Estate Agency blog

You will be aware that all residential estate agents must belong to an approved redress scheme.  The OFT have now issued a prohibition order against a Southampton estate agency and the two principles of the firm after the local Trading Standards office had issued a £1,000 penalty charge for failing to register with an approved scheme.  Neither the agency, nor the two principles can now engage in estate agency work.

The Property Ombudsman (TPO) scheme earlier in the year also expelled two agents, one in London the other in Merseyside, because they did not pay awards the TPO had made against them.  In both cases the agencies then paid up and were eventually allowed to re-register.  Recently another agency in Ilford has been expelled from the TPO for not paying a £2,000 award made against it.

In the Ilford case part of the problem was the agency claiming to be a member of NALS and the NAEA when they were not members.  This is clearly a breach of the TPO code of conduct but is also a breach of the Consumer Protection from Unfair Trading Regulations 2008 so there is a risk of a prosecution under these Regulations which would then be a trigger offence for a warning or prohibition order from the OFT.

Clearly the OFT and the redress schemes are flexing their muscles and taking action against agents and agencies that breach regulations.

From October 2009 the ultimate appeal court in the UK, the House of Lords, will be replaced by a new Supreme Court.  This means that when appealing through the court system any appeal from the Court of Appeal from October will go to the Supreme Court rather than the House of Lords

The Supreme Court will only deal with the judicial functions that the House of Lords used to deal with.  The House of Lords will still exist as part of the law making function of the UK (until such time as this is amended or modified by Parliament)

Diagrams of the court system in learning materials should replace ‘House of Lords’ at the pinnacle of the diagram with ‘Supreme Court’

From 31 July 2009 all estate agency practices will need to regsiter with the OFT under the Money Laundering Regulations 2007.  Firms that only undertake lettings or property management work will not have to register.

At the time of writing this, the registration forms are still not available but will be availble on the OFT website from 31 July 2009 and information can be obtained by emailing amld3@oft.gsi.gov.uk

Registration will begin on 31 july 2009 and firms will have six months in which to register.  The registration process will take up to 45 days, so firms are recommended to apply before the end of November.

Regsitration will involve a fee.  The fee levels are £115 per office with a maximum fee of £2,300 where there are multiple offices.  Operators without an office will pay £115.  There will also be an ongoing charge to continue registration payable from 2010, but the amount has not yet been decided.

Firms that continue to trade after 31 January 2010 without registration will be committing an offence.  Prosecution could result in an unlimited fine and/or a prison sentence of up to two years.

Further information will be avialble on the OFT website at www.oft.gov.uk/mlr

David Hughes

July 2009

From the 1 May 2009 the Ombudsman for Estate Agents (OEA) will be known as The Property Ombudsman Service (TPOS)

The change of name reflects the fact that the scope of the ombudsman service has widened to include residential lettings and may widen further in the future.

The web address remains the same www.oea.co.uk but may well change in the future

Under the Money Laundering Regulations 2007 the OFT have the power to require estate agents to register with them.  The OFT are to exercise this power from July 2009.

The requirement to register with the OFT will affect all those engaged in estate agency work as defined in the Estate Agents Act 1979, so covers residential and commercial estate agents.

The position with residential letting and management agents is less clear.  Those dealing only with ASTs will not have to register, but if such agencies sell property now and again for landlord clients or deal with leases that have a value on the open market they would have to register.

Many estate agencies are already regulated by the FSA under the Financial Services and Markets Act 2000.  Where this is the case such firms will be supervised by the FSA under the Money Laundering Regulations 2007 and will not be required to also register with the OFT.

The cost of registration has not yet been released, but will be posted on the OFT web site before July.  Registration will take place from July and firms must be registered within six months.  Failure to register can lead to a fine and/or imprisonment up to two years.

Under the Regulations any suspicious activity must be reported.  A Suspicious Activity Report (SAR) can be made online to SOCA

You might be surprised to learn that in the current recession property agents are still investing in training for their staff, encouraging them to achieve the Technical Award.

The reasons behind this are varied and may include:-

* Preparing for the implementation of new legislation e.g. CEAR (Consumers Estate Agents and   Redress Act 2008)
* Potential licensing of the property profession
* During the recession there is more time for staff to study a qualification, (possibly harder in a more buoyant market).

It will be interesting to see if this trend continues!

