My Lords, I support the amendment, to which my name is attached. I declare my interest as chairman of the advisory board of the Property Redress Scheme, which has been mentioned in passing.
It seems very little to ask, in legislating for housing, to require letting agents to have a protection scheme in place for moneys received by them in their course of business from tenants, prospective tenants and anyone who is renting or seeking a place to rent. It has been estimated—I always wonder how these estimates are arrived at—that letting agents hold about £2.7 billion in client funds, yet if the agent has not elected voluntarily to obtain cover, landlord and tenant can lose their money. If disaster strikes in the form of an agent going bust or running off with the loot, under this amendment the landlord and tenant would be covered. The amendment does not require government underwriting, so the Chancellor does not need to amend the Budget. The cover could be provided by the users; this would supplement any award under any one of the redress schemes. As the noble Baroness, Lady Hayter, has said, we are not asking for reinvention of the wheel. Section 16 of the Estate Agents Act 1979 already provides protection in the course of sale and purchase transactions.
Client money protection is of course operated by the travel industry. Travel agents in the UK are required by law to be a member of an independent client money protection scheme that uses ABTA or ATOL. Many of us may have had to use these in the past—I certainly have. When you pay for your travel, your payment to
the agent is protected by ABTA or ATOL against the agent going bust or going walkabout with your holiday money. You claim against ABTA or ATOL rather than against the travel agent. This amendment asks that what is the norm for the travel industry, just for going on holiday, is also used for letting agents—for most people, the property that they own or seek to let is much more important—and that there should be compulsory protection for rents, deposits or moneys held, even moneys for repairs.
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The current problem is that while there are voluntary schemes, which, as the noble Baroness, Lady Hayter, mentioned, the good guys subscribe to, the bad guys do not subscribe to them, which is why we need the system to be compulsory. The careful tenant or landlord, if they have the opportunity to choose, can have their money protected, because independent schemes are in use. It is particularly important that the independent holder of client protection money should be involved rather than the money simply staying in clients’ accounts.
What is different? The noble Baroness, Lady Hayter, gave the example of solicitors, so I will concentrate on that. As a chartered accountant in my early career, I audited firms of solicitors and I had to give them something called the accounts rule certificate. It was incredibly traumatic when I found that a client, who was a friend of mine, had, sadly, not separated the money properly into a clients account and I had to qualify my accounts rule certificate. I use this as an example because in the letting industry letting agents do not have a law that requires them to have a clients account. If, as the noble Baroness, Lady Hayter, says, they should have a clients account, nobody forces those letting agents to operate in that way, as the Law Society does for solicitors.
There is an urgent need for us to convert into law what is voluntary at the moment and is done by many people who belong to professional bodies to protect people who are most at risk, often small landlords and letting agents. A noble Lord described a property owned by one of his children, I think, and said that they should not choose the room next to the kitchen. Very often people do not have the ability to decide whether to choose the property—often they feel that they are only too lucky to find someone who will let to them and they do not realise that the rents, deposits and money for repairs are at risk. That is why we urgently need this amendment.