Changes to laws governing estate agency in Britain could leave some home buyers with no more protection than if they were buying a used car in a private sale.
The warning comes from the Property Ombudsman, Christopher Hamer.
He accused the Government, which he said is not prepared to make any attempt to change the Estate Agents Act to protect landlords and tenants, of “moving with unfamiliar speed to remove protection from home buyers”.
Under changes announced by Vince Cable’s Department for Business, Innovation and Skills (BIS), intermediary websites that advertise properties for private sellers, and can offer For Sale boards making them look like genuine estate agents, will be exempt from the provisions of the Estate Agents Act 1979.
In effect, says Hamer, home buyers would be entering into an entirely private arrangement with the seller, introduced by a website that would not be able to offer any type of help or advice with marketing or negotiations in order to remain within the constraints of the new rules.
He said: “Just like a purchase of a second-hand car on a private basis, there is the possibility that the buyer could be led to believe what they are buying is in a certain condition only to find out later that significant work is needed.”
Simultaneously, the Government is also planning to repeal the Property Misdescriptions Act (PMA) that forces estate agents to ensure that any promotional material they use accurately describes property for sale.
Instead, the Government intends they should be covered by the Consumer Protection from Unfair Trading Regulations (CPRs), which Hamer says are intended more to apply to general retail sales.
Intermediary websites will be exempt from the PMA until it is repealed, which BIS has said will be ‘as soon as the parliamentary timetable allows’.
Adherence to the CPRs will only be proportionate to the level of service that intermediary websites offer, which in effect means that the CPRs will offer little protection to the consumer.
Hamer believes consumers will have difficulty understanding the nature of some of the businesses they deal with, little realising that they have no comeback against these intermediary websites should things go wrong.
He said: “The changes to the EAA mean that intermediary websites are outside it and will therefore not have to offer any form of redress through one of the two approved Ombudsman schemes that all residential sales agents have been compelled to join since the Consumers, Estate Agents and Redress Act came into force in October 2008.
“I am also unclear as to how the intermediary business will be policed and how the possibility of such businesses crossing the line into full estate agency will be monitored.
“I am surprised that the Government has taken such steps.
“I, along with many other organisations, expressed a strong view that any changes to the EAA should bring about a tougher regime by way of the obligations placed on letting agents.
“The current economic climate has seen, and will see, more consumers moving into the private rented sector where significant amounts of money are being passed over.
“Despite strong evidence that consumers are at risk, the Government has claimed that regulation is not a priority.”
The consultation by BIS closed on August 10 and detailed changes to the legislation were announced in little more than a month on September 13.
Hamer and Gerry Fitzjohn, deputy chairman of the company that provides the Ombudsman scheme, both made submissions to BIS highlighting potential detriment for consumers in the proposed legislative changes.
Fitzjohn said the Government’s aim was stated as opening up estate agency to more competition and to make it easier for businesses to enter the arena.
He said: “With 14,000 estate agencies already in existence, according to Government figures, there was little apparent difficulty in entering the industry already.
“These changes do nothing to enhance the experience for consumers, who will have difficulty understanding whether they are dealing with an estate agency covered by the demands for redress or an intermediary website that is outside the scope of every regulation.
“It may be a winning solution for people who want easy entry to the property sales arena but it’s a backward step because it puts every consumer potentially at much greater risk through lack of advice and the inability to seek free-of-cost redress via the Property Ombudsman when things go wrong, as I believe they inevitably will.”
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Comments
...and how many people have bought a 2nd hand car that isn't dodgy. Look at how successful Autotrader is.
I think Chris Hamer has been in the industry for too long, he's talking like an estate agent. It is denial of the inevitable change that is coming.
We are all relatively intelligent in this country and shouldn't be treated as if we aren't and just like one would have checks done on any 2nd hand car you buy, so you should have with a 2nd hand house. That is what the solicitors and surveyors do.
It wasn't many years ago when 1 in 4 of all sales in the UK were agreed privately (In 1979 the Price Commission's survey of sellers found that just 73% used an estate agent, while 25% of homes were sold privately), and this is likely to be the case again soon (privately or online)...
