Dermot Ahern (Louth, Fianna Fail)

I am very pleased to have the opportunity to introduce the Property Services (Regulation) Bill 2009 in this House and I look forward to our discussion. The Bill provides for a comprehensive and streamlined legislative framework for the regulation of auctioneers, letting agents and property management agents. It will replace the current court-based system for regulating auctioneers and house agents with an updated system for the regulation of all property services providers.

Under current legislation, the Auctioneers and House Agents Acts 1947 to 1973, licences are issued to auctioneers and house agents by the Revenue Commissioners on presentation of the required District Court certificate. The legislation is confined to auctioneers and house agents and does not extend to property management agents. The latter comprise a relatively new and expanding segment of the property services sector.

In so far as the legislation extends the licensing system to property management agents and extends statutory safeguards to the clients of such agents, mainly property management companies, the Bill constitutes an important element of the Government's strategy to address problems arising in respect of the management and governance of multi-unit developments. I can confirm that legislation to improve the management of such complexes and arrangements for the governance of property management companies will be published within the next few days.

The Bill seeks to give effect to the principal recommendations of the Auctioneering/Estate Agency Review Group which reported in 2005. At its heart is a proposal to establish a new statutory body, the property services regulatory authority, to control and supervise providers of property services and to improve standards in the provision of those services. The Bill also provides for improved consumer protection by establishing a system for investigating and adjudicating on complaints relating to the provision of property services in addition to a property services compensation fund to compensate those who suffer financial loss as a result of dishonesty by property services providers.

I turn now to the Bill's main provisions to give Senators an outline of its scope and an understanding of how the proposed system of regulation will work in practice. Time constraints prevent me from elaborating on every provision of the Bill but, in any event, doing so is not necessary as the Bill is accompanied by a very detailed explanatory memorandum.

Under the commencement provisions set out in section 1, it will be possible to introduce the Bill's provisions on a phased basis. Such a phased introduction will help to ensure a balanced workload for the authority.

Section 2 contains the important definitions that determine the scope of the Bill. I want to draw attention specifically to the definition of "property service" as the provision in the State of any of the following services: auction of property other than land; purchase or sale, by whatever means, of land; letting of land; and property management services. All auctioneers, letting agents and property management agents will, therefore, require a licence from the authority. This licensing requirement will apply both to the property services employer, for instance, an auctioneering company or partnership, and to individuals providing a property service in the course of employment or as an independent contractor.

If the property service is provided in the State, a licence will be required regardless of whether the property concerned is located in the State. Part 2 of the Bill contains special provisions dealing with the provision of such property services by licensed providers from other EU member states. A limited number of exemptions to the licensing requirements are set out in section 3. These include the purchase or sale of land by a solicitor on behalf of a client in the course of and ancillary to the provision of legal services and the auction of property other than land for charitable purposes.

Part 2 of the Bill contains many standard provisions relating to the structure and operations of the authority, including provisions regarding the appointment of members and staff, the conduct of meetings and the keeping and auditing of annual accounts. I draw specific attention to the main functions of the authority in section 10, which include the following: to operate a comprehensive licensing system covering auctioneers, letting agents and property management agents; to set and enforce standards for the granting of licences e.g. educational and training standards and levels of professional indemnity insurance, as well as standards to be observed in the provision of property services by licensees; to establish and administer a system of investigation and adjudication of complaints relating to the provision of property services; to promote increased consumer protection and public awareness of property services in general, and the cost to consumers, risks and benefits associated with the provision of such services; and to establish, maintain and administer the property services compensation fund. This part also contains provisions on the charging of fees; it provides that the annual fees charged by the authority should be sufficient to meet the costs of administration of the Act. This is in line with the recommendation of the review group that the new regulatory structure should be funded through fee income generated by the authority for licences and other services.

Provisions in section 18 enable the authority to prepare and publish, or approve of, codes of practice which can be given statutory effect. While breach of any such code will not be an offence, the authority may have regard to the content of the code in any proceedings to determine whether improper conduct by a licensee has taken place.

