Alan Shatter (Dublin South, Fine Gael)

I welcome the fact that this Bill is now finally before the House. As with every action of the current Government, the stable door is being closed after the horse has bolted.

It is interesting to return to the origins of this legislation. During the early years of the property boom, there was substantial public concern over the conduct of auctioneers and estate agents. Instead of addressing this, the Government initially provided for multiple examinations by a variety of different groups to identify what was wrong with our laws and what changes were required.

The Bill aims to give effect to key recommendations of the Auctioneering-Estate Agency Review Group, which recommendations published in July 2005. As described by the Department of Justice and Law Reform, the review group was set up against the backdrop of "public concern about certain practices in the property services sector, weaknesses in regulatory and supervisory arrangements and the need to take account of new forms of property services". The group's report, when published, made the case that there was a need for urgent legislation. Urgency in this State with Fianna Fáil-led Governments apparently results in legislation coming before the Dáil more than five years later than it should. The Government failed abysmally to put in place the legislative structure necessary to address a series of issues. Had the legislative structure been put in place to deal adequately with certain problems that were clearly evident in the period 2004 to 2006, some of the thousands of people in this State who made disastrous decisions to purchase property, particularly residential property, might have thought twice before doing so. Alternatively, they may not have been seduced into doing so by the campaigns run by certain auctioneers and estate agencies on behalf of developers. Such campaigns were commercially astute but their ethical standards and morality left a great deal to be questioned. I will return to this issue.

The Law Reform Commission also produced reform proposals in this area. In the context of the many difficulties in this area, the commission, in its consultation paper of 2006, referred to an understanding deficit that must be addressed as urgently as possible in the context of consumers dealing with auctioneers and estate agents.

The National Consumer Agency recommended in 2006 that legislation to regulate this area should be "prioritised in the Government's programme to ensure that it is enacted as a matter of urgency" with a view to ensuring "early protection for the consumer". I wonder what aspect of prioritising the word "early" fell on the deaf ears of Ministers.

As we know, there is currently no licensing system in place for property management agents. The code of practice for property service providers in regard to auctioneers and estate agents does not apply to the management agent profession. It is, of course, welcome that this legislation extends to management agents. In the context of the construction of a large number of apartments throughout the country, management companies have employed agents to undertake work. Some agents have undertaken the work extraordinarily well while others can only best be described as having been unfit to undertake such work and as having behaved with gross negligence. Initially, management agents were appointed by the developers of apartment blocks who controlled exactly what the management agent did. All too frequently, management agents used annual fees paid by residents of apartments to make good work that developers failed to complete properly at the cost of those who had acquired apartments instead of at the cost of the developer. The reason was because the management agent was in the pocket of the developer and behaved in that manner in the hope that they would be appointed to manage other further apartment blocks or private housing estates for which the developer was responsible.

There are welcome provisions in the legislation in so far as there will be an updated legal structure for the licensing of auctioneers and estate agents, dealing with disciplinary issues, when they arise, and issues relating to management agents. A number of particular provisions in the Bill are welcome. The Government, of course, is not happy to establish a general whistleblowers' charter which might blow the whistle on difficulties in the public sector or within Government Departments or State agencies. However, it is welcome that there is essentially whistleblowers' protection contained in section 67 of the Bill.

While I welcome various aspects of the Bill, I may table amendments on Committee Stage that may be required to it. I note the Minister has said he will introduce certain amendments. I wish to refer to a number of issues of general relevance to this legislation which impact on people outside the House, some of which I do not believe have been adequately or appropriately addressed in the Bill but which could, to great benefit, be addressed in it.

I will start by making reference to a section the Minister referred to in his speech which deals with the functions of the new property services regulatory authority that is to be established. The Minister quite properly made reference to section 11 which prescribes the functions of the authority and states:

(1) Subject to this Act, the Authority shall control and supervise licensees and maintain and improve standards in the provision by them of property services.

Maintaining and improving standards is a very broad concept. I have absolutely no doubt that there is a need for better standards as was clearly exhibited during the insane period between 2004 to 2007 until the complete collapse in the property market. Section 11(1) is a general provision relating to the maintenance of standards, but what perception will be taken of standards and what standards should be maintained is a highly subjective issue. I wish to draw the Minister's attention to certain matters which I believe should be more specifically dealt with in the Bill but, before doing so, I want to refer to section 11(2).

