My Lords, I listened carefully to the debate we had on this issue in Committee, and to the points made today by the noble Baroness, Lady Hayter. I remain concerned that requiring letting agencies to belong to a client money protection scheme would introduce significant costs into this sector, which could have implications for rent levels and the availability of affordable rental properties.
Requiring agents to pay to belong to a client money protection scheme is forcing honest agents to buy insurance against themselves being fraudulent—something the vast majority of agents are not. Let me explain. There are two main reasons why a landlord or tenant
could lose money that is held by a letting agent: the first, as already mentioned, is that the agent is fraudulent; the second is that the agent has gone bankrupt.
While I agree that an agent will not always know that they are about to go under, client money held in registered client accounts agreed in advance with the bank will be protected and returned to the client, rather than used to settle the agent’s debt. This is standard business practice and is not expensive. Good agents can therefore protect their client’s money without having to join expensive third-party insurance arrangements. These arrangements would be expensive. I am aware that good agents may do this already and that deposits must already be protected by law, but they are not as complex and expensive as they would be as a result of this amendment.
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I turn to the government amendments. I do not believe that excessive regulation in the lettings sector is desirable. We have made changes but we have to be careful. I appreciate the level of support for action, both in this House and externally. I can see benefits in requiring letting agents to publicise whether or not they are a member of a client money protection scheme. We therefore propose to extend the transparency measures already in Part 3, Chapter 2 of the Bill to include such a requirement.
Tenants’ security deposits are already protected as a result of existing legislation; that vital bit of tenant protection is already in place. What now need is to raise consumer awareness that, if landlords and tenants want protection for other money held by the agent, they should choose an agent who carries the Government’s kitemark, Safe Agent. Membership of that scheme requires agents to belong to a client money protection scheme. Requiring agents to state publicly whether or not they are a member of a client money protection scheme will encourage landlords and tenants to choose an agent based on level of service, rather than just on what fees they charge.
In addition, given that all letting agents are now required to be a member of one of the three government-approved redress schemes, I propose to further extend the transparency requirement to require letting agencies to declare which redress scheme they are a member of. This should make it much easier for local authorities to enforce this requirement, but the real benefit will be in raising consumer awareness of this important new right and in making it easier for tenants and landlords to complain about any poor service they receive. This will ensure that good practice squeezes out bad practice: it is not a damp squib. Transparency will encourage landlords and tenants to choose agents with client money protection, without introducing significant costs into the sector. Ensuring tenants know their rights and landlords their responsibilities will empower consumers to make the right choices, and, if things go wrong, to find appropriate redress.
These changes, coupled with existing consumer protection rights, mean that we believe that the balance of regulation for the lettings sector is now about right. I have agreed to review our new provisions on transparency in a year’s time to ensure they have had the desired
effect. I therefore propose to move Amendments 44A, 44B and 44C, and I ask the noble Baroness to withdraw Amendment 44.