Regulation of residential estate agency and residential lettings and management has been a topic of discussion for many years, with professional bodies and some consumer associations asking for formal regulation of the market.  To date this has not happened, although various pieces of consumer legislation have required estate agents to belong to a redress scheme (CEAR Act 2007), and some professional bodies such as NAEA and ARLA require their members, including those in residential letting and management, to belong to a redress scheme.

NAEA and ARLA have welcomed the recent Jones report.  This is one of many recent reports on the residential housing market in general.  It follows the other reports in suggesting that there should be greater regulation of residential estate agents and residential letting and management agents.  However, it goes further and suggests that landlords, property search companies, caravan and trailer park oweners and leasehold retirement home owners should also be regulated.

Although it does not call for licensing of agents, it does suggest that there should be some barrier to entry into the agency market, so that it will not be possible for anyone to simply decide they will be an estate agent or letting and management agent and then set up shop without any qualifications or experience.  The ability to set up very cheaply has been helped by the growth of the internet and the growth of ‘virtual’ agencies

The Jones report suggests that at least the principle professional in an estate agency or  residential letting and management agency branch must have an accredited, advanced qualification.  This call corresponds to the calls of all professional bodies that workers within agency should be better qualified.  The NAEA and ARLA have their technical awards which act as an entry qualification, but also have their diploma qualifications which are at an advanced level.  All these qualifications are accredited by the government Qualifications and Curriculum Authority (QCA - now Ofquals)

NAEA and ARLA are themselves bringing in a form of licensing for their members based on qualifications and in the future it seems likely that there may well be some statutory requirement to have qualified people working in agencies.  MOL, as the NAEA’s and ARLA’s preferred supplier of technical awards and only supplier of diploma qualifications by supported distance learning, can help with your training needs.

Please call us on 0161 203 2103 to discuss how we can help

New Services Available

to the Property Profession

MOL is offering two new services to compliment their already popular suite of flexible learning courses for the property profession.

1                    MOL Mock Exam Papers.

2                    ‘Technical Award in 35 Days’ programme

MOL Mock Exam Papers

With no past test papers for the NFOPP Technical Award, MOL are making available, for the first time, their own mock Technical Award exam papers (previously only accessible to MOL students).

Who better to test your knowledge than the company who wrote the NFOPP Technical Award workbooks?

1                  Purchase a set of 4 MOL ‘Technical Award’ multiple choice mock test papers, for each unit of either the Technical Award in the Sale of Residential Property or  Technical Award in Residential Lettings and Management. These will be individually marked, scored and the incorrect answers indicated                              £69.00

2                  Purchase a set of 4 MOL ‘Technical Award’ multiple choice mock test papers, for each unit of either the Technical Award in the Sale of Residential Property or  Technical Award in Residential Lettings and Management. These will be individually marked, scored AND for incorrect answers the correct answer explained   £99.00

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Book your 4 examination papers with NFOPP during this programme and unlock

• an extra 1 hour study session and
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£300.00 (not including workbook and exam fees)

Ring MOL on 0161 203 2103 for further details.

On 8 December 2008 Margaret Beckett the Minister for Housing and Planning released a written statement about HIPs and the residential property market.

First Day Marketing

The ability of estate agents to immediately start to market properties on which they had received instructions was due to run out on 31 December 2008.  This has now been extended until 5 April 2009.

From 6 April 2009 estate agents will need to have a basic HIP in place before they start marketing a property.  However, the Minister believes that a basic HIP can be provided within 3 to 5 working days.

Content of a HIP

There has been little alteration to the content of a HIP apart from the need for a Property Information Questionnaire (PIQ) which will be a mandatory part of the HIP from the 6 April 2009.  The PIQ will include a summary of the leasehold information for leasehold property together with a copy of the lease.

The local authority search of the property is still a mandatory element, but sellers will have up to 28 days to provide this, and their property can be marketed without the search information as soon as the basic HIP has been assembled.

A working group is considering how the property searches can be made simpler and easier to use.

The HCR is currently an optional part of the HIP and few have been provided.  The government still feel that buyers would find information on the condition of property useful before deciding whether to make an offer to buy.  Therefore, the government will establish a working group to explore options for making condition information available from existing practitioners, including home inspectors.  This means that HCRs or similar products are likely to become mandatory in the future.