Part 3, comprising sections 28 to 42, sets out details of the licensing system which will apply in future. Under section 28, it will be an offence for a person to provide a property service without the appropriate licence unless he or she falls within one of the limited exemptions in section 3. If a licensee provides a property service other than a service for which they hold a licence, or presents himself or herself as available to provide a property service other than the service in respect of which he or she has a licence, it will constitute improper conduct and an appropriate sanction may be imposed.

In order to provide ready access to the list of licensees, section 29 requires the authority to establish and maintain a register of licensees which will be available to the public. This will enable users or prospective users of property services to confirm that a provider is registered to provide the service concerned.

Sections 30 to 34 contain details of the licensing system. Each application for a licence from an eligible person must be accompanied by references as to the applicant's character and competence, including details of education, training and experience, a certificate by an accountant that proper financial systems and controls are or will be in place for the protection of client moneys, evidence of availability to the applicant of the necessary level of professional indemnity insurance and the appropriate fee. Applicants other than employees will also be required to furnish an up-to-date tax clearance certificate. Moreover, the legislation also permits the authority, if it considers it necessary in any particular case, to require the applicant to furnish additional information. When deciding whether to issue a licence, the authority will take into account the information provided by the applicant and, where appropriate, any information provided by the Garda Síochána under section 42. It will not issue a licence unless it is satisfied that the applicant is a fit and proper person to provide the property service concerned and complies with the other statutory requirements. A successful applicant must pay the appropriate contribution to the compensation fund before the licence will be issued by the authority.

In the case of companies and partners in a partnership, these requirements will apply to principal officers of the company or partnership. Principal officers are defined in the Bill as directors and partners as well as any manager, secretary or other similar officer of the company or partnership or anyone purporting to act in that capacity. As the principal officers of a company or partnership may change over time, it will be a condition of a licence issued to a company or partnership that the licensee takes all reasonable steps to ensure that the principal officers of the company or partnership are fit and proper persons to hold the positions in the company or partnership.

Before refusing to issue a licence in any case, the authority must notify the applicant of its intention to do so and its reasons for so doing and give the applicant an opportunity to make representations. It will be possible to appeal any decision of the authority in refusing to issue a licence to the property services appeal board which is being set up under section 72 and Schedule 5.

Arrangements applicable to the renewal of licences are set out in sections 35 and 36. A licence will be renewed provided the application is in the specified form; is made at least six weeks before the expiry of the existing licence; is accompanied by the appropriate fee and contribution to the compensation fund; and is accompanied by an accountant's certificate that proper financial systems and controls remain in place and evidence that appropriate professional indemnity insurance is in place.

Part 3 also includes provisions imposing obligations on licensees to have the licence in their possession and to produce it if requested to do, or to display it in their place of business, depending on whether the licensee is an individual or a company. It also requires licensees, other than licensees who are employees, to include their registration number in advertisements, on their stationery, in sales brochures and so on.

Section 40 provides that where a licensee is declared bankrupt, his or her licence will be suspended immediately and will remain suspended until it expires or the bankruptcy is discharged, whichever occurs first. Section 41 requires an applicant for a licence or a licensee to notify the authority of any material matter which would be likely to affect the validity of the licence.

Part 4 of the Bill, consisting of sections 43 and 44, requires a licensee to issue a letter of engagement to all clients. Once the letter has been signed by both the licensee and the client, it becomes a property services agreement. Details of the extensive information that must be included in such a property services agreement are set out in Schedule 2. A property services agreement must include details of the services to be provided by the licensee, the fees or commission payable by the client and the period during which the agreement has effect. The authority will specify the form of letter of engagement which all property services providers must use. Part 4 also imposes an obligation on licensees to keep records of all services they provide for a period of six years.

Part 5, sections 45 to 53, contains important provisions dealing with client accounts and related matters. It updates existing provisions in the Auctioneers and House Agents Acts 1947 to 1973 and extends them to property management agents. Section 45 empowers the authority to make regulations, including the kind of bank accounts which may be opened by licensees for the keeping of client moneys; the rights, duties and responsibilities of a licensee in respect of client moneys; the accounting records which must be maintained by a licensee; and client entitlements. Section 46 makes it an offence knowingly to lodge client moneys to an account other than a client account, or knowingly to make a false or misleading entry or record in accounting records.