Section 11(1) provides the general provision for maintaining standards. Section 11(2) states "Without prejudice to the generality of subsection (1)", but then delineates specific matters the authority may have regard to in respect of dealing with issues of standards. Section 11(2)(d) states that the authority may specify and enforce standards, including technical standards - this is reasonably straightforward - and appropriate ethical standards to be observed in the provision of property services, which is a good deal more complicated.

What are appropriate ethical standards? There is something that needs to be said about this area and it is of specific relevance to the property bubble, the collapse of our economy, the profligate behaviour of the banking sector and the silence, to date, on the role played by auctioneers and estate agencies in that. I do not expect that we will witness a repeat of that disaster for many, many years, but history has a horrible habit of repeating itself. There was conduct on the part of auctioneers and estate agents, who were acting in cahoots with developers and financial institutions, that can, at the most charitable, be described as immoral and disreputable. This should have been policed many years ago by the Government, it should have been stopped by Government and to which the Government turned a blind eye. As a consequence, tens of thousands of people in this country are trapped in negative equity having borrowed funds that should never have been made available to them and which they used to acquire houses and apartments at exorbitant prices for no reason other than the hysteria which developed in the market to which auctioneers and estate agents, by their marketing tactics, contributed substantially and in respect of which the financial institutions and developers aided and abetted.

To what am I referring? The House has not yet explored to any great extent the fact that a very small number of well-known auctioneers and estate agents - I have one particular firm in mind but I will not name it - appeared, by 2002 or 2003, to have essentially taken control of a substantial portion of the market for the sale of apartments throughout the State. They organised sales on behalf of developers, who were funded by the financial institutions. Having funded the developers, they were very happy, either directly or through their subsidiary companies, to put together "attractive" financial packages to facilitate anything between 90% to 110% loans being made available to purchasers of apartments. There was no competition because the sale of apartments was orchestrated. Where one estate agent was dealing with a large number of sales, it would orchestrate matters so that on a particular weekend only one launch of apartments would take place in north Dublin. There would be no competition from other developers in north Dublin. At the same time, there would only be one launch in south Dublin on the same weekend and this would be heralded in a great fanfare of publicity.

When such launches took place - this also applied to some housing estates - they said that because of the concerns of the developer, only 20 or 30 apartments or houses would be released for sale. People in my constituency, who were desperate to buy for fear the prices were about to go up, queued overnight to buy overpriced houses and apartments from developers, which the banks were immorally funding, being sold at prices that could never be maintained. Due to the fact that the numbers being released onto the market were artificially restricted, a perception was created that they were a rarity as we were heading into constructing 60,000, 70,000, 80,000 and then 90,000 individual units in consecutive years. We were constructing at a level that was not even required per head of population remotely in our neighbouring countries of England, Scotland and Wales.

Auctioneers were in the centre of this; auctioneers were orchestrating this. If I am talking about conduct that is unethical or maintaining moral standards, this legislation needs to do a lot more than it does. It needs to ensure that there is proper competition in respect of the marketing of apartments and houses, as well as commercial buildings. It needs to ensure that it will be unlawful for an individual company of estate agents in any particular part of this country to orchestrate the release of properties - development is practically in parallel - such as apartments, residential units or houses in an orchestrated, anti-competitive manner in co-operation between developers who should in fact be in competition with each other to the detriment of the consumer. This legislation does not deal with that.

Too many people in this country are casualties of what happened on the Government's watch and what did the Government do while all of this was happening? It formed a committee to examine the issue, who finally produced a report in 2005 and in November 2010 we are debating the legislation in this House. I believe there should be an inquiry into the conduct of estate agents and auctioneers during the property boom period between 2000 and 2007. I believe there is a need for an independent inquiry. I believe there is a need for formal evidence to be taken. I believe there is a need to examine the practices that applied.

I believe that developers and financial institutions should be required to explain the arrangements that were put in place whereby financial institutions that were facilitating spiralling land prices, the acquisition of building land at excessive prices through the financial assistance provided by a financial institution and the role played by that financial institution to ensure the developer paid back the borrowings by that financial institution, guaranteeing anything from 90% to 110% of required finance to purchasers. That helped to fuel the property bubble and auctioneers and estate agents were right in the middle. They were the conductors of that orchestra and there has been no examination of their conduct to date. I do not believe that this legislation adequately addresses remotely that particular difficulty and that particular issue.

