Agents should err on the side of caution when describing a property, the Ombudsman is advising.
Christopher Hamer also warned that agents cannot rely on disclaimers to avoid their responsibilities under the Consumer Protection from Unfair Trading Regulations 2008 (CPRs).
It is these regulations which have led to the Government’s decision to scrap the Property Misdescriptions Act next year.
But Property Ombudsman Hamer, writing exclusively for EAT, says that the application of the newer regulations is ‘not an easy matter’.
He says: “The nature of those regulations is that they do not specify precisely how the legislation applies in individual scenarios, rather it is left open to interpretation by the agent.
“Agents should err on the side of caution by openly describing all aspects of the property, assessing whether there is anything that puts them on notice that a particular aspect needs further consideration or examination.
“Agents cannot rely on disclaimers to avoid their responsibilities under the regulations.”
Hamer says that agents must bear in mind: “The impact their act or omission in describing a property would have on an average consumer and in particular their financial behaviour.”
Currently, just one agent, part of the Countrywide group in Wales, has been prosecuted by Trading Standards under CPRs, for omitting to tell a prospective purchaser about the existence of a mine shaft.
Clearly, it will take some time for more case law to filter through, and the Ombudsman himself will be taking into account the new regulations. He plans to build up a bank of precedents to feed back to the industry.
EAT presented him with a series of 15 possible scenarios where an agent might have a duty to disclose a particular aspect of a property – whether one for sale or let – even if the agent is initially unaware of it.
In the article below, Hamer answers each one of our scenarios, and also gives his views about the shift in law.
Two things to note: this is advice from the Ombudsman but it is not legal advice. Agents should always take their own legal advice, specific to the circumstances. Secondly, the article is by necessity long, although we think it will make for an excellent training and/or discussion session.
It really is essential reading.
Comments
"...nobody is going to get a suitable number of instructions with an up front charge as the corporates will not do this. They drive fees down and not up and in doing so will cripple any rival."
Hawkeye - you MAY be right about the corporates resisting such an initiative - but you just as possibly MAY be wrong!
Corporate Estate Agents need income to survive just as you do. They get their income from the same sources as you do - vendors; purchasers; landlords; and tenants. Without these income sources, the corporate stakeholders would not support the businesses as they now do. We've seen many walk away - and many more would do it now if the income stream dries up, no doubt.
Interestingly, I see a different picture to you in relation to Fees, Sir. Here 'oop North, the corporates and corporatesque independents seem to drive fees up, and the smaller independents offer clients their services for beer money.
I call that suicide - slow, painful - and totally unneccesary in my opinion (unless of course 'cheap' is followed by '...and nasty' in which case it is all they can hope to earn).
" There is a large number of tight fisted dipstick vendors who do not even want to pay for the EPC let alone a portion of up front fees."
Maybe so - but if EVERY Agent made a Marketing charge then they have no alternative. I don't know you (as far as I am aware...) but I get the feeling from your posts that you've been on the block a while. I stumbled into Agency in 1992 from another property-related field, and NSNF was in full swing. The Cortporate I worked for preferred to work on a withdrawal fee basis - and I had no problem with that whatsoever. In fact, I raised it by 50%! I also raised my Fee structure to be the highest in the town - I was a full one percent higher than one of my 'competitors' - which on an average sale price of £55000 at the time was a canny chunk of money 'more' for my clients to pay than ElCheapo & Co down the road were offering to charge.
But - pay they did. And why? Because they got results.
Forgive me if I overshoot with your age/experience - but if you (or any other reader/contributor - Ray Evans, Trevor Kent etc...) are able to recount the days pre-NSNF, and how it affected the business and them personally, I would be most interested to hear. I think that it is of great relevance to what we are now discussing.
You KNOW that you are better than your post portrays you. I'm even inclined to ignore the profanity within, as it's not your usual style and I believe that passion got in the way of reason in that last post of yours.
