Christopher Hamer:
Consumer Protection from Unfair Trading Regulations 2008
The Office of Fair Trading (OFT) guidance on property sales was issued in September 2012 to assist agents in complying with the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). That guidance makes clear that if agents treat consumers and competitors fairly, then they are unlikely to breach the regulations.
The regulations emphasise that it is the ‘consumer’ who must be treated fairly, so although the agent is instructed by the seller or the landlord there is a clear responsibility also to be fair and even-handed with the buyer or tenant – this obligation exists currently under paragraphs 1d and 10b of the TPO Sales Code of Practice and 1d and 14a of the TPO Lettings Code of Practice.
In assessing whether they are acting appropriately, the agent should bear in mind:
• The definition of a consumer is an individual acting for purposes outside their business.
• The definition of an ‘average’ consumer is someone who is reasonably well-informed, and reasonably observant and circumspect. It is expected that such a person would pay some attention to documentation but not necessarily to the small print unless key points are brought to their attention; they would check out publicly available facts if that is easy so to do but they could be influenced in those checks by what information they have been given.
• The impact their act or omission in describing a property would have on an average consumer and in particular their financial behaviour.
The OFT guidance makes clear that in the most straightforward sales the material information that would need to be given to potential buyers may be quite basic and might consist of (for example) asking price, location, number and size of rooms and the tenure of the property.
However, that guidance then goes on to say that the material information that would need to be given will be dependent on the circumstances of each sale. This obligation currently exists under Paragraphs 5h–5k of the TPO Sales Code of Practice and paragraphs 4f and 4g of the TPO Lettings Code of Practice.
For sellers and landlords, the agent will need to fully disclose what services are being offered, fees and charges, terms of business and the duration of the agreement. These obligations currently exist under paragraphs 3a–3v of the TPO Sales Code of Practice and paragraphs 3a–3q of the TPO Lettings Code of Practice.
The application of the regulations is therefore not an easy matter. The nature of those regulations is that they do not specify precisely how the legislation applies in individual scenarios, rather it is left open to interpretation by the agent according to the circumstances presented to him.
Agents should apply the principles described above and should err on the side of caution by openly describing all aspects of the property, assessing whether there is anything that puts them on notice that a particular aspect needs further consideration or examination. Agents cannot rely on disclaimers to avoid their responsibilities under the regulations.
Over time it is intended that a bank of case law will be built up (following prosecutions by Trading Standards) which eventually will start to clarify and specify how agents should approach their dealings under the legislation. That realistically will take time.
As Ombudsman I already see disputes that have arisen because a misdescription or an omission has occurred. To these cases I have applied the principles of the Property Misdescriptions Act 1991(PMA), the requirements of the Code of Practice and what is fair and reasonable in the circumstances as presented to me.
Given that the PMA is due for repeal in October 2013 and that the new regulations will be the legislation that applies (although the obligations have been in place since May 2008 it is really from now on that action will be pursued under CPRs) I will take into account those regulations but will still measure the actions of the agent against the Code and against what I consider to be fair and reasonable.
It is not for me to make a determination on whether the law has been broken: only the courts can do that. As a breach of the CPRs could result in a criminal prosecution, it would be inappropriate for me to express an opinion that I believe the law had been broken.
It is my intention, though, that I will build up a bank of ‘persuasive precedents’. Although every case I see is dealt with and decided on the specific circumstances of that case, I believe that some principles will emerge (limited of course to the scenarios presented to me) which I can feed back to the industry to assist agents in determining how they can operate under the CPRs. The consequence will be less opportunity for consumer dissatisfaction and less disputes arising.
I have been presented with a number of example sales and lettings scenarios where agents have questioned how the CPRs could have implications. My answers below should not be taken as a definitive statement as to how I would decide if that matter was formally referred to me with knowledge of all the circumstances and it should be remembered that I am not making a determination of the law, so a court could hold a different view.
Those scenarios are:
1. I am an agent who currently always asks why a buyer has pulled out of a sale. Should I stop asking this question?
No – you have a duty to your seller to ascertain feedback, and if for example a structural defect is found, then I assume the seller would want to know that because further marketing would be compromised.
