In a landmark case, Beresford Adams estate agents, part of Countrywide in Wales, have been found guilty of failing to disclose something about a property which could have put buyers off.
The case at Wrexham Magistrates Court, which was heard last month, is believed by the county’s trading standards officers to be a first and one which will set a precedent.
It was brought under the Consumer Protection from Unfair Trading Regulations 2008 – one of the two pieces of legislation replacing the Property Misdescription Act, which is being ditched.
Under guidance from the Office of Fair Trading, agents must not leave out important information. The guidance was issued in light of the Consumer Protection from Unfair Trading Regulations and also the Business Protection from Misleading Marketing Regulations 2008.
The guidance warns that breaches could lead to criminal enforcement action, unlimited fines and up to two years in prison.
Importantly, even if agents are not aware of a particular drawback or material feature, but should have been and fail to disclose it, then the agent could also be culpable.
The case against Beresford Adams was brought by Wrexham Council Trading Standards following receipt of a complaint in 2011 about a house that Beresford Adams was offering in the Rhos area.
The complainant had had an offer accepted on the property but subsequent searches and surveys revealed the presence of a mineshaft very close to the property.
Disappointment turned to anger when it was disclosed that Beresford Adams had been aware of the presence of the mineshaft for some time, having had their attention drawn to it by other potential purchasers who had withdrawn from purchasing when they too discovered about the old mine working.
However, the agents did nothing with this information and allowed the complainant to go ahead and incur the costs of searches and a survey.
Despite a submission from the barrister representing Beresford Adams that an appropriate penalty would be a conditional discharge, Wrexham magistrates imposed a fine of £3,500.
Beresford Adams were also ordered to pay the council costs of £5,000 and to pay the complainant compensation of £515, representing the cost of searches and surveys incurred which would never have been commissioned had the information about the mineshaft been disclosed.
Wrexham Trading Standards said the decision of the magistrates in the case could have far reaching implications for estate agents.
Councillor David Griffiths, lead member for health and social care at the council, said: “This is a welcome decision that supports the view that house buyers should be protected as consumers in just the same way as all other consumers.
“For almost everybody, buying a house is the single biggest financial transaction they will ever make and it is vital that those who are in business selling homes act professionally by not only giving true and accurate information but also by not withholding relevant significant information.”
EAT asked Countrywide to comment on the case, and to say whether it had issued new guidance to its offices as a result.
A spokesperson for Beresford Adams said: “We are committed to providing excellent services to our customers. We have no other comment to make in respect of this matter at this time.”
Currently, the Ombudsman’s Code of Practice states that: “The estate agent must describe the property as accurately as possible and not misrepresent the details.” The Code also refers to the need to make disclosures under the newer legislation.
The issue in this case was that the estate agent did not misrepresent the details of the property but did make a misleading omission, and that is covered by the 2008 Consumer Protection from Unfair Trading Regulations Act.
This is how we ran the guidance from the OFT:
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Comments
Dear Wardy,
Sorry for making assumptions.....never a good idea
Ok so do you think the adoption of the Consumer Protection from Unfair Trading Regulations 2008 law over the PMA is good or bad thing?
I think it is much clearer than the PMA and gives buyers better protection.... i hope it is not abused though.
So what do you think the implications are for
1. Vendors
2. Buyers
3. Traditional EA's
4. On line EA's
5. Intermedairies
6. Any other stakeholder
Cheers Happy Chappy ;)
Ps Are you lawyer of any description and do you have any law qualifications? If so it is nice to hear from an experts perspective if not then, well, nevermind your 2 penneth is as good as anyone elses.
Deal with what exactly Chappy? What implications don't I like?
Your post, an assumption that I have a problem with discloser suits your argument doesn’t it. Nowhere in my post says I have a problem with it. I am merely pointing out that you are talking to people on here that know infinitely more about their jobs than you and a quick 5 minute Google session will ever uncover.
Wardy I understand it perfectly and you just dont like the implications.
I have said before the PMA was pointless as ommision was allowed, now it isn't deal with it!
The average aginy aunt will say, 'if you are doing something that you don't think your wife would like and are hiding it from he, you probably shouldn't be doing it'
Same applies, if you know something and avtively withhold it, it is more than likely you will be asked why. If you are withholding information it is probably because you think the buyer won't like it and therefore on thin ice.
