Agents MUST disclose referral fees, Trading Standards...

Customers must be told about third party referral fees when buying or selling a home says the National Trading Standards Estate and Letting Agency Team.

In a report to government NTSELAT recommends mandatory disclosure to improve transparency and ensure consumers feel confident in the services they receive.

At this stage it’s just a proposal but a statement overnight from NTSELAT says it wants estate agents who flout this rule to be banned from the industry.

The proposal follows a review into referral fees and their impact on buyers and sellers carried out by Trading Standards at the request of the Ministry for Housing, Communities and Local Government.

The recommendations include proposals for government to make transparency of referral fees mandatory and require a warning to be given to customers that they should consider shopping around. NTSELAT also wants a public awareness programme to warn consumers about hidden referral fees, and additional industry guidance with professional bodies and redress schemes to encourage compliance.

In a recent survey of The Property Ombudsman members, almost 60 per cent had referred customers to external companies. Over 80 per cent of those members admitted receiving a fee for the referral.

The review by Trading Standards noted that the practice of referring customers to a preferred service provider in exchange for a fee is “regularly concealed.”

It claims that many customers remain unaware of the existence of referral fees when buying or selling and it says: “In some situations, customers may be pressurised to use a referred provider despite the fact it does not meet the needs of the customer or provide best value.”

James Munro, senior manager at NTSELAT, says this morning: “We recognise that referral fees have a place in business if used ethically and transparently and with no pressure to use the referred service.

“It is important that customers are fully aware of the basis and value of a referral or recommendation so they are able to take an informed transactional decision. Mandatory disclosure of referral fees would ensure there is full transparency around this practice, helping to build consumer confidence in the estate agency industry and demonstrating the duty of care agents should have to both parties in a property sale.”

The recommendations are now to be studied by the government according to Housing Minister Chris Pincher.

“This government is committed to making it easier, cheaper and clearer for people to own their own home, including by making the buying and selling process more transparent” he says.

Pincher adds: “It is unacceptable that unscrupulous practices are still taking place where consumers are not being made aware of referral fees when buying or selling a property”

“I welcome the National Trading Standards' work to raise consumer awareness of referral fees and will carefully consider the recommendations of their report. I have asked National Trading Standards to continue to monitor the situation to help inform if further steps need to be taken.”

NTSELAT says it’s developing further industry guidance and wants consumers to report experiences of non-disclosure to local Trading Standards departments.