This section provides for both summary and indictable offences. Where a licensee is convicted summarily, the court may order that any or all licences held by the licensee be revoked and that the licensee be prohibited, on a permanent or temporary basis, from applying for a licence or a particular type of licence. Where a licensee is convicted on indictment, the court is required to order that all licences held by the licensee be revoked and the person be permanently prohibited from applying for a licence.

Part 5 also contains provisions for the protection of client moneys and documents in the event that the authority refuses to renew a licence, a licence is suspended or revoked, or the licensee ceases to provide property services. It also makes provision for the protection of client moneys in the event of the bankruptcy or insolvency of a licensee.

Part 6, sections 54 to 60, deals with the sale and letting of land and includes new provisions requiring auctioneers and letting agents to provide statements of advised market value or advised letting value, as the case may be, to their clients within a seven-day period. The advised market value of land for sale must be reasonable and the authority may investigate cases in which values appear not to have been reasonable. This value can be a price range but the difference between the minimum and maximum value cannot exceed 10% of the lower value. The advised value can, however, be altered to take account of market conditions. Where land is being sold at auction, the vendor will be prohibited from bidding for it and from authorising or permitting another person to so on his or her behalf. Where land is being sold by private treaty, section 59 requires that licensees retain records of all offers received, including conditional acceptances. In order to avoid conflicts of interest, section 58 imposes an obligation on a licensee to obtain the prior written agreement of the vendor in any case in which he or she intends to provide a financial service to the purchaser or potential purchaser in respect of the land.

Section 60 empowers the authority to make regulations on matters concerning the sale or letting of land. This will include regulations concerning the contents of advertisements for the sale or letting of land, booking deposits, the terms of building contracts and similar issues.

One of the shortcomings of the present licensing system identified by the review group is that the only available sanction against misconduct is refusal to renew a licence. Part 7 addresses this deficiency by making provision for a comprehensive system for investigating complaints and imposing appropriate sanctions where such complaints are upheld.

Section 61 provides that any person can make a complaint to the authority and the authority must investigate the complaint provided it is made in good faith and is not frivolous or vexatious or likely to be resolved by mediation or other informal means between the parties. Section 62 provides that where the authority considers that immediate suspension of a licence is necessary to protect the clients or customers, or potential customers, of licensees, it may make an application on notice to the licensee to the High Court for an order to suspend the licence.

In exceptional circumstances where the authority considers that there is an immediate risk of financial harm to clients or potential users of a property services provider, the authority is empowered to apply to the High Court on an ex parte basis for an interim order to suspend the relevant licence. An interim order can last for a maximum of eight working days. To extend any such order, the authority must apply to the High Court on notice to the licensee for a new order.

Section 63 provides that an investigation may be carried out by the authority on foot of a complaint or on the authority's own initiative. It provides for the appointment of an inspector, or inspectors, to carry out such an investigation and to submit a report to the authority. Section 64 gives inspectors comprehensive powers to enable them to carry out investigations, including powers to enter and search premises, to carry out examinations and inquiries and to conduct an oral hearing. This section also provides that a person who obstructs or impedes an inspector is guilty of an offence.

Where a licensee is summarily convicted of an offence under this section, the court may order that any or all licences held by the licensee be revoked and that the licensee be prohibited, on a permanent or temporary basis, from applying for a licence or a particular type of licence. Where a licensee is convicted on indictment, the court is required to order that all licences be revoked and the person be permanently prohibited from applying for a licence.

Section 65 provides protection for persons, including employees of licensees, who make complaints to the authority. Section 66 sets out the actions to be taken by inspectors and the authority on completion of an investigation and includes provisions to ensure fair procedures are applied. On completion of an investigation, the inspector must submit a report to the authority. Before doing that, a draft of the report must be sent for comment to the licensee, and to the complainant if the investigation arose from a complaint.

