Commons Gate

The Draft Housing Bill (2)

ODPM Housing, Planning, Local Government and the Regions Committee 17 Jun 2003

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Witnesses: MR MELFYN WILLIAMS, President and MS JULIE WESTBY, Acting Chief Executive, National Association of Estate Agents, examined.
Witnesses: MS JUDY FARRAR, Head of Services Research Group, Which? Magazine, MS EMMA HARRISON, Senior Public Affairs Officer, and MS JENNI CONTI, Senior Researcher, Which? Magazine, Consumers' Association, examined.
Witness: MRS MARIA COLEMAN, Estate Agent, examined.
Witness: MR NORMAN PARKINSON, King's College, London, examined.

Q271 Mr. David Clelland (Tyne Bridge): You would be keen on licensing?

Mr Williams: Yes.

Q272 Mr. David Clelland (Tyne Bridge): You mentioned the effect on low value areas. How do you think that problem should be handled?. Should there be a general exemption for huge areas or should individual properties be exempted? How do you think the problem should be handled?

Ms Westby: I think in the low value areas we would have a problem if we started making exemptions because they would become almost blighted areas. I can refer to my own area which covers part of your constituency, which is Reddish and Denton. I am in Heaton Moor. Reddish is only two miles away from me but a two-bedroomed terrace in Reddish is around £55,000, where I am it is £145,000. We are only two miles away. I think this is appropriate to use as an example. If Reddish were brought into the scenario as an exempt area I could see the people thinking, "Let's move a little closer down the road, I do not really want to live in an exempt area", because it becomes an area of low value and all the implications that go with it. The Association and our members would not really look to create this sort of tiering system because of the blight element and then it would become an area that would be less popular to live in.

Q273 Mr. David Clelland (Tyne Bridge): You have said there is a problem with low value areas so how would you handle it then if you did not have exemptions?

Ms Westby: There is a problem with low value areas, if the pack comes in as it is maybe the government would intervene and help and there would be some subsidy to the people there because they would not be able to afford it. You have only got to go another two miles the other side of the Reddish area to Gorton and the people are selling houses for £20,000. People cannot possibly afford £500 or £600 for the pack. The answer there would be for the government to intervene rather than have a blighted area.

Q274 Sir Paul Beresford: Their intervention may lead to blight?

Ms Westby: But you are not really calling it a low value area, you are not putting a name tag on it.

Q275 Mr. David Clelland (Tyne Bridge): But you say the government should intervene. The Consumer Association suggested that people like yourselves and the mortgage lenders should pay the costs up front and then recoup them after the sale goes through, in order to help people in low value areas to meet the costs.

Mr Williams: The net result there is an increased cost in selling. There is no way any industry could absorb these costs. The net result would be that the commission rates, if it is on a no-sale no-fee basis, will inevitably increase. It could be a case of what happens then if the agent does not achieve a sale and the seller wants to move agent, who owns the pack, who has paid for the pack? All these problems will come into this.

Q276 Mr. David Clelland (Tyne Bridge): You do not feel there is a role for the industry in this, it is for the government?

Mr Williams: What I am saying is if the industry introduces or absorbs this scheme it will inevitably lead to increased costs for the consumer because there is no way they could absorb it free of charge into the running costs of any business. At the end of the day what we are saying here is that it is increasing costs for the consumer. As agents you could say we will love it because it will increase our fees, but that is not what we are about, we are here to look after the consumer as well.


Q298 Mr. David Clelland (Tyne Bridge): It is argued that all estate agents should be licensed. Is that something you would agree with, and how much would you think that this argument is affected by the production of the home improvement pack?

Ms Harrison: As you have mentioned, this month in Which? we did a report into estate agents. Ten of our researchers put homes on the market and then ten other researchers went to try and buy them so we could find out if there were any problems in the system. We found huge problems with misleading and unfair contracts. We also found that in one very serious case the law was broken, and we are hoping the OFT is going to take action over that. What we found mostly was that a lot of agents are in breach of the Estate Agency Act. This is obviously a concern. The only way we found out was by doing research. Your average seller and buyer will not know if people are in breach. I know you are not going to like this answer entirely, but at the moment we are looking at our position. We do not want to say wholesale licensing without having done proper research. We have seen there are problems with the enforcement of the Act, so we would like to deal with that, but we are currently mapping out different systems which we think could work for estate agency and as soon as we have this we will pass it to the Committee. The one thing we are very strong on is we do believe that estate agents must be members of an Ombudsman scheme. We are still researching whether it is the current scheme or a broader scheme that deals with all the sectors. One of the major problems for consumers is you cannot get redress easily in this area because only a third are members of the estate agents Ombudsman scheme.

Ms Conti: Can I pick up on the point about the possibility of home condition inspectors missing defects. It is fundamental that this system is underpinned with a system of affordable and accessible redress. The Royal Institute of Chartered Surveyors has an arbitration scheme which is woefully underused and they are currently looking to move to an Ombudsman scheme, and we would certainly recommend that something like that underpinned home condition reports.

