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The issue of agent's fees has been a source of much discussion over many years.

The bone of contention has been over the inclusion of VAT in quoted fees, with agents wanting to quote these exclusive of VAT in all cases whether it is a percentage fee (1.5% + VAT) or an actual monetary amount (£2,000 + VAT), whereas, consumer organisations, the OFT and Trading Standards Officers have always wanted fees shown to include VAT.

The agents' argument is that they want to make consumers aware of their fee and the fact that VAT goes on top of that fee. I must admit I have little sympathy with that argument. I am firmly on the inclusive side of the argument, because I am a consumer. When I look to buy anything I simply want to know what I will have to pay and I am unconcerned about how that figure is made up or that there is a large percentage in taxes.

The Property Ombudsman's Code of Practice actually does not help to clarify the position because it states in one clause that for percentage fees agents must give an example of the actual fee that would apply if the property sold at the asking price plus VAT. In the next clause it states that where the fee is fixed, you should state the actual amount payable including VAT!

Even the Government's own guidance documents are conflicting. Their sales agent guidance states that whether you charge a fixed fee or a percentage of an as yet unknown sale price, stating the fee or percentage inclusive of VAT is more meaningful for consumers, but it then gives you a get out option by going on to say that if there are circumstances where this is not possible, at least make it clear upfront that VAT will be charged on top.

The letting agent guidance however, is slightly different and this states that you should quote your fees to landlords inclusive of VAT regardless of whether it is a fixed fee or percentage. It also says that in advertising charges to tenants, these should always be expressed inclusive of VAT (including in circumstances where the fee may be expressed as a percentage of something else). There is no get out option here!

The Private Rented Sector Code of Practice published this week follows the Government's Lettings Guidance on this.

So, for sales agents the legal position has actually been messy, open to debate and without case law agents have taken a view on it and followed their chosen path with little risk of any action.

However, I believe we now have clarity on it and the debates can end.

All agents whether sales or lettings must now move to the inclusive option due to the recently introduced Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.

The Regulations are known better because they changed the consumer's cancellation rights period from 7 to 14 days. However, they also stipulate that regardless of where the contract is agreed and regardless of whether any cancellation right exists, all fees must be quoted and they must include VAT.

*Founder of Compliance Matters, David Beaumont is a Trading Standards compliance consultant working with estate and letting agents all over the UK

Comments

  • icon

    I agree buy agents won't change one by one as the public only look at the headline amount. Solicitors also quote a fee plus vat.

    • 13 September 2014 11:50 AM
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    In the eyes of the Advertising Standards Authority there has always been clarity on this subject. Prices advertised to consumers should always be VAT inclusive in all forms of advertising that fall within their remit (eg print ads, TV, websites).

    Many examples where this is not followed through though.

    • 12 September 2014 14:05 PM
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