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Referral fee ban considered as part of house buying reform

The civil servant leading work to reform the house buying has revealed key areas of government thinking - with a ban on referral fees being considered.

Matt Prior, from the Ministry of Housing, Communities and Local Government, told agents at the annual conference of The Guild of Property Professionals that politicians and officials are working on a raft of areas for radical change.

Prior explained that government thinking was that the house buying process was broken, but not in need of an “immediate fix”. After all, he said, some one million households a year - often inexperienced at buying and selling - successfully negotiate transactions annually.


But to agreement from the audience he said that “very few people embark on the process with any happiness” and suggested that there was concern at how long the process would take - an average of 19 weeks (longer if a property is leasehold).

Underpinning the government’s desire for change, he says, is the key assumption that “we will make the process cheaper and reduce stress if we can shorten the time and increase the commitment between [transacting] parties.”

Areas under review by the government to achieve this end include:

Referral Fees: in response to the Call for Evidence issued by the government ion the reform of the house buying process some 77 per cent of members of the public who responded wanted action on this.

The government is committed to transparency and measures under consideration range from banning to restricting such fees. “Expect an announcement shortly” Prior told agents.  


Reservation Agreements: Prior told Guild conference attendees that there was considerable momentum on obliging buyers to “have some financial skin in the game” in a bid to reduce the proportion of fall-throughs. 

MHCLG figures suggest that 25 to 33 per cent of transactions fall through, costing an estimated £270m per year. “It doesn’t feel the system’s right” when that scale of fall-through is the norm, Prior explained: he says a trail reservation agreement process has been agreed with the Law Society and may be tested in a part of the market in future.


‘Log Books’: Prior was at pains to stress that there was no intention to reintroduce a version of Home Information Packs which had been widely criticised by agents and others in the property industry. 

But he said it was clearly wasteful that substantial sums were spent gathering a wide range of useful information on a home during the sales process, only for it to be effectively thrown away and compiled again at additional cost by others attempting to purchase the same home. Some form of log book would be useful, he insisted.

E-conveyancing: The audience of some 400 agents heard that this was a difficult area because there were 4,100 conveyancers operating individuals or as companies, at very different levels of technology.\

Work is underway now looking bat ID verification procedures, digital signatures and other PropTech to help the conveyancing element of house moving operate more cheaply and more transparently.


‘How To Buy’: As has already been revealed by the MHCLG, there are plans to build an online guide to prospective house buyers, along the lines of the ‘How To Rent’ guide for tenants that has become a mandatory part of the new tenancy process.

Prior says this would give useful questions for prospective purchasers to ask agents, developers, auction houses or others selling property. The first version of this document is likely to appear later in 2019. 


Prior, who also spoke on a conference panel of industry experts chaired by Estate Agent Today editor Graham Norwood, suggested that the scale of reform and the different procedures required by different stakeholders was such that individual measures may be announced separately, starting this year, rather than in one ‘big bang’ change.

  • Rob Hailstone

    More transparency is needed re referral fees (a client needs to know if their £800.00 is going to their conveyancer or if a high percentage of it is going to the introducer). However, a complete ban would only drive referral fees underground. I recall seeing many a brown paper bag be handed under tables in various waterholes back in the late 70s and early 80s! Not with my fingerprints on I hasten to add!

    We definitely need to look at and trial Reservation Agreements and Property Logbooks, but let's not forget the compilation and provision of up-front information was, and is, the easiest and best way to begin to Improve the Home Buying and Selling Process!

    Nick Richards

    We launched our Reservation Agreement service in October, and have had a great response from innovative agents, but one of the biggest hurdles we face is getting some agents to embrace a new idea , typically we hear "but we've always done it that way". Whilst the government and homeowners might want change, it seems unless they make it mandatory then some agents won't embrace the majority of improvements out there.

  • James Robinson

    Beware! Westminster uses "Broken" or "Crisis" to describe anything it wants to raise taxes on.

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    It is also time for the government to look at the way property searches bundles are marked up sometimes by 100% in order to provide a further kick-back to the estate agent introducer - they seem to want to draw a veil over that at the moment but it is should be subject to exactly the same scrutiny if transparency is genuinely the object of the game here!

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    • J C
    • 18 January 2019 09:49 AM

    Will they be banning the local Funeral Director from referring a florist or the local wedding venue from referring a caterer? Why are the government so anti-business and anti-agency? (probably because they are London-centric and agents in the city have been taking the p*ss). I work tirelessly for modest returns; if they keep on at this rate I may choose to close and make seven people redundant.

    James Robinson

    Not fair J C, not fair at all. Most prosecutions and accusations of sharp practices are levelled at agencies operating outside central London. We have offices in Notting Hill, Bayswater and South Kensington and we have never taken referral fees from conveyancers, mortgage brokers or surveyors.
    We actually promote the fact that we don't.

    However I do think you are correct about the large corporate and PLC firms but they are national/international. As in all things there are the good and the bad but rest assured there are still some small independent firms competing and succeeding against those types of operations.

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    One of the major problems with our converancing system is the ability of buyers and vendors to go right up to the wire and then pull out. We should have a system similar to the French. A buyer signs a preliminary contract which may have certain provisos (survey for example). Pay a deposit (10% perhaps). After a 'cooling off' period of say 2 weeks, the contract becomes a legally binding contract. If the buyer pulls out he / she loses the deposit, and if the vendor pulls out the deposit has to be repaid, plus a similar amount. Of course, the buyer would have to have his / her finances in order before proceeding with the purchase. No incentive for either party to renage on the deal. I believe the Scots have a similar syatem.
    William Pearson

    Nick Richards

    Hi William - I don't know if I'm allowed to 'plug' my company, but if you are interested in knowing more about our service which handles reservation agreements with a deposit then please email me - office@propertypledge.co.uk

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  • Rob Bryer

    In other news MP's are looking at banning supermarkets from putting a mark up on their products just in case they make a profit.

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    I think the government need to get their own house in order and deal with the current job in hand rather than planning for any other changes and reforms!

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    Whilst referral fees and the conflict of interest they create should be stopped, I doubt this Government, with the mess they have made of Brexit, will be in a position to do anything to improve the mess in the conveyancing market any time soon. Unfortunately the Law Society lost control years ago and that horse has long since bolted to the Wild West.


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