2. A property I have just been instructed on looks to be in very good condition. It appears to have no problems and the seller has not advised me of any. Can I take it as read that the property is okay to market? Or should I be asking questions – and if so, what questions?
In assessing the property, is there anything that puts you ‘on notice’ that all might not be as it seems: for example, have you sold other houses in that road where there was a particular issue?
3. A property on my books is very close indeed to a motorway, the front door being about 200 yards away. The garden of the property is obviously very noisy. I took care to ensure that the photos do not show the motorway, and the details make no verbal mention. However, it is clear from the mapping that the property is almost on the hard shoulder! Is this sufficiently spelled out to possible purchasers or should I amend the property details?
The photograph should give a realistic understanding of the property and its location – remember the Dungeness case.
4. A previous buyer pulled out because of a bad survey – it apparently showed that the roof would need substantial work. The buyer gave me this information, although I do not know the full details, as they did not pass on the survey itself, which is in any case copyright. Should I put a warning in the property details about the roof, even though I have not seen proof?
If you are aware that there is a major defect that is going to affect a prospective buyer’s behaviour – disclose.
5. A previous buyer pulled out citing a bad survey, although I actually believe they simply changed their minds. They gave no detail as to the survey. Should I advise in the property details that there had apparently been a bad survey, even though I have not seen proof?
You should make an attempt to find out what the issue is and then act accordingly by speaking to your client and/ or describing the fault to prospective buyers.
6. A previous buyer pulled out citing a bad survey, which with their surveyor’s permission they let me see. Should I highlight this information in the property details?
Yes, you need to explain that matter to prospective buyers.
7. I am aware that a house on which I have been instructed may have had an extension built that has not had the correct planning and building regulations. I am not sure. I have not yet put together the details. Should I check with the local council?
You are ‘on notice’ that further enquiries need to be made to establish the true position.
8. A house I am marketing has as its neighbour a somewhat eccentric woman who keeps seven large dogs and 14 cats. Should I highlight this in the property particulars?
I think that this involves a degree of subjectivity. Eccentricity can be levelled at many people but on balance I would say no disclosure, but if a prospective buyer asks about the neighbours then you should mention the menagerie!
9. A rental property on my books has been the subject of endless problems: it is in a block with anti-social neighbours, and previous tenants have complained of condensation. Must I highlight both of these problems in the marketing literature?
Not sure how you can describe sensibly the anti-social behaviour but you should not describe the property as, for example, secluded, comfortable, quiet etc. I would recommend that the condensation issue is divulged during viewings.
10. I am listing a property on Rightmove that has a basement that flooded this summer – as I know, when I went to value it. Do I need to point this out on the property details, and how far do the regulations extend to website marketing?
The regulations do not place the same level of responsibility on the portal as the agent advertising on that portal. You are the one required to make the appropriate disclosures and in this instance you should disclose the flooding issue.
11. I have a property on my books which is next door to a primary school playground. Is this something that I should mention in the marketing, given that viewers of the property would see it for themselves very clearly, and that people like myself enjoy hearing the sound of children at play?
Again this is a bit subjective – I cannot see that being next to a school is a negative but it should be disclosed, as someone might travel from a distance to view the property and would not have done so if they were aware of that fact.
12. The neighbour of a property I am marketing is the subject of enforcement action, as he is running an illegal business from home. Surely, this is only a very temporary situation. Do I need to mention this in the particulars?
It has to be clear how temporary the business is – neighbour issues should be disclosed in the property questionnaire but it should be presented to prospective buyers as early as possible.
13. Property details I have agreed with the owner do not mention the presence of motorcycle scrambling which is held half a mile away every other Sunday. It is very noisy. Is it okay to omit this from the property description? The seller does not want it mentioned.
I would say it is not relevant to property particulars but should be disclosed at viewing.