Q299 Mr. David Clelland (Tyne Bridge): There is a suggestion that the recruitment and training of the new home inspectors is likely to cause problems, partly because of the numbers required and there are concerns about the levels of training. Do you think it is feasible to recruit the sheer numbers which are going to be needed in time for the introduction of the pack?

Ms Conti: I think every effort has to be made for the numbers to be there for this to work and for consumers to be able to rely on this system. It will spell disaster if home information packs cannot be brought together because there are not the people there to do the inspections. We are optimistic that you can recruit the numbers. We feel that the two-year course resulting in an occupational qualification and some kind of bridging course for surveyors would result in the level of training necessary for high level inspections.

Q300 Mr. David Clelland (Tyne Bridge): Do you think the current proposal as it is at the moment is going to be adequate for the task?

Ms Conti: I think at the moment we do not have any major reservations about that.


Q316 Mr. David Clelland (Tyne Bridge): Should the landlord, in terms of the licence, be the person who owns the property or the person who manages the property?

Ms Harrison: There is a big problem with that because if you are a letting managing agent, which is what we were investigating, you have all the contact with the consumer and it would make sense that you would be the person licensed.

Q317 Mr. David Clelland (Tyne Bridge): Could landlords find a way out of having to be licensed if they were actually handing the management of the property over to another agency?

Ms Harrison: They could if they were really handing over the management of the property entirely to the letting agent. It is the letting agent who is dealing with the problems over conditions in the home and rent.


Q329 Mr. David Clelland (Tyne Bridge): You say that 98 per cent of vendors choose the sellers pack route. That appears to be for older properties. What about those selling newer properties?

Mrs Coleman: No, modern properties as well. I have my office where I have low cost housing and then I have an office where it is more upmarket properties. I wondered how it would work in that office. I have only had that office for two years and I was not quite sure how it would work in that office. There is a sort of snob value in that they want to know if there is going to be anything that is likely to come up in the survey and they want to put it right before they put their house on the market. By having all this information up front, when a buyer suggests to me that they want to put in an offer £20,000 below the asking price, I am able to say, "How do you justify that £20,000 reduction? I have just given you a survey report that gives it a clean bill of health." Over the years I have done over 700 and I have had four people who have queried it and we have offered that consumer the choice that we will go out to another surveyor. My surveyor is a bit of a pain in the neck, he is very thorough. I wanted the sort of surveyor who would not miss a thing. When we have had any contentious issues we have suggested that we go out to a third independent party and if my surveyor is right he picks up the tab for the other survey and if their surveyor is right he does it, and usually they have come to an agreement. Usually it has been over timber and damp, it is related to water, either penetrating damp or rising damp.

Q330 Chairman: You say usually the people in the better off area put things right before they sell them, but there must be a significant number of elderly people who do not have the resources to put something like that right.

Mrs Coleman: No, so then they make an informed decision, "What are we going to do? Shall we reduce the price and let Mrs Coleman tell the purchaser that we have done this because of this work?" It is totally transparent. We make it perfectly clear to the vendor that we will not withhold any information, or will they put it right after the exchange of contracts and have a conditional contract so that the purchaser is guaranteed that it will be put right, but the vendor is guaranteed getting their full asking price.

Q331 Mr. David Clelland (Tyne Bridge): How many clients do you find are put off by the cost of the home improvement pack and the time taken?

Mrs Coleman: They do not have any cost until completion.

Q332 Mr. David Clelland (Tyne Bridge): There is going to be a cost eventually.

Mrs Coleman: Yes, but instead of 26 of my sales falling out of bed, only three per cent fall out of bed. So because more sales are going through you can keep your costs down. The solicitors and the surveyors are able to offer a very realistic cost. The cost does not go up. In the fullness of time, when all agents are doing it, with all the IT that we are told is going to be around and all the expertise that is going to be there, the cost should go down, not up. In the past I have had to allow in my three-year business plan for a third of my business never earning me any income whatsoever whereas under this situation only three per cent is going to fall through. It is obvious that you can keep your costs down. The other thing is that people say about not enough properties coming onto the market, time wasters will not put their houses on the market and therefore they will be kept off the market. In the real world what I find is that the people who tend to do that are at the upper end of the market, the very people you are asking about and the reason they want to test the market is they want to get the highest price. When they do not get the highest price they take their house off the market, but in the meantime all their neighbours have suddenly discovered that their house that they thought was going to be worth £300,000 is now worth £400,000, so you get an influx of over-priced properties which are equally unsaleable and that inflates the marketplace, and then they all come off the market and all the other agents in the area who will put it on at any price and any fee are artificially raising the market.


Q354 Mr. David Clelland (Tyne Bridge): Could you tell us more about your concerns about the new proposed Housing, Health and Safety Rating System? You seem to be part of the small minority of respondents to the Government's proposals, although the minority is often right, as we know in politics.

Mr Parkinson: I do not think I am part of the minority.

Q355 Mr. David Clelland (Tyne Bridge): In terms of the respondents anyway.

