Referral Fees - agents should disclose them up-front insists Ombudsman

The Property Ombudsman has joined calls for greater disclosure of referral fees by agents. 

The issue has become a hot topic in recent months after the submission of a report to government by the National Trading Standards Estate and Letting Agent Team.

NTSELAT’s report recommends mandatory disclosure to improve transparency and ensure consumers feel confident in the services they receive.

The proposal in turn 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. 

Now the new Property Ombudsman, Rebecca Marsh, has told Estate Agent Today: “Referral fees themselves are not necessarily bad. However, not disclosing these to consumers undermines trust and confidence in agents. Put simply, we share the view … that disclosure is the key.”

In a 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.

Marsh’s predecessor, Katrine Sporle, was part of the Referral Fees Working Group put together by the government in late 2018. 

Then TPO updated its sale and lettings codes in June 2019 to reflect the obligation that referral fees are material information and, as such, should be disclosed to allow consumers to make informed decisions.

Marsh has just taken over as TPO, having previous been Chief Ombudsman at the Legal Ombudsman and previously the Deputy Ombudsman and Executive Director of Operations and Investigations at the Parliamentary and Health Service Ombudsman.

On her first two months in her new role, Marsh says: “TPO is involved in a significant number of initiatives within what is a complex sector and I am already on a steep learning curve. However, I am fortunate to be able to call upon my previous experience as an Ombudsman to have been able to hit the ground running on the core business of resolving complaints. 

“In fact, given that the Legal Ombudsman’s biggest sector of work is in conveyancing complaints, there is a distinct cross over to the complaints TPO deals with.”