The Property Ombudsman’s office has defended a change to its code of practice which, according to a national newspaper, means agents in England and Wales can ask purchasers for £1,000 deposits to indicate the seriousness of their intent to buy.
The Guardian says that accepting pre-contract deposits is banned for agents in Scotland, and while not illegal in England and Wales it was - until recently - in contravention of TPO’s code of conduct.
The Guardian on Saturday stated: “Until recently the code, which covers 95% of sales agents, told firms unequivocally that ‘you should not take pre-contract deposits’” although this did not apply to new-builds. But it says this was changed late last year and deposits are now acceptable in certain circumstances.
The paper says it has been contacted “by a number of angry would-be homebuyers who handed over cash to an estate agent and are now battling to get it back” and cites a case study of a couple allegedly in dispute with East London estate agency Property Link over what they consider to be a deposit and what the agency describes as a non-refundable reservation fee.
The newspaper also refers to two other cases apparently involving deposits.
Estate Agent Today has asked The Property Ombudsman for any comments in addition to those included in The Guardian piece, which says: “Katrine Sporle, the ombudsman, acknowledges that prior to last October the code only allowed agents to accept a so-called ‘pre-contract deposit’ from a buyer if it was a new-build home sale.
"The rationale, she says, was ‘to prevent unscrupulous agents from simply demanding monies from buyers for, say, removing a house from the market’. However, she says the code must adapt to market conditions, adding: ‘Where there are more buyers than properties, there is a heightened risk of gazumping, more failed transactions and more buyers left significantly out of pocket.’”
The piece goes on to state that TPO says that, if undertaken properly, a pre-contract deposit “has the potential to give a buyer and a seller the confidence that the transaction is likely to complete – the potential for gazumping is significantly reduced, as is the risk of last-minute price negotiations”.
It concludes by quoting Sporle saying she still recommends that agents should avoid the practice although “it was considered prudent to set out what steps they must take when they did receive an instruction from a seller to collect a deposit from a buyer”.
You can see the full Guardian piece here.