After considering an investigation report, the authority may decide to request the inspector to carry out a further investigation, impose a major or minor sanction on the licensee if it is satisfied that improper conduct is occurring or has occurred, or dismiss the complaint and take no further action as appropriate. Before making its decision, the authority may conduct an oral hearing or invite the licensee and complainant, if the investigation arose from a complaint, to make submissions on the investigation report.

A "minor sanction" is defined in section 2 as a reprimand, warning, caution or advice, while a "major sanction" is defined as the suspension or revocation of a licence, payment of up to €50,000 into the compensation fund, payment of up to €50,000 towards the costs of the investigation or payment of a penalty of up to €250,000.

Factors to be taken into account in determining the sanction are set out in section 71 and include the need to ensure that any sanction is appropriate and proportionate to the improper conduct, the seriousness of the improper conduct, any gain made by the licensee as a result of the improper conduct and the amount of any loss suffered or costs incurred as a result of the improper conduct.

Sections 67 to 70 contain detailed provisions dealing with major sanctions. Section 67 provides that a decision by the authority to impose a major sanction will not take effect unless the decision is confirmed by the High Court. Section 68 provides that a licensee may appeal a decision of the authority imposing a major sanction to the High Court. Where the licensee does not appeal the decision, the authority must apply to the High Court under section 69 to have its decision confirmed. Section 70 makes provision for an appeal to the Supreme Court on a point of law.

In addition to a complaints and investigation procedure, an appeals system is also essential. Part 8 provides for the establishment of an independent property services appeal board to hear and determine appeals against specified decisions of the authority. The appeal board will have power to hear appeals against any decision of the authority refusing to issue a licence, declining to investigate a complaint, dismissing a complaint, imposing a minor sanction, refusing to make a grant or relating to the level of a grant out of the compensation fund. Matters relating to the composition of the appeal board and its operations, including the procedure for handling appeals, are set out in Schedule 5.

Part 8 also makes provision for related matters including provision for an appeal to the High Court on any question of law arising from a determination of the appeal board.

Part 9 - sections 75 and 76 - provides for the establishment, administration and maintenance of the property services compensation fund by the authority. The purpose of the fund is to compensate clients of licensees who suffer a financial loss as a result of dishonesty on the part of a licensee or an employee, partner or agent of a licensee in the course of the provision of a property service. Section 76 sets out rules on the payment of compensation out of the fund. Detailed provisions for the administration of the fund are set out in Schedule 6. This part and Schedule 6 are modelled on similar provisions in the Solicitors Acts.

Part 10 empowers the authority to draw up regulations for professional competence schemes for licensees and principal officers of licensees and related matters. Part 11 and Schedule 7 contain provisions governing the provision of property services in the State by persons who hold licences from comparable authorities in other member states. Rights of establishment and freedom to provide services are set out in the European Community treaty. These treaty rights have been elaborated in greater detail more recently in Directive 2006/123 on services in the Internal Market.

A person who has a licence from another member state to provide a particular property service has a right to provide that service here provided he or she is subject to requirements in relation to client accounts similar to those provided for in Part 5 of the Bill. To provide such a property service here, the person does not have to obtain a licence from, or to register with, the authority. Where such a person has his or her authorisation to provide a property service suspended or revoked by a competent authority in another member state, that person will be treated as a person who does not have a licence from the date of revocation or during the period of suspension, as the case may be.

A person who is permitted to provide a property service here on the basis of an authorisation from another member state will be subject to the complaints and investigation procedures, and to the new statutory requirements in relation to letters of engagement, client accounts, and the sale or letting of land.

Part 12, comprising sections 84 to 93, contains miscellaneous provisions. I already indicated that once the Bill comes into force in respect of any category of property service, the provision of that type of property service without a licence will be prohibited. To ensure this prohibition is enforced, the authority's powers of investigation extend to persons who are suspected of providing a property service or claiming to be available to provide such a service, without a licence. This power is set out in section 84 of the Bill. If the authority considers that a person, other than a licensee, is operating without a licence, it is required to report the matter to the Garda Síochána and the Minister. The authority can also seek a High Court injunction requiring the person to cease the activities concerned. In addition, the authority may initiate summary proceedings against the person concerned.