After all it IS what the public want, the power of the big agencies is apparent within TPOS and the big portals but sooner or later the forces for good in the government will win over and the changes will be pushed through.
The universal issues in any business where advice is required are;
1) firstly realising that you need advice
2) knowing where to seek the advice
3) recognising quality advisers from the rogues
4) knowing which questions to ask
5) judging which advice from perhaps 2 or 3 " advisers" is correct
In the largely unregulated and emotion driven (buyers) property purchase world caveat emptor does of course apply but by and large we have a population that expects the government and everyone else to automatically protect them so they go around daily sticking hands into the the unknown areas of life and wondering why they get their fungers bitten when if they just thought for a moment that they don't know something and sought advice then their lives would be better.
eMoov; you have an interesting way of interpretation, if you read that as 'outlawing sole agency agreements' .....
Just worked out what this load of drivel is about!
He is new in the job and is trying to make a name for himself and he is succeeding in making a pillock of himself.
Shapps - eat your heart out as here is another one with as much knowledge and experience as next doors cat, the difference being the cat can lick it and he has to have someone do it for him or do it for someone else.
So - back on your heads lads the tea break is over.
I'll tell you what "Regulations" mean in this country.
Two "doormen" type thugs walking up and down the High Street, wearing SWAT team style uniforms including flack jackes / stab vests with CCTV pinned on there puffed out chests seeking out the young, old and vulnerable, ready to pounce on any careless discarded cigarette butt or sweet wrapper.
I don't want dirty streets, but you can keep your "Regulation". 1939 Germany coudn't get enough regulation. "Papers please!"
Any minute now, my front door will be kicked in due to typos in my post.
W...
"Unfortunately for traditional agents, they also now go as far as outlawing sole agency agreements and over valuing (so it seems). "
It's over 60 pages; do us all a favour and tell us which section has the bit about sole agency so we can jump straight to it please......
Have a look at this on page 33, Section 4.18:
When you gain new clients and instructions
• Imposing onerous or disproportionate requirements
which prevent a client from exercising rights to
terminate an agreement or switch to another
property sales business.
• Refusing to allow a consumer to cancel their
contract with you, where a cancellation period
applies and has not expired.
A shot in the foot then
@emoov please clarify if you are an Estate Agent, a Passive intermediary or are waiting to see which is the more commercially lucrative before deciding.
We are estate agents.
We advise guidance on value in the same way as other agents by using comparables based on SOLD price, not asking price.
But the market decides whether the asking price is accurate. It's not the agent that dictates price.
@W
Telecoms regulation! Are you having a laugh?
As the Bible says, there is nothing new under the sun. Pretty soon people are going to realise that you can't beat a reasonably remunerated, well-trained and experienced professional as a source of valuable advice on the important desicions of life - and that if a system (whatever its drawbacks) is actually about as good as you can get and by and large works, don't change it, especially if it is merely to deliver control from one set of vested interests to another (who will slip you bigger backhanders than the first lot).
OMG, I've become an inveterate cynic - it's what age and experience does for you, I suppose.
Shame the politicians will never acknowledge that they and their "special" advisors rarely know better than the people who earn their living in any particular sector
eMoov;
"Unfortunately for traditional agents, they also now go as far as outlawing sole agency agreements and over valuing (so it seems). "
It's over 60 pages; do us all a favour and tell us which section has the bit about sole agency so we can jump straight to it please......
From the other thread it was established that Estate Agents who visit property give accurate valuations but the reliance on virtual valuations is what is giving rise to spurious valuation advice, particularly from Calnea the people whop advise government!
@emoov please clarify if you are an Estate Agent, a Passive intermediary or are waiting to see which is the more commercially lucrative before deciding.
How do you advise on value?
Jimmy;
Goodbye to....
Financial Services Regulation?
Trades Descriptions Act?
Insurance Industry Regulation?
Telecoms regulation?
etc
etc
and everything else that gives the consumer protection...?
Or just the stuff relating to Estate Agency?
You might like to take a look at the new OFT guidelines that relate to the Consumer Protection Regulations. They have been significantly beefed up to include ALL such firms that advertise properties for sale and not only mirror much of the PMA but also, importantly, cover off having to inform buyers of potential issues rather than being able to hide behind 'ommission' as the PMA allowed.