Bad schools ect are not an issue but construction matters, including massive developments ect are, especially when in the course of our job we would be expected to more aware of this than others.
Sight unseen surveys are not an issue for us as it is heresay and we have all had people exaggerate surveys for their won benefit, maybe they should be under the same legislation?
Well thanks for your advice chappy, although I don't remember anyone asking for it. As per usual you have picked up a thread that you don’t understand, run with it and are now proceeding to advise us on it.
Wouldn’t it be lovely if everything was black and white like it is in chappies world. A world where mine shafts, council estates, telephone exchanges and pylons are all the same thing.
Ironic that the person who is in most support of FSBO sites is the same person who is here telling us to disclose mine shafts.
All we know from the scenario
Information that was available to EA but was not disclosed to potential buyer
This information was discovered by potential buyer after survey
Buyer pulled out
EA gets sued
So my advice is if you know it.... disclose it
So as the headline states this case creates a precedent!
Hmmmnn how long is it before somone sues after the sale has been made in this litigation culture we live in
Mr Lester
Exactly.
So - we concur, then.
Where does that leave us with your first comment, "Rebel, you are obliged to bring to a potential buyer's attention any fact or circumstance which might affect his decision to enter into a transaction."
There's that "might" again. It equally "might not" affect his decision.
Can't convict on a "might", remember? ;o)
Dear Peebee,
No lawyer would ever guarantee what would or would not be the outcome of a tribunal opining on compliance with such a nebulous piece of legislation, hence the word "might".
Of course it is only my view, hence the use of the words "in my view".
Mr Lester -
"In the given scenario regarding the mineshaft made safe, it might still be information material to the consumer's decision and in my view should therefore be disclosed."
With respect, Sir, the word MIGHT is a highly dubious choice in this respect. In Law, it either IS or it ISN'T. You can't be convicted on a "might" - but you can be freed on one...
Similarly, the words "in my view" mean nothing. You are entitled to your view - your view may well be correct (and at some point no doubt it will be legally tested...) - but a view it is.
The whole point of this aspect of the CPRs is to ensure that the "consumer" is provided with information which is (or should be) within the "trader's" knowledge (and not within that of the consumer) to enable the consumer to make an informed decision about whether to enter into a transaction (and the word "transaction" is widely defined so would include a decision to proceed with a survey or instruct solicitors etc).
In the given scenario regarding the mineshaft made safe, it might still be information material to the consumer's decision and in my view should therefore be disclosed. To put it another way, if knowledge of the mineshaft is not likely to affect the buyer's decision to proceed, then why worry about disclosing it?
Hi Peebee
Nope I could not tell this either but i would imagine that if the buyer pulled out it was probably not made safe, but even if it was under the new laws it would seem being an EA now carries more risks.
Happy Chappy -
"In your example the mineshaft has been deemed capped and safe when the houses were built.
When these houses were sold they were probably adhering to the PMA which allows for non disclosure"
Try as I may, I cannot find any information that this was not the case with the mine shaft that is the subject of the story.
Perhaps someone who knows would enlighten us.
Was the shaft safe... or not?
In your example the mineshaft has been deemed capped and safe when the houses were built.
When these houses were sold they were probably adhering to the PMA which allows for non disclosure
However, with the repeal of the PMA iminent and with this landmark case, if you are aware of the mineshaft etc you should dislose it, If you do not any buyer could cite this as reason for pulling out, and you could be sued the same applies to private sellers)
If you think its worth the risk dont disclose it but IMO this would make you appear less professional.
Happy; The builders sold all their houses without mention of mine workings in their sales literature. Many of those houses have subsequently been resold. I've seen no mention of the mine workings in any resales material for any of them, apart from the one with the capped mineshaft in the garden. Unlike the case cited in the article, I'm aware of the mineworkings, but it appears obvious to me that they haven't been an issue for previous buyers, and I've known no sales to fall through because of them; indeed, all of the houses are currently occupied. Why should I mention them if they haven't been an issue for all the currrent owners?
W - because that is what you are required to do when you act as an agent. As an agent you assume legal reponsibility for aderance to laws, a direct seller takes on that risk themselves.