14. I am taking on a property which has failed to sell via two other local agents over a period of three years. No one has offered. The reasons are various – suspected woodworm infestation, damp, and the property is very close to a church with enthusiastic Sunday bellringers. The house is Grade Two listed, and very beautiful, but does need work. As an agent, I know that the reason it has failed to sell is that it was priced far too high. Given that no previous buyer withdrew, should I mention the drawbacks in the particulars?
Yes.
15. I have a rental property on my books where, sadly, the last tenant was murdered. Should I say this in the marketing? If the owner decides to sell the property, should it be mentioned?
A difficult one given the sensitivity of the matter, but on balance I think it should be disclosed at the earliest opportunity.
Christopher J Hamer
Property Ombudsman
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Comments
If marketing a commercial property with a 34% NBS and the tenant requries all it's branches to have an NBS of 67% + is this something I would need to disclose to prospective purchaser or only if the ask? As I undertand the tenant won't renew their lease when the term is up in 3 years unless the property is upgraded to 67%.
Dear eMoov
I think your smugness may be short lived if the current rumour doing the rounds is true. If it is, it will bring an abrupt end to your “low fee” model, assuming you wish to continue advertising on portals.
In case you haven’t heard, rumour has it that several large chains are tired of having to compete with the “low fee” online agents on what they see as being an uneven playing field.
They feel that they are being penalised by having to take a separate listing for each of their offices, whilst the online sites only have to take one listing from which they can advertise all of their properties. To put this into contect, a chain with let’s say 464 offices could be paying around £7m per annum to appear on Rightmove & Zoopla, whereas an online firm will be paying around £24k.
To get around this, the large chains are considering scrapping individual office listings in place of just one central listing. All calls would go through to a call centre where they would be farmed out to the individual offices. This would result in a massive cost reduction of over 99%.
This would no doubt terrify the portals who most likely will be forced to change their T&Cs to make sure all advertising agents are charged for each town (defined by a localised radius) they list property within, thus forcing the online agents to pay for their advertising on the same basis as traditional agents.
The portals do not have a business model without the 1000’s of traditional agents who are charged advertising costs based on individual office locations. They won’t allow this revenue to be threatened by a small segment of the market whose advertising revenue is miniscule by comparison.
'Legal Eagle' - thank you for that... however I would ask is this actual case law - or simply your opinion?
A mineshaft of within WHAT radius of a property would you say requires to be disclosed?
What about mineworking beneath a property? These do not necessarily come up on even mining searches. Usually a general caveat is present that there are or may be ancient mineworkings not on plan.
Now - about this murder. YOU may think that it bears no relation to the property - but what about yer 'average consumer' that this Legislation is there to serve and protect? Do THEY think that Mrs Bloggs meeting her Maker at the hands of some mad axeman in 1972 is an issue?
What would a jury of your peers think? Or a Judge, for that matter?
A minesaft is a saftey, structural and permanent issue and even if made safe should be disclosed.
A murder is historic and temporary event and does not require disclosing as it does ot relate to the property or direct surrounding area.
I hope this clears it up for you all
Picking up on a point raised by 'BigG' -
"15. I have a rental property on my books where, sadly, the last tenant was murdered. Should I say this in the marketing? If the owner decides to sell the property, should it be mentioned?
A difficult one given the sensitivity of the matter, but on balance I think it should be disclosed at the earliest opportunity."
WHY? Under WHAT Legislation is this required to be disclosed? What possible bearing would such an unfortunate occurrence have upon the marketing of a property - for either sales or lettings?
What about this list of less serious crimes:
an attempted murder?
an armed robbery?
a common-or-garden burglary? What if there have been several over the years? One mention for each - or just a number? Doies the number have to be approximate or precise? How many years do you have to go back?
The LAST part of the final scenario is, I believe, of HUGE importance here with ALL 'disclosures'.
A bit like, funnily enough, the existence of a mine working/shaft, which will have probably been there long before a property was built; and will STILL be there when the subject property is bulldozed to build the next generation of mansionettes or tenements...
Mr Hamer - I look forward to your response. After all - YOU are the man that will be just as responsible for dealing with these complaints as Trading Standards...
Our role is defined and so is our due diligence, designed to protect both client and buyer.
