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Home sale free-for-all!

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Changes to laws governing estate agency in Britain could see some homebuyers with no more protection than if they were buying a car in a private deal. The Government, which is not prepared to make any attempt to change the Estate Agents Act to protect landlords and tenants, is now moving with unfamiliar speed to remove protection from homebuyers. Under law changes  proposed by the Department for Business, Innovation and Skills, intermediary websites that advertise properties for private sellers – and can offer ‘For Sale’ boards making them look like genuine estate agents – would be exempt from the provisions of the Estate Agents Act 1979.

Homebuyers will face greater risk, it will make buying a house through an ‘intermediary’ like buying a car privately –insecure. Chris Hamer, The Property Ombudsman.

Christopher Hamer

Chris Hamer

In effect, homebuyers would be entering into an entirely private arrangement with the seller, introduced by a website that would not be able to offer any type of help or advice with marketing or negotiations in order to remain within the constraints of the new rules. Just like a purchase of a second hand car on a private basis, there is the possibility that the buyer could be led to believe what they are buying is in a certain condition only to find out that significant work is needed.

Simultaneously, the Government also plans to repeal the Property Misdescriptions Act (PMA) that forces estate agents to ensure promotional material they use accurately describes property for sale. Instead, the Government intends they should be covered by the Consumer Protection from Unfair Trading Regulations (CPRs), which are intended more to apply to general retail sales.

Intermediary websites will be exempt from the PMA until it is repealed, probably next October. Adherence to the CPRs will only be proportionate to the level of service that intermediary websites offer which, in effect, mean that the CPRs will offer little protection to the consumer. We believe consumers will have difficulty  understanding some of the businesses they deal with, little realising that they have no comeback against these intermediary websites should things go wrong.

The changes to the EAA mean that intermediary websites are outside it and will not have to offer any redress through one of the two approved Ombudsman schemes that all agents have been compelled to join since the Consumers, Estate Agents and Redress Act came into force in October, 2008. I am also unclear as to how the intermediary business will be policed and how the possibility of such businesses crossing the line into full estate agency will be monitored.

I am surprised that the Government has taken such steps. I, along with many other organisations, expressed a strong view that any changes to the EAA should bring about a tougher regime by way of the obligations placed on letting agents. The current economic climate has seen, and will see, more consumers moving into the private rented sector where significant amounts of money are being passed over.

Despite strong evidence that consumers are at risk, the Government has claimed that regulation is not a priority.

The consultation by BIS closed on August 10 and detailed changes to the legislation were announced in little more than a month, on September 13. Both I and Gerry Fitzjohn, deputy chairman, made submissions to BIS highlighting potential detriment for consumers in the proposed legislative changes.

Mr Fitzjohn said the Government’s aim was stated as opening up estate agency to more competition and to make it easier for businesses to enter the arena.

“With 14,000 estate agencies already in existence, according to Government figures, there was little apparent difficulty in entering the industry already. These changes do nothing to enhance the experience for consumers, who will have difficulty understanding whether they are dealing with an estate agency covered by the demands for redress or an intermediary website that is outside the scope of every regulation.”

the-property-ombudsmanHe went on, “It may be a winning solution for people who want easy entry to the property sales arena but it’s a backward step because it puts every consumer potentially at much greater risk through lack of advice and the inability to seek free-of-cost redress via The Property Ombudsman when things go wrong, as I believe they inevitably will.”

The complete response from Christopher Hamer is downloadable from: www.tpos.co.uk

toy-houseThe Department for Business Innovation and Skills (BIS) announced the removal of ‘passive intermediaries’ on the same day the Office of Fair Trading (OFT) issued new guidance on property sales and compliance with consumer and business protection legislation. These announcements have far reaching implications for the industry, but they lack a coordinated approach between the Government departments.

Considered in isolation, the new OFT guidance accurately reflects the realities of the UK residential property market, following feedback from RICS members and other industry stakeholders. It provides clarity for estate agents on how to comply with consumer and business protection legislation and ensures consumers understand their rights and responsibilities when buying and selling a home.

However, the potential benefits of the OFT’s guidance thrown into doubt by BIS’ amendments to the 1979 Act. The term ‘passive intermediary’ refers broadly to businesses that do not handle the sale of property but simply publish adverts or information supplied by third parties. The specific removal of passive intermediaries from the 1979 Act has created some confusion about how they need to comply with consumer and business protection legislation. Whilst the aim of the amendment to the 1979 Act was a reduction in red tape by simplification of existing legislation, this part of the residential property sector is now left without clear regulation or guidance.

These recent changes to the 1979 Act are causing unintended confusion in relation to the new OFT guidance which has potentially far wider ramifications for consumers. We are concerned that homebuyers and sellers will find it harder to distinguish between ‘passive intermediaries’ and traditional estate agents. Consumers could, perhaps unknowingly, be left responsible for undertaking their own detailed sale negotiations without the advice and guidance of a property professional. This could lead to delays, increased costs and even sales falling through, causing frustration and stress for all involved.

Furthermore, these ‘passive intermediaries’ do not offer the regulation and protection of traditional estate agents, leaving the consumer vulnerable to rogue operators.

We would like to have seen a tighter definition of ‘estate agency work’ in the 1979 Act to avoid high risk activities taken out of the scope unintentionally. In addition, we are calling for further specific consumer and business protection guidance to be published for passive intermediaries on how they need to comply with the consumer and business protection legislation, and for this further guidance to be enforced by Trading Standards for passive intermediaries. This will help to ensure a clear message is issued to the industry on government regulatory reform of the residential sector and keep consumers protected.

We also continue our call for the Estate Agents Act 1979 to be extended to all lettings agents. This will ensure a single regulatory framework for the industry, subject to a clear redress system, helping to prevent consumer harm and create clarify for businesses.

“Passive intermediaries do not offer the regulation and protection of traditional estate agents, leaving the consumer vulnerable to rogue operators. Peter Bolton King, Global Residential Director at RICS .

Peter Bolton King of RICS

Peter Bolton King

To support industry in understanding the guidance and regulatory changes, RICS has published its own technical advice to its members in residential agency to help them understand the OFT’s recently published guidance and ensure they are complying with the law. This advice is also publicly available on the RICS website.rics_home_sale_regulations

RICS will be hosting a series of half-day seminars around the country in the next few weeks. RICS members can register to join the web class at: https://training.rics.org/file.php/55/new_portal/webclass_portal_class27.html

Download the RICS technical advice at: http://www.rics.org/Global/info_alert_compliance_spr_bpr_timwainwright_140912_asn.pdf

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