An estate agency says it is returning money to buyers after a newspaper revealed it was demanding would-be purchasers paid the firm £2,000 “if they want to be taken seriously” when making an offer.
The outer London agency Brian Cox - which has five offices in Greenford, Northolt, Harrow and Sudbury Hill - allegedly wanted prospective buyers to hand over a £2,000 ‘deposit’.
Brian Cox told buyers to pay the money into a NatWest account in return for which “the property will be removed from the market.”
The website of the agency carries a ‘reputation report’ from ReferenceLine, an ‘OFT Approved Code’ logo (although the Office of Fair Trading was abolished over a year ago) and also carries The Property Ombudsman’s logo.
However, The Guardian quotes outgoing-TPO Christopher Hamer on the Brian Cox tactic:
‘He told us the current code of practice which took effect in August 2014, “stipulates that agents must not take pre-contract deposits. Firstly, it is the vendor who decides what offer to accept and whether the property is taken off the market. Secondly, the agent is paid by the vendor to progress the sale of their property, not by the buyer”.
‘He says that in some cases, known as “sale by tender”, the buyer is asked to pay the agent’s fee, but adds that this is not the same as taking a deposit to progress an offer.’
The newspaper claims there is no information about who this account belongs to, or whether it is a protected client money account. The Guardian also says the documentation seeking the £2,000 from buyers “suggests the deposit won’t be refunded if the buyer changes their mind or has to pull out because, for example, they have lost their job – they would only get their money back if the vendor withdraws from the sale, or the buyer receives an adverse survey/valuation report on the property, or the local authority search throws up problems that can’t be sorted out quickly. The deposit is also refunded once contracts have been exchanged.”
Estate Agent Today contacted Brian Cox agency over the weekend but has not received a response.
However, The Guardian says the agency - which has reportedly been demanding the deposits for about a year - is now reconsidering its tactic in the light of the newspaper’s article.
An agency spokesman is quoted in the article saying: “It’s not a new idea. We saw loads of developers doing it. I’ve told the ombudsman we are stopping the scheme and are in the process of giving everyone their deposits back ... It was an oversight. No one else has complained. It’s not my bank account.”
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My take is as follows but please take your own professional advice before acting! I think The Estate Agents Act 1979 still defines the legal position in relation to buyers deposits taken by estate agents. I believe the rules are that you can take a deposit but it has to be refundable and it has to be held in a special statutory client account, thereby rendering the process purposeless. However the law has real teeth and if an agent breaks it even inadvertently, it is a serious criminal offence! Of course, as far as I know, there is nothing to stop an agent taking a deposit on behalf of a seller and lodging it with the sellers solicitor, or acting as a buyers agent and transferring all or part of the fee to the buyer. In the later case a declaration of interest would have to be made and recorded to both sides.
Shocking! And people wonder why estate agents get such a bad name. There's no smoke without fire.
@Simon Shinerock - so, basically, the risks far outweigh the benefits.
Seems a stupid and unreasonable measure to take and I'm glad to see Brian Cox have been called out on it.
As the poster above says, it does nothing for the reputation of estate agents even if the reactionary headlines don't necessarily tell the whole story.
Not the brightest move from Brian Cox, but seems like the story has been blown out of proportion a little bit. I'm not sure we're getting the full story.
Having said that, Brian Cox's lack of response leads one to assume that they know they've done wrong and are hoping to ride out this PR storm without too many people noticing.
If they haven't done anything wrong, come out and say so. The lack of defence speaks volumes.
On a side note, no agency should still be displaying the OFT Logo.
I think Mr Cox has bigger worries than bad PR, if his actions were through simple ignoran then hopefully a caution or even the fright of the PR will be where it stops, but he should give all the money back asap
I work for the company and the story has been blown up. The deposit scheme was completely acceptable with the property ombudsman until August last year, there was no clear update that the rules had changed.
The deposit scheme was simple, if the buyer wished the property to be removed from the market immediately we requested a £2,000 holding deposit which was held in a separate account for deposits. This was returned upon exchange of contracts or if any adverse survey reports or searches came in, which meant the buyer did want to go ahead with the purchase. No one has complained until now and home owners are happy they have a committed buyer. We were simply trying to keep fall through rates down and see more transactions complete.
To add, the rule change was an oversight that we have apologised for and any deposits we held have been returned.
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