If you can negotiate, close and progress a sale to completion then you should know when to 'disclose'. Its not rocket science, just apply some common sense.
As agents shouldn't we be doing this anyway? We all bang on about being professionals yet we employ selective ethics just to make a sale.
Our reputation is well deserved and instead of repairing it by embracing more transparency we want to run like roaches back into the shadows.
There's all different flavours of crazy on here but this is just ridiculous.....
15. I have a rental property on my books where, sadly, the last tenant was murdered. Should I say this in the marketing? If the owner decides to sell the property, should it be mentioned?
A difficult one given the sensitivity of the matter, but on balance I think it should be disclosed at the earliest opportunity.
'at the earliest opportunity''...So not that sensitive after all then !!
Stupidity breeds stupidity
Will the online agents still be able to operate their current modus operandi? As in - receive listing call from (say) Newcastle, send field agent from (say) Manchester to measure up and take photos, do all research back at Manchester HQ, and list it on RM?
Won't they have to actually spend some real time at the location of the property and have a good look around?
If they get pulled up by Trading Standards, will it be a valid defence to say "We didn't know about X, Y and Z, we don't have anyone in the local area" ???
The more you read the 'answers' to the posed questions you have to wonder is this guy Hamer for real? Hamer knock it on the head mate, you are clearly delusional if you honestly believe your own responses. Maybe we should be taking our fee from the buyer?
The answer for many of the questionable scenarios seems to be "disclose at viewing" . Right - my clients can do their own viewings from now on.
Anonymous Coward -
(copied & pasted from the same thread - YOU started it! ;o) )
"Which then means the lower cost but upfront charge agents have a more sensible business model that is more likely to survive long term."
WHY, AC?
Why can't the 'upfront charge' business model simply be incorporated into your 'standard' percentage fee? Same income outcome - but with an upfront proportion paid on instruction. A retainer, for want of a better word; deducted from the eventual Sale Fee.
Or... am I missing something?
Happy Chappy: "....yes fees up perhaps or maybe more instructions refused."
I would say the two go hand in hand, Sir.
'eMoov'... you are quick to decry "Yet when a piece of protective legislation comes along in a similar vein, you moan that it is too difficult to adhere to, unnecessary and/or too complicated" - yet you struggle with legislation yourself.
From you own blog:
"Did you know that you are only allowed one for sale board post at each property?"
INCORRECT. You can have as many POSTS as you want. It is the size and number of BOARDS attached to them which is subject to scruitiny.
"Or that a for sale board must be no bigger than 0.8sq metres in size?"
WRONG AGAIN. A residential board for a single property must be no larger than 0.5 square metres. YOUR board would break the Law by quite a chunk, Sir.
Your entire blog entry was verging on 'Hendryesque' innacuracies and twisted views, in my opinion
Funnily enough - I posted a response to this particular blog entry only for it to dissapear into cyberspace. Wonder why?
Fight your corner - yes. No problem with that.
But when you DO fight - do it correctly and professionally, okay?
No-one likes people who simply knock the competition. It doesn't get you a competitive advantage with most people - just makes you appear a whinger!
Oh - and before you respond - please note I AM NOT an Agent so there is no 'agenda' in my post here.
Except, that is, for the raising of professionalism in the industry - a cause you claim to champion...!
You'll have no issue with what I say, in that case! ;o)
This could be a good weapon for buyers and buyers agents. They will ask more and more questiions, hoping to expose reasons to lower the price.
q.1 Has any potential buyer ever pulled out of purchasing this property ? If so why? The agent is obligated to give the answer.
etc etc etc
Peebee....yes fees up perhaps or maybe more instructions refused.
Hmmm... interesting how one word can have several 'definitions' -
According to Mr Hamer, "a consumer is an individual acting for purposes outside their business."
According to NBS - a wholly-owned part of the Royal Institute of British Architects, " A 'consumer' client is a natural person entering into a contract for purposes outside their trade, business or profession who wishes to have work carried out on their own house."
And our good old Oxford English Dictionary defines a consumer as "a person who purchases goods and services for personal use."
