Consumer Protection Regulation – Embrace? Panic? Avoid?
In this short article, I give some background and information about the regulations and suggest that agents wake up to their responsibilities and obligations before they find themselves in potential hot water.
Consumer Protection Regulations (CPRs), or to give their full title – the Consumer Protection against Unfair Practices Regulations and the Business Protection from Misleading Marketing Regulations – have largely gone under the radar of sales and letting agents since their introduction five years ago in 2008.
Most residential sales agents were reasonably aware of and compliant with the Property Misdescription Act (PMA) which for the last 20 years was the primary legislation protecting consumers from false or misleading information provided by estate agents.
So, why should the property industry be concerned now? The regulations have been in place since 2008 and have not caused issues for many.
Well, the PMA was repealed in October 2013 leaving CPRs as the legislation that governs a business’s relationship with consumers and are much wider-reaching than the PMA and affect both sales and lettings. They also have the potential to be much more difficult for unprepared agents to comply with.
My view is that there will be an increasing number of cases brought under CPRs and its profile will rise significantly. Already there have been cases where the Ombudsman has made awards to consumers based on his views on this legislation and where agents have not met their obligations.
Julian O’Dell of TM Training and Development and myself have been running short CPR courses in recent weeks and have been amazed at the lack of awareness in the industry of the requirements of the regulations and of the lack of systems and procedures that agents have in place to help deal with their obligations. Both Julian and myself have also had many conversations with business owners who were, in some cases, unaware that the PMA was no more and had certainly taken no action to ensure that their businesses were compliant under CPRs.
So what is it all about?
Quite simply, the thrust of the regulations is about removing unfairness (of which five clear forms of unfairness are defined under the regulations) and the key element makes it a requirement that the “average consumer” (again defined in the regulations) is provided with the information they require in order to make a “transactional decision”. A “transactional decision” could be many and various but would include deciding to view a property or make an offer etc.
Crucially the regulations make “misleading omissions” an offence as well as “misleading actions”, and so not revealing something is as important as revealing something incorrectly.
The regulations therefore effectively remove the old “caveat emptor” (let the buyer beware) maxim, as now a buyer (or indeed any “average consumer”) should be able to rely on the information he or she has been given or not given by the “professional” in the process – the agent.
Many of the situations where an agent could fall foul of the regulations would have been picked up during the legal purchase process, but by this time a buyer will have incurred expense and spent time and resources ascertaining a position that the regulations intend to have been clear at the outset. Remember too that the regulations govern all business, not just sale and purchase, and in the case of lettings, a tenant wouldn’t normally be represented by a legal practitioner who would be making these enquiries.
Clearly, there are situations that develop during property transactions that may require action. For example, an adverse survey sees a buyer withdraw and the seller and agent are now faced with what information to provide when the property is remarketed.
There are potentially hundreds of situations that could lead to a seller and agent being exposed to a risk of not complying with the regulations and, until case law develops, it may be an educated “judgement call” that is required. Clearly, the better prepared and equipped agent is much less likely to find themselves at the centre of creating legal precedent and will be able to demonstrate “due diligence” in approach.
It is ironic that, if we still had Home Information Packs, these would go a long way to ensuring that the right information was available (at least in a sales environment) in a timely fashion.
It is however vital that agents put in place systems and processes for recording information and that staff are trained to use that information properly and in a timely, effective and auditable fashion.
Embracingthe regulations will make your business more professional, ensure good business practice and is likely to reduce issues that arise during transactions.
Panickingover the regulations is unnecessary as you can seek help and guidance and, through good systems and training, ensure that your business is both operating compliantly and diligently for the benefit of all.
Avoidingthe regulations or “turning a blind eye” is simply not an option unless you are prepared to face heavy fines, a potential jail term and the terrible adverse PR that would result.
Michael Day MBA FRICS FNAEA is Managing Director of Integra Property Services and has over 38 years’ residential property industry experience (he says he started when he was three!). Integra Property Services provides a range of business mentoring, coaching, training and consultancy services together with marketing and social media content and management services.
msd@integra-ps.com www.integra-ps.com
01753 889287 07717 295369
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Comments
"Peebees spot on."
Be careful - you don't know who is reading this - and you'll get some stick for it!
Happy holidays!! ;o)
Peebees spot on. This is a ticking time bomb, yet to be exploited by a new "claims" culture and nanny state that now exists, but it will be when the good old public catch on.
That will take case law and publicity, I think that will come at the expense of the big boys to make impact , so Corporates watch out.
These regs have been in place since 2008 so there could be thousands and thousands of claims in the pot already, just waiting for the parasite lawers to work on....................
Mr Day states: "...and the key element makes it a requirement that the “average consumer” (again defined in the regulations) is provided with the information they require in order to make a “transactional decision”. A “transactional decision” could be many and various but would include deciding to view a property or make an offer etc."
According to the European Fair Trading Law, the definition is:
" 'transactional decision' means any decision taken by a consumer concerning whether, how and on what terms to purchase, make payment in whole or in part for, retain or dispose of a product or to exercise a contractual right in relation to the product, whether the consumer decides to act or to refrain from acting"
Erm... hang on a minute! If that be the case, then surely using the 'deciding whether or not to view' scenario, this could logically apply to ANY viewing appointment where the person viewing the property simply decides "it's not for them" (which we all know as the stock-standard follow-up comment)?
How can Agents suddenly (of course, 'suddenly' is actually backdated to 2008 - and how long do people have to file retrospective complaints...?) be responsible for people's decisions?
Caveat Emptor was far from the perfect state of affairs - but surely this is pushing the boat completely across the ocean?
Mr Day continues: "There are potentially hundreds of situations that could lead to a seller and agent being exposed to a risk of not complying with the regulations and, until case law develops, it may be an educated “judgement call” that is required."
Great. The rules are there are no rules. You only think you have an inkling where the goalposts might be.
And I would say that Mr Day's "hundreds" be multiplied by hundreds again - EVERY ONE of them a ticking bomb.