I want to put into the record of this House a letter received by me from a constituent of mine dated 31 October. For the sake of his confidentiality, I am not going to tell the House his name but he is classically the type of individual who is caught by what occurred on the Government's watch. The Fianna Fáil-Progressive Democrats Government in office from 2002 to 2007 should have enacted legislation to put a stop to the type of activities I am talking about. This is a letter he sent to the Taoiseach, Deputy Cowen, and he copied it to me. He said:

Dear Taoiseach,

I am writing to you regarding my situation and that of countless others like me and to find out what your plans are to deal with same. I appreciate you are busy so I will try to be concise and make my points in bullet form.

Then he does. He states as follows:

I had quite a good start in life. I went to a good school and have an arts degree. Ever since I have worked in typical white-collar jobs, sales, marketing, etc., plus I have had my own business but never earning very much money. The most I ever earned was about €45,000 and usually much less, but these days it is closer to €35,000, plus I had a period of six or seven months in 2010 where my earnings veered down to dole levels. I have always paid my taxes, I have never been on the dole and never had a medical card. In other words,I have made a decent contribution to society and have never been a drain on it. I also do voluntary work. Having bought into Ireland, so to speak, I purchased an apartment in Carrickmines off the plans in 2006. My purchase price was €340,000 for a tiny one-bedroom apartment.

There have been various problems on-site as you might imagine, living in a half-finished development with flooded car parks, some antisocial problems and a general lack of funds to manage the development. Also, myself and everybody on my floor were burgled in 2009 mainly due to the fact that the entrance to our block is in a secluded area. It was originally envisaged that we would back onto another block, of course never built. However the biggest problem, it goes without saying, is the catastrophic collapse in our property values.

In the spring of this year they did a highly publicised fire sale of units in our development with the equivalent of my apartment going for €130,000.

I remind the House he paid €340,000 for this apartment into 2006. He goes on to state:

That is not even half of what I paid; it is closer to one third. They could not even sell them at that price. There was quite a bit of interest but apparently many of the would-be purchasers could not get mortgage approval and since then prices have fallen further, with further falls forecast for 2010 and 2011. In conclusion, my apartment is effectively worthless and I am mortgaged up to my neck. It is a massive amount. I currently owe more than €300,000, paying over €1,400 per month lasting until I am 70 years old.

As a single person I can't afford my payments on my reduced salary and this is while interest rates are still relatively low, plus I am swamped in debt and sinking further. If I lose my job I will be in default immediately. I am still quite young, 38, energetic, willing to work and I try to be positive but it is hard not to think my future is very bleak. I have literally thrown away over €200,000 worth of equity, will probably never be able to purchase another property and am most likely destined to spend the rest of my life in this tiny apartment. Please keep me in mind; I only bought the apartment so that I would have a place to live, not as an investment.

I thought it was a responsible thing to do to try to get on the property ladder before I ran out of mortgageable years. I purchased at the age of 34 but the delay in building my apartment caused by the builder running out of money meant I did not start my mortgage till I was 36. I can't even emigrate as the rent I would achieve on my apartment would fall considerably short of my mortgage payments and therefore it is unlikely that I would ever be able to afford to have children or become a normal high spending member of society. Have you considered these specific effects of the property crash?

This situation really only affects those who joined the property ladder between approximately 2002 and 2007, that is, it is not a massive number of people in the overall scheme of things. All those who purchased earlier than that had built up enough equity and those who have not purchased at all will be in the best situation of all, providing they can acquire jobs. Indeed, people of my generation will be at a huge disadvantage compared to the next generation, saddled as we are with these millstones, massive mortgages on reckless properties. All of this has had a significantly detrimental effect on my health. [He goes on to ask the Taoiseach] to consider Peter Bacon's recent suggestion that the Government pay off the negative equity experienced by my generation and therefore free us up to spend more money in the economy and remove some of the despair that is out there.