Feel free to take your pick as to which to rely upon, people!
Speaking of which...
Mr Hamer goes on to state "Over time it is intended that a bank of case law will be built up (following prosecutions by Trading Standards) which eventually will start to clarify and specify how agents should approach their dealings under the legislation. That realistically will take time."
FANCHUFFIN'TASTIC! So you are ALL entrants into the Lottery as prospective Case Law candidates! How warm and tingly does that make all you Agents feel - even the online bods?
I feel a Fee rise in the offing here - and I wouldn't blame you in the slightest!!
Mr Hamer's answers to the scenarios - which, let's face it, should be fairly authoratitive seeing as it is HIS organisation that is policing you guys... contain the words "I assume..."; "I would say..."; "I think..."; "I would recommend..."; "I cannot see..."; and the best of all - "...on balance I think..."
Don't fret - you can all call on him as "expert witness" if need be, I'm sure...
Good luck, all!
Does this mean agents will have to tell buyers that the vendor took a lower offer from another buyer previously?
eMoov; I don't object on the grounds of complication or difficulty, but on the grounds of vagueness, and on the basis that the legislation seems to place me responsible for disclosure of matters which are of public record. Why should I have to disclose the presence of a church with bells, a factory, a nursery, a school near to the property, when it's plainly clear to anyone who looks at a map or drives/walks around the local area? If, as discussed in a previous example, a housing development is built on a mining site which had to be stabilised, where there's at least one mineshaft in someone's back garden, and the builder has sold all of the houses from new (with no mention of the workings in their sales literature), and some have re-sold since, again with no mention of this, and the details of how the ground was stabilised are on the local council's website, as part of the planning application........ why am I responsible for disclosure of this all of a sudden.....? (and the answer is not 'because the CPR regs say so!)
''A previous buyer pulled out citing a bad survey, which with their surveyor’s permission they let me see. Should I highlight this information in the property details?
Yes, you need to explain that matter to prospective buyers.''
Did someone throw out caveat emptor with the bath water?
Good one Russell @ Emoov. But this does affect you too. Online agents are doing a great thing forcing the industry into a modern world but the powers that be are making it ever impossible for ANY type of agent. I don't think you can put it better than 'Skegvegas'...it really is ridiculous.
I wonder if this will just push agents into making more and more in depth contracts to protect themselves from the vendors who effectively could cause lawsuits against agents left right and centre by not mention the negatives.
So agents get sued by buyers and vendors get sued by agents. Lovely world isn't it. Chris Hamer moans about estate agency possibly turning into Autotrader but that would be a much healthier way of doing it. Obviously it should be more indepth; the vendor fills a legal questionnaire/inventory and the purchaser has to undertake a set level of survey. Simple.
It really doesn't need to be this messy. All we need is perspective and intelligence from the powers that be. Sadly i'm not sure if we'll get that in the near future.
You High Street guys, ever protective of the 'value' of your fee, cannot have it both ways.
You decry the repealing of the PMA as it will 'render the consumer unprotected'. You state that it is only 'traditional agents' that are professional enough to understand and work within the PMA for the best protection of your clients, hence attempting to justify the thousands that you charge the consumer.
Yet when a piece of protective legislation comes along in a similar vein, you moan that it is too difficult to adhere to, unnecessary and/or too complicated?
Insisting that the seller is liable, not you, rather blows your fee justification argument to smithereens, doesn't it?
Very helpful and practical advice from Chris Hamer, most of which is common sense with the exception of the addition of certain facts on sales particulars and websites which would have been dealt with verbally under the PMA.
However, no14 opens up a complete can of worms and contradicts some of the advice in Chris's previous points. With overpriced properties prospective purchasers often site reasons not to proceed which are not real to them but just excuses. Siting these as actual problems with the property would not be true and would also conflict with the agent's primary duty to the vendor. As for church bells, there are 2 recent cases where the court held that the buyer could not miss the church nearby and every reasonable person would have known that churches tend to have bells which ring. so which takes precedence, these common law rulings or the CRP which is, by essence, vague?
