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Speak up! Why estate agents must not keep quiet on property problemsWhile focusing on the desirable features of a property may help to secure a sale, what isn't always clear is that estate agents are also required to disclose to potential buyers any material problems or drawbacks affecting any of the houses on their books.

In reality of course, this means that the age old concept of caveat emptor or buyer beware is now virtually redundant. The repeal of The Property Misdescription Act last October, along with the recent inclusion of property sales within the Consumer Protection from Unfair Trading regulations, marks a significant departure from the traditional norms of house selling - and one which estate agents need to be aware and fully appreciative of.

These changes combine to ensure that the emphasis is now on vendors and estate agents to proactively inform potential buyers of any negative, as well as positive features, of the properties they are selling.

In essence, estate agents are required to notify potential buyers of any 'material information' that could cause a buyer to take a 'transactional decision he would not have taken otherwise'. In clear English, this simply means that estate agents must provide any and all information that could influence a potential buyer's decision as to a property, which could include the making of an offer.

In particular, estate agents must now notify potential buyers of any inherent structural defects, or if a sale has previously fallen through because of a poor or failed survey. The requirement is also likely to include the disclosure of neighbour disputes, even if these are relatively minor or amount to day to day annoyances.

Responsibility to disclose such information still also falls to vendors of course. However, if the seller notifies the estate agent of any structural issues, previous failed surveys or other factors that could impact the value of the property, then the estate agent is bound to notify potential buyers. If the agent withholds this information and it is discovered by the purchaser following completion, they could face legal action, resulting in possible criminal charges, a fine of up to £5000 and/or up to two years in prison. Notification can include verbal or written comments, plans, 3D plans and virtual or printed particulars.

So why have these changes come about The government recently recognised that house buyers needed greater protection, and set out about implementing the changes outlined above, as well as creating the Competition & Markets Authority (CMA); a new independent regulatory body arising out of the merger of the Competition Commission with consumer protection elements of the Office of Fair Trading (OFT). Now, the CMA and Trading Standards Institute have joint responsibility for enforcing the consumer protection regulations governing house sales.

So what does this mean in practice for estate agents In essence, agents will need to ensure that they have internal processes in place to comply with their disclosure requirements, and provide full staff training. They will need to undertake their own due diligence to ensure their particulars of sale are accurate, and should ask vendors to review and approve these in writing before publication and distribution.

They should also ensure that their complaints procedure is up to date, and that all employees understand it.

It will be extremely important to maintain clear records of any defects or issues a seller has mentioned, or that have become clear as a result of observations and research. In addition, and most importantly, agents should keep detailed records of when and how potential purchasers were notified of relevant issues and their responses. At the very least, agents should read the Property Ombudsman's new code of practice to see what is expected of them.

In reality, reputable estate agents who already operate in a fair and transparent manner should not have anything to worry about. However, as always, it is advisable to have recorded clear and enforceable processes in place in case an issue of this nature arises in the future.

*Joanna Norris is a Partner at Ratio Law, specialising in property, landlord and tenant law


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