Leasehold information, currently mandatory in the HIP, will be authorised (and hence discretionary) from 1 January 2009 (although the need for the HIP to have a copy of the lease remains a mandatory requirement).  However, basic leasehold information will be contained within the PIQ from 6 April 2009.

Property Information Questionnaire (PIQ)

The PIQ will be a mandatory document from 6 April 2009 and will cover a range of basic information that it is believed can be easily completed by the seller.  The PIQ will include

Postal address, name of seller and date the PIQ was completed

When the property was bought

If the property is listed

The council tax band

Parking arrangements

Whether there is any damage to the property from storm or fire and if so if subject to an insurance claim

If there has been flooding and if the Environment Agency’s flood website has been checked

Any treatment for wet/dry rot or damp and if so any guarantees

If there is central heating and its type and when last serviced

When electrical wiring last checked

Which services are connected to the property and type (ie mains or other)

Details of changes to the property (eg alterations, extensions) and if so if relevant permissions obtained

If windows have been replaced and if so details of changes and guarantees

Access arrangements

Leasehold information where appropriate eg

            Who collects ground rent and service charge and their amounts

            Length of lease left

            Amount of buildings insurance

            Details of proposed or ongoing works

            Use restrictions in the lease

            Details of parking or communal gardens

A slightly amended PIQ is available for new homes

Enforcement and Service Standards

The Minister also promised better enforcement against estate agents who break the law.  The Minister believes the new regulations will make it easier for TSOs to enforce the requirements of the HIP regulations.

The OFT are also to conduct a comprehensive study of home buying and selling.  They will consider competition between service providers and how consumer interests are served.

David Hughes

12 December 2008

From the 1 October 2008 consumers have extended rights to cancel contracts for the sale of goods and services.  1987 Regulations gave consumers rights to cancel contracts entered into with people who made unsolicited calls to their home.  New regulations, the Cancellation of Contracts Made in a Consumer’s Home or Place of Work etc. Regulations 2008, extend this right to cancel if the contract is entered into anywhere other than the service providers own premises, including the consumer’s home, even if the call was requested by the consumer.

For residential estate agents (or letting agents) this means that if clients come to the estate agent’s office and sign a contract for the estate agent to sell (or let) their property there will be no right to cancel.  If however, the signing of the contract takes place elsewhere, either at the consumer’s home, or at a viewing of a property they wish to buy, or anywhere else other than the estate agent’s own office, the consumer will have a right to cancel within 7 days of signing.  Cancellation must be in writing (this includes email)

Estate agency contracts that are signed by consumers in their own homes or away from the estate agent’s business premises must now also incorporate

• a notice of the right to cancel (Schedule 4 Part I) and
• a form of cancellation notice able to be filled in (Schedule 4 Part II)

The Department for Business, Enterprise and Regulatory Reform (BERR) have issued a guidance note related to these regulations which is also attached to the usual explanatory memorandum published with the Statutory Instrument.

Local trading standards departments will administer and police the regulations and will have similar powers of investigation and entry to those under the PMA.  An estate agency as well as the member of staff breaching the regulations will be liable to prosecution.  There is also a defence of due diligence for estate agencies (Regulation 18) similar to the PMA.

Failure to give notice of the right to cancel is an offence.  If found guilty, the penalty is a fine not exceeding level 5 on the standard scale.  Currently this is a maximum of £5,000.

This will undoubtedly have an impact on the way that residential estate agencies (and letting agencies) take instructions from clients and when and how they start to implement the instructions to sell.  An estate agency is likely to have three options

• start immediate marketing and write off any expenses if the client cancels
• delay marketing until the 7 day period has passed
• insist that all contracts for estate agency work are signed in the agent’s office

A further possibility allowed by the Regulations (Regulation 9) is for the client to request in writing that the estate agency start to perform the contract immediately or before the 7 day period has expired.  If they subsequently cancel within the 7 day period allowed they would then be responsible for paying the ‘reasonable’ costs of the service up to the point of cancellation.  ‘Reasonable’ is not defined in the regulations.

This latter point could cause some problems in an active market where a buyer could be introduced within a few days, the contract could be cancelled within the 7 day period allowed and the introduced party could continue to buy the property.  Normally an estate agent would claim a commission in such circumstances but it is not clear how the courts would interpret the regulations in such an instance.