I am lost for words. I agree with comments about being transparent with buyers whilst not compromising your duty to your clients (the seller), BUT this is absolutely ridiculous. Imagine the everyday scenario. Joe Bloggs rings for a chat about 3 or 4 properties they are thinking of coming to view this weekend - before fixing the viewings you will need to go through each property mentioning the neighbours who let their garden run riot because this house overlooks their messy garden, the slate thats slipped off the roof last week in the wind, the primary school just up the road makes the road busy at 9am & 3pm, the fact that the owner mentioned he hasn't had the boiler serviced for a couple of years, oh, and you can hear the main road in the distance when the wind is in the right direction.......& don't forget we are only 3 miles form the seaside, so there is a potential for flooding at some point in the next 100 years............."Oh" says the buyer..."I think we'll leave those properties thanks very much - we'll view the ones with that other agent who said his properties were lovely......" It is absolutely ludicrous - brochures will need to cover all the things that 'might' put a buyer off. And what happens when the viewer goes over the weekend & rings Monday morning saying he wants £50 petrol refunding from his weekends viewings because we didnt mention the sea was half a mile away & he wouldnt have bothered coming if he'd known. Come on guys, there's transparency & there's blatant farce. Buyers MUST take SOME degree of responsibility for checking out the area they are looking to move to!!!
(copied from the my other post - just to make sure everyone reads it!!!)
The world of estate agency is changing way faster than most of us poor stupid stick-in-the-muds are able to cope with.
The problem that we face is our no-sale, no fee business model.
I actually think proper investigation and full disclosure has always been the job of the estate agent. The solicitor needs to check it all, sure, but surely it is madness for a buyer to offer on something when they only know a tiny amount about it.
The reason that we don't do proper investigation is (in part) because we can't and/ or won't because we have chased our own fees down and down - it is entirely our fault.
Once again, I would suggest that proper licensing with industry body minimum standards (such as copies of land registry info on file, etc) which then implies a fixed minimum cost would be a good idea.
I absolutely LOVED the HIP - it got rid of the time-wasters (both buyers and sellers).
And, if you think about it, this is the HIP by another route, except instead of forcing the owner to pay for it in one go, this will force agents into ever greater due diligence under the current "no sale, no fee" business model - which is unsustainable.
Which then means the lower cost but upfront charge agents have a more sensible business model that is more likely to survive long term.
Weird how things work out, isn't it...
Christian,
"We shoudl turn back to just marketeers" and "The onus needs to be shifted to the vendor of the property not the agent."
I take you wont mind your fees being reduced to reflect this change then. In fact you are almost advocating the services of an intermediary, careful you will be burned at the stake!. :o)
We had a flat conversion in an old hospital and had someone pull out after Googling its history and finding out it was haunted.
I found the story and it was a previous resident who, surprise surprise, had a paranormal corporate entertainment business (no, I didn’t know they existed any more than ghosts!).
I bounced it off our friendly trading standards officer and he agreed with me that we didn’t need to mention it to buyers.
My reasoning was that there was no way it could be proved.
His was different. He said if we told people it was haunted “What if someone takes the place because they want to see ghosts and don’t? THEN you have a problem!!”
Thank God someone has a sense of humour, I’m fast losing mine.
Ok - so I go to the vendor and say "i'm really sorry that your sale fell through, we'll put your house back on the market BUT i am now going to have to tell everyone online what the issue is with the house". The vendor's reaction will likely be; I'm not happy with that and go elsewhere to the next agent who is unaware of the issue.
This industry is becoming more and more weighted against the agents that are trying to provide a service. It needs someone with perspective who's not been within the industry for long to come in and re-write the whole industry.
The onus needs to be shifted to the vendor of the property not the agent. There is no way an agent can know everything about a property but will in the end will have to take responsibility for what the vendor has hidden. Similarly the onus needs to be put on the purchaser to make the relevant checks.
The agent's responsibilities are becoming too much. We shoudl turn back to just marketeers who can help provide whichever necessary services are required. NOT to be the person who has to take responsibilty for the house which he does not even own.
I'll turn out the light, who's got the keys?