My Lords, I support the amendment in the names of the noble Baroness, Lady Hayter, the noble Lord, Lord Kennedy, and my noble friend Lord Palmer. I hope that noble Lords will not read anything into my very brief appearance here on the Front Bench.
We have heard a little about some of the figures. Back in 2012, Reading University carried out a survey that showed that some £23 billion a year was paid in rent and that in a year some £6 billion to £10 billion was held by agents after being collected by them on behalf of landlords. However, as my noble friend Lord Palmer points out, a more recent survey shows that, at any one time, some £2.7 billion is held by letting agents. The amendment is about the protection of that money.
It is worth reflecting on what eminent people have said about this issue. In July 2013, the Property Ombudsman felt moved to say something about client money protection under the heading:
“Client Money Protection Is a Necessity for the UK Lettings Market”.
He said:
“'We need an even playing field for lettings. All agents are required to hold client money in a separate Clients Account but there is no current requirement to have those funds insured against unlawful use or fraud, which is why”,
client money protection,
“is crucial for landlords and tenants”.
He went on to say that client money protection,
“is not a duplication of any deposit scheme or professional indemnity cover. It goes beyond that and provides landlords with the peace of mind they need to know that the rent collected by an agent is protected”.
As we know, many good agents and trade bodies, such as the Association of Residential Letting Agents and the UK Association of Letting Agents, recognise the importance of this and provide necessary protection for their members. Sadly, however, some do not.
Back in 2013, the Property Ombudsman surveyed some 8,000 lettings branches and discovered that, while 80% had client money protection, 20% did not. The ombudsman concluded:
“My personal viewpoint would be to question why a letting agent would not support CMP. In the absence of any regulation … agents themselves need to take proactive steps to show landlords and tenants that they have taken out the necessary cover to protect rental income”.
However, it is very difficult indeed for the vast majority of agents—those who provide client money protection—to persuade the others to do so. It is also difficult for them to run the necessary publicity campaign to warn landlords or would-be landlords and the public of the need to choose an agent who provides that protection.
Of course, agents are helped to some extent by the new transparency rules, which are being enforced by local authorities; I have no doubt that the Minister will refer to that in his response. These require the publication of the breakdown of the fees that agents charge to tenants and landlords, the redress scheme that they belong to and a statement of whether they are a member of a client money protection scheme. I recognise that there are many such schemes—again, no doubt, the Minister will refer to schemes such as SAFEagent and CM Protect. However, as the noble Baroness, Lady Hayter, points out, there is no evidence to suggest—and the vast majority of agents agree with her—that those schemes alone will provide the level of protection that is needed.
Earlier in our deliberations on this legislation, during our discussion of zero-carbon homes, the Government said that by opposing the introduction of tighter energy efficiency standards they were protecting housebuilding businesses; they said that they were stopping the overregulation of housebuilders. I was able to point out at the time that the housebuilders themselves supported the introduction of the regulation. We have a similar case here. It is instructive to learn what
Mr Brandon Lewis said in response to such an amendment when this matter was discussed in another place. He said:
“We want to ensure that we have a strong and thriving private rented sector that is not tied up in excessive regulation. Requiring agents to pay to belong to a client money protection scheme would force honest agents to buy insurance against the risk that they themselves were fraudulent, when, as the hon. Lady said, the vast majority of agencies are not. Introducing a mandatory client money protection scheme at this point would be a step too far and would overburden a market that is perfectly capable of self-regulation”.
That is slightly odd, coming from a Minister who is imposing a large number of regulations in the Bill. However, it was much more bizarre that in this case, just as with zero-carbon homes, the industry itself is pressing the Government to introduce regulation.
It was the Association of Residential Letting Agents that drafted the amendment before us today to protect money received from clients and held by agents, such as rent due to landlords. The Government claim that the only reason for rejecting the amendment is that it would overburden the industry, but given that the industry wants it imposed on itself, I hope that the Government will drop their opposition. I hope that when the Minster responds he will reflect on the other thing that Mr Brandon Lewis said during his response to a similar amendment in another place. He went on to say, rather indicating that even he is a bit worried about the situation:
“However, in May 2016 we will review the impact of the transparency measures that were put in place only recently. At that stage, I will take due consideration of whether any further action is needed”.—[Official Report, Commons, Housing and Planning Bill Committee, 10/12/15; col. 719.]
We see yet again another example of the Government being prepared to consider something after we have finished our deliberations on this legislation. I urge the Minister to reflect on the fact that the agents themselves want to see an amendment such as this in place. I hope that the Minister will support, if not the precise wording of the amendment, something along these lines.