I know of one site where an old mineshaft is in the back garden of one of the properties. The whole area had to be stabilised by the builder before building. There's documentation on the council's planning portal of geology reports, ground engineer's reports, contractor's reports etc on how they filled the mine workings with concrete, etc.... with all this already in the public domain, why does it fall on the selling agent to make the general public aware of what's underneath or near the house for sale?
@ Anonymous Coward
Our TS people are realists and when we met following the CPRs coming in they took the view, as under PMA, that it depends on whether there was anything to put you on notice that the boundary fence may be in the wrong position and neighbouring boundaries didn't suggest an issue.
Also, you are entitled to rely on the information provided by the builder (something you can't do with an individual seller).
The other test if you did suspect something was wrong would be how you could check. That would mean you intepreting Land Registry title docs which is a conveyancers job (not yours), again a point TS acknowledge.
In this case, you did your job, the conveyancer did his.
Sorry I hope that made sense typing training required here!
"The large portals need to ensure that FSBO ads don't appear via FSBO operatives." Why?
"If understood - then the legislation creates a clear divide between poor grade cheap agents and professional agents". Wrong, it divides a clear divide between a type of service not the level of service.
"If a private seller cocks up, they can be sued by the buyer under contract law" which is exactly why they should be allowed on the portals. his will do away with the need for FSBO operatives.
I can't believe you are so scared of a private site, come on are you that bad at your job!?
There had to be a first example case and others will follow.
Ive had extensive talks with the OFT and TS. If policed it should give the industry a better name. The Private sales sites have more to watch out for as legislation basically stops them giving ANY advice or assistance other than providing a FS Board and a place for FSBO's to put their home on the web.
The large portals need to ensure that FSBO ads don't appear via FSBO operatives.
If understood - then the legislation creates a clear divide between poor grade cheap agents and professional agents.
The biggest change is ''OMISSIONS'' compared to PMA.
So as it stands the TESCO's of this world may have mortgages available, but would cross the line should they offer the service (or conveyance, home insurance etc) to private sellers or their respective buyers.
If a TESCO FSBO client had property errors and TESCO or any other supermarket or like offered other services they would be open to PMA.
If a private seller cocks up, they can be sued by the buyer under contract law.
"In a landmark case... in Wales... subsequent searches and surveys revealed the presence of a mineshaft very close to the property."
Erm... sorry - but couldn't you say that about pretty much EVERY house in Wales?
... or Yorkshire... North East England... parts of the Midlands... the list goes on.
Question is - was the house likely to COLLAPSE INTO the mineshaft?
I reckon not.
Dave, thats not you, even you are not THAT stupid!
Vince Cable, correct well done!
This would not happen in Japan!
Caveat emptor?
Sorry, English failure there
That should read:
why I hadn't told him.
I've just completed on 3 new build sales, where, right at the last minute on the third exchange, it was discovered that the garden was not part of the original title, but would come under the realms of possessory title as it had been enclosed for well over 30 years.
Two completely separate solicitors had allowed exchange and completion on the first 2 houses.
Only a finicky stick in the mud solicitor who has been a thorn in my side for years noticed it.
Quite rightly too.
Buyer number three started throwing expletives round, asking why told him.
The honest answer was because we didn't check.
After all, why should we? The rear fences for 10 houses on either side are all in a straight line (they also have the same problem it would appear).
The land was bought by a developer who got planning consent to build new houses - so his professionals (solicitors, surveyors, architects, etcetera) should have picked it up.
I am hoping that it would not be deemed "reasonable" to expect an estate agent to investigate this, but am scared that it might.
In the end we got a statutory declaration from the previous land owner to say that the fences were in place before she bought the house in 1972 and got an insurance policy.
The third buyer went on to buy it too, which was quite cool!
@Chris
That's a point I've been concerned about from the start and raised with the OFT when I was at their workshop on their guidance to agents which came out recently.
What if the buyer uses the survey as an excuse? Would you really want to disclose without evidence? And how many buyers will even let you see the report?
Without that, it's hearsay and if the buyer had, perish the thought, exaggerated the issue and you are discouraging other potential buyers as a result, next you'll have the seller with a possible claim against you for not acting in their best interests.
To give you an example of how scary (an apt choice of phrase) this disclosure element can be, our lettings side had a tenant who withdrew because when researching online the area and development they had agreed to rent, the property came up as being haunted. I kid you not.
