by twice as much as wages since 2010. These unfair charges are hitting a group already suffering from high rents.
The Minister touched upon cases of agents double-charging; that is, charging both landlord and tenant for the same service. I am less relaxed than the Minister that simply putting up the list of charges will deter that. There is, furthermore, probably an interesting legal question as to whether tenants become clients if they pay an agent for a service. Can the Minister tell the Committee whether a payment for such a service makes the tenant a consumer under the Consumer Rights Bill? Would they therefore have the same consumer rights over those services, especially the right to have such a service provided with “reasonable care and skill”, as set out in that Bill?
It is clear that redress systems themselves cannot, of course, enforce their awards. If a letting or managing agent does not implement an adjudication, all the redress scheme can do is de-list the agency. The two existing schemes have an agreement that they would not take on an agency which has been debarred by the other, which is a pretty essential requirement to aid
enforcement. Can the Minister tell the Committee whether the new, third scheme will undertake not to take on an agent that has been debarred from one of the existing schemes for not abiding by an adjudication? Without that, there will be no enforcement—unless the Government have something else up their sleeve they have not yet told us about. Can the Minister also tell us whether the new, third scheme will operate to an existing code, which the other two obviously already work to? What thought has been given to consistency of outcomes, which the two existing schemes strive to achieve?
On the selection of redress schemes, outlined by the Minister in her introduction, could she explain why, for the very first time in the development of statutory requirements to belong to an ombudsman, a profit-making body has been approved? All the others, across housing, energy, health, local government, telecoms, and legal and financial services, are either statutory bodies or not for profit. Why do the Government consider that this area of public policy should reside in the hands of someone out to make a profit? Why, anyway, did the Government want to add a third—a new, non-existent body—to two established, recognised and respected schemes? Is helping to set up a new ombudsman not at variance with Cabinet Office guidance that the Government should not set up a new ombudsman where there is already a satisfactory one in the relevant market? It would be interesting to know what risk assessment has been done of a “flight to the bottom”—in other words, making it as cheap as possible for landlords, when the majority of complaints will come from tenants—if there is a plethora of ombudsmen, with fairly obvious consequences for the quality of adjudications.
I understand that the new scheme is seeking to charge landlords considerably less than the established schemes, but does such competition on price—to be paid by the landlord, who will not be making the complaints on the whole—not risk compromising the quality of service provided to tenants? Will it not be confusing for consumers, tenants and landlords, to have to try and find out which is the appropriate ombudsman for their particular letting agent? Elsewhere, there is a move to rationalise and even reduce the number of schemes to make it easier for consumers, as we have seen from the report by the Select Committee in the other place. At the very least, should we not be working towards a common portal to help complainants rather than setting up ever more ombudsmen?
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My concern is that this apparent government support for the fragmentation of the redress architecture with a plethora of ombudsmen may be a reflection of the lack of support for effective redress, particularly given the Government’s early resistance to this move. I would be interested to know what views they have sought from both landlords and tenants for their approach of supporting the increase in the number of schemes.
As the noble Baroness may know—I realise that she has taken this on very late—the Labour Party is against double-charging landlords and tenants for the same service. It would be interesting to know whether the Government share that view, and what assessment they have done of any conflict of interest where a
letting or managing agent charges both contracting parties. To which does the agency owe a duty of care and other obligations?
Finally, how do the Government’s plans to implement the EU directive on ADR tie in with this particular order? Are we to assume that a similar pattern is to be followed for other markets? Are the Government setting out to allow private, for-profit companies to be the main suppliers of alternative dispute resolution? That is of course wholly different from our long and very advanced history of ombudsmen in this country.