It's that passion that makes you a good Agent.
The world is changing, mon ami. Agents have the ability here to change it to suit THEMSELVES, just as much as the customers - as I firmly believe that Agents doing a better job outweighs an additional cost element for their client. In fact, a better job done will in many instances pay for itself and more.
Over to you and the wider audience, Sir. No doubt I'll be treated to a rough ride on this one from some folks - but as always I'm happy to engage ...! ;o)
Hawkeye your post says a lot about you
EA's have enjoyed increasing profit margins due to the massive appreciation in house prices over the last decade +
With EA's being unable to hide behind the very weak PMA it has unmasked the poor practises and shoddy due diligence of some.
The "Waster in wales" or client as a professional would call him did give the right information but the old rule of "If in doubt say nowt" no longer suffices it should now be "if in doubt spill it out". Caveat Emptor is dead
All EA's now must do the job properly in line with the CPR (as you should already have been doing) so how can you justify increasing your fee. It is not a new piece of legislation its been in place since 2008.
Good EA's will not worry they will continue to act professionally in the interests of their clients but within the business laws of the land.
Increase your fees and you may lose business to your better informed, trained, educated and competitive rivals who provide an excellent service to clients at a better price.
PeeBee, nobody is going to get a suitable number of instructions with an up front charge as the corporates will not do this. They drive fees down and not up and in doing so will cripple any rival. There is a large number of tight fisted dipstick vendors who do not even want to pay for the EPC let alone a portion of up front fees. I can't even get a decent probate fee as the local twats here do it for free.
I agree the due dilligance bit but a decent fee has got to be charged to deal with this onslaught of fact finding. There is no guarantee that the vendors will be any different from the waster in Wales who insisted the information he gave was correct and the agent has gone through the mill. Will the idiot vendor pay the agents fine and legal costs?
If this kind of legislation hits the fan then we need to be looking at the rates US agents get paid i.e. 6%
"Which then means the lower cost but upfront charge agents have a more sensible business model that is more likely to survive long term."
WHY, AC?
Why can't the 'upfront charge' business model simply be incorporated into your 'standard' percentage fee? Same income outcome - but with an upfront proportion paid on instruction. A retainer, for want of a better word; deducted from the eventual Sale Fee.
Or... am I missing something?
Has it passed through Parliament yet? If not, write to your MP
See the comments on the next article aswell.
The whole industry needs to petition to sort out this mess. It is a ridiculous state of affairs.
@Binky - it would appear that you are right.
The world of estate agency is changing way faster than most of us poor stupid stick-in-the-muds are able to cope with.
The problem that we face is our no-sale, no fee business model.
I actually think proper investigation and full disclosure has always been the job of the estate agent. The solicitor needs to check it all, sure, but surely it is madness to offer on something when you only know a time amount about it.
The reason that we don't do proper investigation is (in part) because we can't and/ or won't because we have chased our own fees down and down is entirely our fault.
Once again, I would suggest that proper licensing with industry body minimum standards (such as copies of land registry info on file, etc) which then implies a fixed minimum cost would be a good idea.
I absolutely LOVED the HIP - it got rid of the time-wasters (both buyers and sellers).
And, if you think about it, this is the HIP by another route, except instead of forcing the owner to pay for it in one go, this will force agents into ever greater due diligence under the current "no sale, no fee" business model - which is unsustainable.
Which then means the lower cost but upfront charge agents have a more sensible business model that is more likely to survive long term.
Weird how things work out, isn't it...
The world's going mad. Doesn't this now place the LIABILITY on agents to verify and disclose ALL information? Isn't that what the solicitors do? The PM Act was actually quite a good piece of legislation. It didn't exist for agents to sex up their details with false information - but it was there on the rare occasion to protect an agent who had been provided with incorrect information by her/his client (who may also be unaware of the accuracy of the information). With recent case law and PM Act on its way out, the buck WILL stop at the agent's desk!