Complaints to Ombudsman against letting firms soar

An agent who sold a house for £220,000 charged a flat fee worked out against an asking price of £300,000, his original valuation, which was £50,000 more than two other agents had advised.

The agent offered the seller £500 in recompense, but the vendor went on to complain to the Property Ombudsman.

As a result, the Ombudsman judged the agent’s offer insufficient and awarded £1,304 against the firm, resulting in the complainant paying commission to the agent according to his sliding scale for a £220,000 sale.

The case is among those reported for the second quarter of this year by the Property Ombudsman scheme.

The report also reveals that more than 110 potential complaints about letting agents are pouring into the scheme each week.

But while possible complaints about lettings have gone up by 44%, those about sales agents have dropped by 30% over the last year.

Ombudsman Christopher Hamer said: “This is precisely what I forecast as the property market switched emphasis from sales to lettings during the current slowdown. Inquiries over lettings disputes now far outstrip those for sales.”

He added: “This is one of the principal reasons for asking the Office of Fair Trading to ratify the Property Ombudsman Lettings Code of Practice under its Consumer Codes Approval Scheme. We see this as the first step towards the time when all lettings agents must be legally required to sign up for a redress scheme.”

The Ombudsman’s report also gives a good idea as to the official size of the residential sales market in England and Wales, with more than 10,400 sales offices registered – as they now have to be, by law.

There are also 6,255 lettings offices that have voluntarily joined the Property Ombudsman scheme, out of an estimated 15,000 in total. The Ombudsman says that between April 1 and June 30, 807 lettings disputes have arisen that he can deal with. He is unable to deal with a further 1,446 lettings disputes, because the agents concerned do not belong to the scheme.

Hamer said of this number: “It clearly flags up that consumers have a potentially very large problem. We are trying to help these people with advice wherever we can.”

During the second quarter of this year, the Property Ombudsman also looked at 866 disputes involving residential sales agents, with a total of 1,076 disputes brought to the scheme’s attention.

Of active cases, there are now 104 sales disputes and 117 lettings disputes – a rise of 27 lettings disputes over the first quarter, but a rise of just two sales cases.
 
Hamer is also critical of flat fees. He says in his report that estate agents must take much greater care when explaining fee structures to clients and ensure that clients are aware of what they are signing up to.

He states that while he will not rewrite contracts that are quite lawful, where there is evidence of deliberately induced confusion in the mind of the consumer, he will find in the consumer’s favour and make an award that compensates them for their loss.

“I am regularly presented with scenarios where the fees, although stated in the agreement, have been clouded in some way either during substantiated conversations during the market appraisal or through some ambiguity in the wording of the contract,” says Hamer.

“I have seen cases where the agent has operated a fixed fee basis but it was clear from the evidence presented to me that the charge was portrayed as a percentage of the selling price and sellers therefore rightly assumed that it related to the achieved sale price.

“The message that I want to give from these circumstances is that clarity and precision when describing charges and fees and when they apply are absolutely vital.”

Hamer warns agents: “Do not assume that clients have understood the detail of what is presented. Although they have committed themselves to a contract, it is in my view best practice to highlight and specifically emphasise the relevant information.”

Hamer’s report was written before the judgement in the OFT v Foxtons case was published. This has highlighted the need for agents to make substantive terms and conditions made known not just in contracts but also in all marketing literature, including online.