Section 89 deals with offences and it empowers the authority to bring and prosecute summary proceedings for offences under the Act. Sections 90 and 91 empower the authority and the Minister to make regulations implementing detailed provisions in the legislation. Finally, section 93 provides for transitional arrangements to facilitate the transition from the existing licensing system for auctioneers and house agents to the new licensing regime.

The Bill provides for an appropriate and comprehensive new system for regulating the property services sector. I am confident the provisions set out in this Bill will, when enacted, serve to enhance the standing and image of the sector, provide much improved consumer protection for the clients of property services providers and reassure the public that high standards will be applied and maintained.

Before concluding, I want to refer to the work which is already under way in advance of enactment of the Bill. An implementation group has been established and a chief executive designate has been appointed to advise on practical matters relating to the establishment of the new authority and to prepare for the new licensing system. The implementation group and the chief executive designate have been involved in drawing up the basic organisational structures, systems and procedures required by the new authority. In addition, a number of specific interim initiatives have been taken in advance of enactment of the legislation. For example, a code of practice for auctioneers and house agents has been put in place following consultation with representative bodies and other interested parties.

This code sets out certain minimum standards which must be adhered to in the provision of property services and it incorporates a complaints system which enables complaints concerning non-compliance with the code by those providers who have voluntarily signed up to it to be investigated. A database of licensed auctioneers and house agents has been compiled with the help of the Courts Service and the Revenue Commissioners. All licensees have been invited to subscribe to the code of practice and any licensee who agrees to comply with the code has had such compliance published in a public register. This register was first published in November 2007. Work is ongoing in the preparation of a code of practice for property management agents.

A consumer guide on property services, including the purchase and sale of houses and apartments, and the regulation of property services providers is nearing completion. A programme of education and training for the sector is being prepared in consultation with the industry and institutes of technology. This programme is designed to establish the minimum levels of education and training necessary for property services providers.

An interim website has been developed. Preparations are being made for the enhancement of the website to provide a wider range of consumer information as well as enabling some degree of on-line transaction. Work is ongoing on the development of a complaints handling and licensing database for the authority.

I take the opportunity to refer briefly to an issue which, while not directly related to the substance of the Bill, has been very much in the news of late and continues to generate controversy. I refer to upward-only rent reviews and the difficulties which rigid adherence to such reviews is causing for the retail sector in current economic circumstances. I am very conscious that the most acute difficulties are being faced by those who are parties to existing leases where the traditional arrangement which has evolved is that rent reviews take place every five years on an upward-only basis. These arrangements are not mandated by any legislative requirement. Rather, they represent well settled practice in this area and, as is often the case in such matters, it can be more difficult to effect change where practice rather than legislation is at issue.

I have written to key players in the commercial rental sector urging them to take a flexible and pragmatic approach to rent reviews arising in the context of existing contractual arrangements. I have also suggested that, regarding new leases, consideration be given to moving away from traditional practice in this area and that a more creative approach be taken to the drafting of rent review clauses. It is, perhaps, too soon to say if there is any appreciable shift in market practice in terms of recognising the new reality which prevails within the retail sector. The anecdotal evidence is somewhat mixed. However, it is clear that the new trading conditions which are evident within that sector require an innovative response on the part of all players. In that context, I again urge commercial landlords, in particular, to consider what part they can play in offering support to the retail sector bearing in mind that it is not in anyone's interest that vacancy rates increase to an unacceptable level because of a reluctance to offer sensible concessions to traders who are in difficulty.

I am aware that there have been repeated calls for legislative intervention in this area. I have not ruled out the possibility of such intervention but I would caution that the scope in this area may be limited having regard to constitutional and legal considerations. That said, I would welcome submissions which interested parties care to make on the issue of upward-only rent reviews so they can be taken into account in my Department's consideration of the policy issues which surround this matter.

I highly commend the Bill to the House. It is one part of a suite of legislation which the Government has been bringing forward in this area of property services and the issue, which will be dealt with in the multi-unit development Bill, that will be published in the next few days and that deals with the management of apartments and estates.