Estate agents have been warned that if new guidance over referral fees is not taken seriously, they could be faced with an outright ban.
The warning comes from Mark Hayward, chief executive of NAEA Propertymark, who says he and his organisation are both “hugely supportive” of new guidance which has been produced by the National Trading Standards Estate Agency Team.
Hayward says it’s an opportunity for the industry to improve transparency and provide greater clarity for consumers at a time when markets across all regions need support to boost consumer confidence.
“We’ve long called for guidance which is easy for both agents and consumers to understand and comply with. Buying a home is no mean feat and it’s probably the most expensive type of transaction we engage in – so transparent and fair fees are essential. It’s therefore important all agents take the time to understand the guidance and ensure they are compliant” he says.
And he goes on to warn: “NTSEAT has given the industry an olive branch. Rather than an outright ban, we’ve been given the opportunity to improve the practice of charging referral fees by increasing transparency.
“But if the guidance isn’t taken seriously, referral fees could be banned when the guidance is reviewed next year.”
Within the new guidelines, agents now need to disclose in writing, at the earliest opportunity:
- the price of services, including any ‘compulsory’ extras;
- where a referral arrangement exists, the fact that it does exist and with whom;
- where a transaction-specific referral fee is to be paid, its amount;
- where a referral retainer exists, an estimate of the annual value of the retainer to the estate agent or its value per transaction; and
- where the referral is rewarded other than by payment, an assessment of the annual value of the reward or the value of the reward per transaction.
Hayward will be running a live webinar tomorrow, Thursday March 21, and you can join here and submit questions to email@example.com.
The executive summary of the NTSEAT guidelines issued on Febraury 28 is as follows:
Failure to disclose referral arrangements may render an estate agent liable for criminal prosecution under the CPRs and/or action by NTSEAT for warning or prohibition under the Act.
Ultimately, only a court may decide whether any particular set of circumstances amounts to a breach of the CPRs.
However, NTSEAT offers the following recommendations as a statement of desirable practice:
An estate agent should disclose in plain terms
1 (a) The price of its services, including any “compulsory” extras; and
2 (b) Where a referral arrangement exists, that it exists, and with whom; and
3 (c) Where a transaction-specific referral fee is to be paid, its amount; and
4 (d) Where a referral retainer exists, an estimate of the annual value of that retainer to the estate agent or its value per transaction; and
5 (e) Where the referral is rewarded other than by payment, an assessment of the annual value of the reward or the value of the reward per transaction.
Meanwhile the complete new guidance, 14 pages, is available to download from the National Trading Standards website.