When I looked into it, the comments were from previous tenants who just happened to have a paranormal corporate entertaining business!
I did have a chat with our friendly trading standards officer but after he stopped laughing, he made a valid point. If we DID disclose it, somebody then rented it for that reason and they didn't get the rattling of chains and the sound of heavy footsteps across the floor, they could come after us for misleading them too!!
Maybe they should have put the house on a private sale website and not been held accountable?
What would you like to have been told, or expected to have been told, if you had been interested in buying this property?
Well said Dave,
This really does open up an interesting scenario regardibng surveys. If a purchaser back out due to an adverse survey then case law now dictates that the agent must advise any future potential purchaser of the reasons a previous buyer backed out. In the case of a survey that clear but what if they did not like the proximity of a railway or a school playground? that could be subjective.
We undertook training of our front lines sales and lettings teams (remember that unlike PMA, it applies to lettings as well as sales) as soon as the CPRs came in.
The difference is that unlike other businesses, we don't own the product we're selling (look up the definition of 'agent'), something which Government and bodies such as the OFT fail to grasp.
The difficulty comes with material information the agent isn't aware of because that's no defence. Defining what you should reasonably be expected to know is a real challenge.
In one of our branch areas, there are some roads where about two thirds of the garden length is not within the title, it's still owned by the railway from when they acquired the land over a century ago and rented at a peppercorn rent.
We know that because we've been there a long while but the other agents, especially the corporates?
We have a 'material defects' element in our agency agreement but I really don't understand why Government has never put at least some of the responsibility on the person most likely to know of such issues but least likely to disclose, ie the homeowner. Corporate sellers such as builders are included but why not all?
It's certainly something the public need to be aware of when buying privately.
I'd be interested as to the responsibilities of the online 'agents' that are shortly to be outside the EAA etc in this respect too. If they have no responsibility to establish and disclose, then again the public need to be aware of that when dealing with them.
Come on Dan/Rebel does this really need to be explained to you?
Please stop trying to defend this, they got caught- end of!
OUTRAGEOUS!!!!!!!! £515 for survey AND searches!?!?!?!
I'm a 1 branch independent & am aware of this Act ... so I ask the Q as part of my take-on & have it as a para in my contract, signed off by the vendors. Won't fix every complaint.
Re Countrywide ... a local branch took over a house from us after a 1 yr gap. I told the mgr that a sale I had agreed had fallen as the vendor had not disclosed it was of non-trad construction but had been well hidden by DIY work. Even when I provided evidence in writing the mgr did not care & ploughed on with the sale without amending the details ..... I'd like to think they at least told everyone on booking the viewing ! The mgr did consult with vendor, who whilst he had at the time of my sale accused me of being incompetent in not noticing it (nor had Countrywide) the instruction of client was to say nothing as it wasn't very obvious.
The Ombudsman's Code of Practice also states:
"The Consumer Protection from Unfair Trading Regulations 2008 require you to disclose
any information of which you are aware in relation to the property in a clear, intelligible and timely fashion."
This legislation is not new and I'm only surprised it's taken so long for a case to come to court.
Rebel, you are obliged to bring to a potential buyer's attention any fact or circumstance which might affect his decision to enter into a transaction.
There you are then - proof positive that HIPS was a good idea. Such a shame that it was watered down and destroyed by opposition from within as well as other related professions.
This report doesn't state if the mine shaft is located within the land of the property. If so then clearly it should have been mentioned but if not, then why should it be? Sales Particulars do not list negatives as we are trying to sell properties for the vendors who pay our wages, not to put purchasers off. Although with this in mind, if it was causing previous concern, they should have been honest.
Typical corporate agency and typical cover up. Hiring a QC to defend non disclosure? Typical. Reputation now ruined because of what is in effect dishonesty.
That information would have been revealed in a HIP
So are we supposed to list everything wrong with a property?
The neighbour's a drug dealer?
The gutters leak?
The local schools are crap?
The "large" family next door are building a 8m ground floor extension?
The agent got what they deserved. Lucky it was just a fine. A bit like trying to sell a car, knowing it has faulty brakes. What will happen when 'passive agents' enter the marketplce. Will they or their vendors be held accountable, as with above?