I have read that letter because we should not ignore the fact that auctioneers and estate agents earned huge sums selling these properties at exorbitant prices and facilitating putting together the financial deals which enabled young men like this constituent of mine to purchase residential units at prices for which they should never have been sold. There is a great deal more that needs to be done about this but we need to look back at the involvement of estate agents and auctioneers. We need to amend this legislation to ensure that they operate truly independently.

I do not believe that auctioneers and estate agents should ever be permitted to be directly involved in facilitating the putting together of financial packages to enable individuals to purchase properties. That should be left to the individual. I do not believe that financial institutions that fund developers should be allowed to provide prepackaged finance to facilitate the sale by developers of the constructions, residential or commercial, that have been funded by that particular financial institution. There is a need to provide clear blue lines or red lines beyond which no one can travel, in the interests of the consumer.

I want to refer to certain other issues. One of the great difficulties in the area of property is knowing what is the actual value of property. Putting it into a current context, I read with interest the provision in this legislation to which the Minister referred about the sale or letting of land provisions contained in Part 6 with regard to the advised market value, and possible difficulties that a totally ethical auctioneer or estate agent may find himself or herself getting into with regard to advised market values that may not be correct. Will the Minister say how in the current market anyone can advise on the market value of anything in the property area?

One of the areas of work in which estate agents and auctioneers engage is rent reviews. We have already had an amount of talk about commercial leases. In the area of commercial leases it was the practise for many years that when individuals entered into leases there was provision for upward-only rent reviews. The legislation that this House passed has addressed that issue for individuals entering into commercial leases from the date the legislation became operative but has not addressed the problem for all of those who currently are tenants and who have commercial leases which preceded the enactment of that legislation.

There are many businesses located in different parts of the country currently struggling to maintain viability. A number of them in my constituency, some of them in Dundrum Town Centre, are being confronted by landlords many, but not all, of whom are financial institutions who seek rent reviews in circumstances in which under the lease all one can have is an upward-only rent review. If they go to arbitration, the arbitrator, as is normally provided for arbitration in these leases, can only accept an upward-only rent review. An arbitrator may determine that rents should remain as is, but he or she has no remit, jurisdiction or capacity to look at the current market and reduce rents. This is resulting in businesses closing down, jobs being lost and businesses that could remain viable ceasing to function because of financial pressures created by landlords and financial institutions unwilling to recognise that the market has changed and rents should be reduced. Some of the landlords, in the context of pension or other funds, are loath to reduce rents because maintaining them at an artificially high level allows them in their annual accounts to present the capital balances in their accounts and the capital value of funds as being greater in theory than they may be in reality. A wise landlord in the current market would be anxious to hold on to a willing tenant, even if the tenant is offering a lesser rent, if that tenant has a good history of making rental payments.

I do not know whether what has been brought to my attention is accurate, but concern has been expressed to me about this. I am not saying this is necessarily something any estate agent is involved in. It may simply be something which some of those who own rented commercial property have been engaged in. The concern has been expressed to me that when one goes to rent reviews in an arbitration context, or even if rent reviews result in persons ending up in court, the determining factor is when the arbitrator looks at what are called comparators - the rent payable for similar properties in similar locations or in the same location - and relates that rent as a true rent to what the rent should be in the lease being reviewed. It has been suggested to me that in some parts of the country landlords identify individual commercial tenants who they incentivise to agree a substantially increased rent, in other words, a lease is concluded or a rent review is agreed at a higher rate but there is some secret benefit given to the tenant who agrees to it. The reason that is happening is that such rent review can then be used as a comparator to force higher rents on a broad range of other tenants in adjacent commercial properties. If that practice is happening, it needs to be criminalised. Anyone involved in that should be liable to be charged with a criminal offence and I ask the Minister to look at that.

This Bill should provide for the creation of a database of property that is sold and the prices at which it is sold, detailing rental agreements reached and the rents payable so that the general public has a true indicator of the real value of properties and access to information on sales and rents agreed for particular properties. If there can be that sort of accessible public database in part of the United States, there is no reason we should not have it here. The United States has the greatest free enterprise economy in the world. They do not see that as divulging secrets. They see that as ensuring there is a real and genuine market and that when people purchase property there is a real indicator of value and price. This legislation, in the context of dealing with estate agents and auctioneers, should have prescribed the creation of that sort of database, and included within it any changes required or amendments to the Data Protection Acts.

See this speech in context