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Compliance clampdown on Referral Fees and Modern Method of Auction

The Property Ombudsman says its members must in future disclose referral fees in a bid to make previously-hidden costs open and transparent to consumers.

The decision - made with the guidance of the National Trading Standards Estate & Letting Agency Team - is the most controversial of a number of changes to TPO Codes of Practice which will come into effect on June 1.

NTSELAT has already produced its own guidelines, announced in March, saying that agents must disclose to customers in writing, at the earliest opportunity, details of referral fees they enjoy from other suppliers. 


In addition, TPO is also insisting that agents from June 1 should explain both the benefits and disadvantages of their recommended method of transaction at market appraisal stage.

For letting agents this would include (if used) guaranteed rent schemes, for example, and for sales agents this would include (again, if used) the controversial Modern Method of Auction.

MMA has been criticised by consumer bodies and some agents in the past because of an alleged  lack of transparency over the fees, which are often £5,000 plus VAT and which are levied on buyers; these fees go to the auctioneers and agents. 

Many of the other Code of Practice changes set out by TPO reflect recent law and regulation changes - particularly the upcoming ban on lettings agents’ fees levied on tenants. 

The revisions follow extensive consultation with 44 different organisations and individuals, including the Ministry of Housing, Communities and Local Government and the NTSELAT.

The codes come into effect at the end of next week and TPO Katrine Sporle says: “We have carried out the largest consultation yet on the codes and are extremely grateful to all of the parties who have contributed to the process. Consumers and agents can be confident that the Codes reflect both market developments and the significant legislative changes that have occurred over the last 12 months. 

“As the industry changes at such a rapid rate, it is necessary to release new versions of our Codes to help agents understand their responsibilities and reduce the potential for consumer detriment to occur.”

The scale of the changes are such that TPO is doubling the number of agent workshops at its annual conference in July.

Common changes across all the Codes of Practice include the requirement for members to display the TPO logo prominently on their emails, any other digital communications and marketing material. This is in addition to the existing requirements to display the logo in the window of offices and on agents’ websites.

Other key revisions to the Codes include:

Leasehold, commonhold & managed freehold disclosureAgents’ obligations to request and divulge information relating to leasehold have been widened. If material information on the tenure is not known, this should be made clear to the consumer at the outset of marketing.

Dual FeesIn relation to the potential risk to sellers of being charged two commission fees when they sell their property, transparency obligations have been updated and expanded together with a definition of effective introduction in the glossary.

England Only: TPO Code of Practice for Residential Letting Agents is now an England only Code.  The current 2016 Lettings Code will continue to apply to Wales and Northern Ireland until such time as Welsh tenant fee legislation becomes effective. 

Tenant Fees:  The Code reflects changes imposed on agents by the Tenant Fee Act 2019, with new sections on holding deposits and the fees which are permissible under the Act.

Tenancy Deposit Replacement Products: A further update takes into account the emergence of tenancy deposit replacement products, putting the onus on agents to clearly explain the potential advantages and disadvantages of that product prior to tenants and landlords committing themselves. 

Client Money Protection: The Code also reflects the requirement to belong to a CMP scheme and to display the CMP certificate in agents’ offices and on websites. 

All other Codes including, Scottish Sales, Buying Companies, Buying Agents, Commercial and Business, have been updated in line with legislation and best practice.

To view the updated Codes of Practice visit: https://www.tpos.co.uk/members/codes-guidance.

  • Richard Copus

    This is what the majority of auctioneers have been waiting for. The so-called "modern" method is a can of worms. Only last week I was solicited by another new group setting up a franchise across the whole of the country. The headline was: "Do you Want to Earn at least £200,000 a year?" encouraging all and sundry. I went along with the introduction as an interested party a to join up and entered into correspondence with the person who was leading the campaign. I asked whether the buyer's premium was added to the purchase for stamp duty purposes as required under revised HMRC rules, and I was told "no" in writing. I then asked if sellers were told that the amount they might receive for their property would likely be less if the buyer's premium was high and that this would put off some bidders and the answer was that they have had a very successful year with high prices being reached (avoiding the question). I was then cut off with the curt comment: "This model is probably not for you". This company is to hold a meeting for any estate agents who are interested in earning the amount they are promising. I hope they get their act together quickly for the sake of all the potential franchisees! I don't think this will be the last we hear from TPOS on the subject.

  • Andrew Harris

    Virtual auction will launch in the UK with 12-16 weeks. The real time auction has no reservation fee.
    The automated platform enables pre-qualified bidders to participate in a property sale in any device. Safeguards prevent bidders from exceeding a bid ceiling and from submitting more than the next minimum bid. As all legal documents are held in the platform the sale is expedited in real time.


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