Unfortunately for traditional agents, they also now go as far as outlawing sole agency agreements and over valuing (so it seems).
That might just sort the lacklustre housing market out in one foul swoop eh?
See http://www.oft.gov.uk/shared_oft/estate-agents/OFT1364.pdf
I have no interest in what the self serving Mr Hamer has to say. Do you seriously entrust the ability to arbitrate property transactions with someone who talks about second hand cars?
The whole caravan of OFTs, POs, NAEAs and the rest of the gravy train have no value in modern society. Let's see a Government that casts aside thiese limpet legislative bodies and starts letting the people get what they want. Freedom to trade and make choices.
Goodbye Property Misdescriptions Act. Goodbye to complaints from whinging buyers that lost out because the Agent wasn't goint to wait seven weeks to see a survey. Good riddance to you all. Now, jog on.
CAVEAT EMPTOR - let the buyer beware.
Actually works VERY well as long as you get the right advice before buying.
BUT there is a problem.
(MOST) Solicitors do a good job on the whole - in 20 years I have only seen a couple of "mistakes" and this usually came to light on properties that had been owned by the same person for 20-30 years so the rules and regulations had changed.
The problem is surveys and what they mean.
MOST buyers get a mortgage. MOST buyers rely on a survey done for the the benefit of the lender to prove value.
Because the buyer pays the building society, who pays a panel, who pays the surveyor - who can a buyer sue if there is a problem?
The client/ professional relationship is thoroughly obfuscated.
Then you get the standard phrases such as "No evidence of damp was seen, but we recommend that you instruct a professionally qualified damp inspection" or "The central heating installation seems in good order but ..." or "The electrical system seems ..."
YOU ARE BUYING A HOUSE THAT IS NOT BRAND NEW - WHAT THE HELL DID YOU EXPECT?
The other problem is the way that the valuation section is written - there is no commitment to the price, or the way that the works necessary might affect the value.
STRAP ON A PAIR. Is the house worth the money regardless of the work required or not? If it is - great, say so. If it isn't - great, say so in a clear concise manner that makes it obvious to the seller why.
Time after time I have agreed a sale for the valuation to come back fine, but with work evident. Because of the idiotic vague language used to couch the price "Towards the upper end of values for the area", "Whilst the price is considered reasonable, you may need to reflect on the work required..."
There isn't a company out there when asked to quote that will not recommend at least some work. Anyone who expects different is deluded. So even though the surveyor has said "Nothing is wrong" you end up with quotes of hundreds or thousands of pounds for absolutely nothing.
And the Building Regs seem to change every 6-9 months or so which means that what was installed 2 years ago will now not be up to current standard even though it is entirely fit for purpose.
I know it isn't an exact science - after all, I am an RICS member, but nearly every sale in 20 years has had this.
I think that the bank should do a valuation survey for themselves to decide to lend the money or not. Then I think that a buyer should get their own independent survey. I think that the cross selling of Homebuyers Reports is bad, and whilst it looks as though there is some thrift and economy which seems like a good idea, I think it is a false saving.
Like all things, people in the UK are desperate to save a buck today, even at the expense of ten bucks tomorrow.
You are completely missing the point confused. It's not about the fees but about the consumer having some protection and somewhere to make a complaint that will be looked into. This is opening up the online market to all sorts of undesirable practices and if you think otherwise, then yes you are very confused and naive.
'Confused'
Dont be a prat, the government move swiftly to withdraw the requirement to be part of the redress system which protects the general public after they have been discussing for years about 'protecting the people' with compulsary membership of the OFT and Property Ombudsman to ensure professional standards are maintained, this is yet another knee jerk reaction from a government that hasnt got a clue what to do ! This Country is a JOKE!
I'm afraid confused that you are indeed confused if you think a surveyor and a conveyancer are effective means of help, guidance & communication for buyers during a purchase!!
There are conveyancers and surveyors that are employed by the buyer to provide information and advise.
Let's get real here. The only concern is that agents just can't justify the fees that are being charged anymore.
In scandinavia the seller has liability for defects to the property for five years after they sold it. This means that 90% of sellers buy an NHBC type bond for all properties.