Mr Parkinson: I think there has been a climate of resignation. I think it has been made quite clear in many documents that the Housing, Health and Safety Ratings System is coming and I think a lot of people have given up making representations about it. I have yet to meet anybody who actually likes the new system, apart from those who have actually been responsible for its production. On the contrary, when I speak at seminars, there is almost unanimous opposition to all or part of the new system.

Q356 Mr. David Clelland (Tyne Bridge): Could you tell us why you do not like the new system?

Mr Parkinson: Firstly, it introduces unnecessary complexity to what is already a well tried and tested system of judging housing quality which has been around for over 50 years. It has developed a range of precedents which help in its interpretation and the expertise is out there in the staff, in the local authorities, in the private sector. Firstly, it has introduced unnecessary complexity. Secondly, its derivation and its application to decision-making in the field is doubtful. There is a lot of research which associates housing with ill health. There is no question that bad housing can cause bad health, but most of the research is at the population level. We cannot measure housing conditions in a particular house and then relate that through some scientifically supportable dose response relationship to an actual health outcome. What the new system does is put things in rank order. It says something is worse than something else or this house is worse than that or this house is worse than the average, it does not actually say there are health outcomes which are identifiable at a particular level in this house. The officers in the field are going to have to justify these decisions which are derived through this new system. A court is going to want to know why have you intervened in this house, why are you telling my client he has got to spend £10,000 on this house. I personally think that simply saying that it is worse than average is not sufficient justification. If we were stopped for dangerous driving, we would want to know precisely what we had done that was dangerous and what the potential harmful outcome was. To be told you are the worst driver on the motorway I do not think is sufficient.

Q357 Mr. David Clelland (Tyne Bridge): The new system deals with a much broader range of issues than the present system. Are you saying there are not any improvements to be made to the present system?

Mr Parkinson: No, not at all. Nobody could justify the list of defects that can be taken into account in the current standard. My argument is that if there are defects that are missing from the current standard, put them in. Why throw it all away and start from scratch? If they want radon and fire safety and energy efficiency and internal arrangements, put them in. One in its entirety used to be in and it was taken out.

Q358 Chairman: Which one was that?

Mr Parkinson: Internal arrangements, things like steep staircases, inadequate ceiling heights, safety hazards, design features.

Q359 Mr. David Clelland (Tyne Bridge): Which is going to be in the new one, is it?

Mr Parkinson: Yes, but it was in until 1989. It can work if it is in there.


Q369 Mr. David Clelland (Tyne Bridge): Are you suggesting that the Bill will prevent emergency action or are you just saying that the Bill has not taken into account the effect of the Bristol case?

Mr Parkinson: The Bristol case has had quite an impact. I think a lot of representations have been made over the development stages. I think people expected to see something and it is not there. On the question of enforcement powers, the biggest problem is the loss of the repair powers, the powers to require the repair of houses which are not considered to contain category one or category two hazards. Indeed, any repair that you ask for will have to be linked with a hazard. So you will not be able to intervene to stop hazards arising, you will have to wait until a problem occurs before you can act. Those powers that we are losing, section 190 powers, were put into earlier legislation because of those problems and they are going to be taken away. We will only be able to act once a house has become hazardous. Also, there will be big implications for urban renewal programmes which rely upon encouraging people to bring their properties up to scratch. As it stands, those houses which externally could appear to be very dilapidated but they will have wonderful handrails on the staircases because the hazard will have been taken away, their future will not have been extended and urban renewal programmes will not have been aided one iota. The health and safety of the occupants will have been improved. Whether they perceive that is another matter. How are we going to encourage people to take up the grants when we will not be able to grant aid for things that traditionally they want grants for, repairing the roof, installing kitchens and bathrooms? We can only do that when we relate it to a hazard.

Q370 Mr. David Clelland (Tyne Bridge): So you think that there will be particular problems in relation to clearance areas, do you?

Mr Parkinson: Urban renewal is the area I mentioned. There will be real problems with clearance, because at the moment we use the fitness standard plus the guidance in Circular 1796 to decide when clearance is justified. The fitness standard takes into account disrepair, structural stability --- issues which have a bearing on the life of the property. Circular 1796 tells us to take into account socio-economic factors, planning factors, the future of the area, redevelopment plans, and so on. The presence or absence of hazards in a house, however serious, are not really an indication of that house's obsolescence. It does not really give us an indicator of what the future life of that property is and what the future investment in that property is likely to be. It simply takes away demonstrable hazard that we can identify today. That is another issue --- if I may return to the Housing Health and Safety Rating System. Yes, it is evidence-based. The old fitness standard was also based on the same evidence, but it had a precautionary element: precautionary in the sense that we would take action even though there is no absolute proof. The Health and Safety Rating System is based upon current evidence. That inevitably gives it a safety rather than a health bias, because we have good actuarial evidence which links injury with causation. We do not have any particularly good data which links long-term exposure to small doses of bad housing conditions, with health outcomes. We do not present ourselves at the accident and emergency service when we are 70 and say, "The quality of our life has been impeded because of the dampness in our house"; but we do turn to the accident and emergency to say, "I fell down the stairs". So we have good evidence for safety; we do not have that evidence for health.

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