Spring is (almost) in the air – traditionally the best time to move house. With Britain having lost its AAA credit rating and the housing market rather gloomy anyway it may hardly seem so. But life goes on – and so must the buying and selling of houses. Estate Agents are crucial in that process. Most do a good job even in these straitened times. But some cut a few corners; a few may indulge in misleading and aggressive practices.
This Note says a little about the protections given by the public law to “consumers” of estate agency services. Regulations have been in force covering such consumer protection since 2008 (the Consumer Protection from Unfair Trading Regulations 2008/1277 (“the Regulations”)). The Regulations cover consumer protection generally: they are not specific to estate agency businesses. They apply across the board. The Office of Fair Trading (OFT) issued guidance towards the end of 2012 specifically covering the application of the Regulations to property sales. It is that recent guidance which is the focus of this Note. But first some general comments are made about the Regulations themselves.
The background to the Regulations
A flavour of the Regulations can be gleaned from the 2005 EU Directive which heralded them. Article 2 said:
“This Directive is without prejudice to contract law…”
And Article 11 said:
“Member States shall ensure that adequate and effective means exist to combat unfair commercial practices in order to enforce compliance with the provision of this Directive in the interest of consumers.”
This is reflected in the Regulations which do not provide private law remedies for consumers themselves but for public law remedies – usually enforced by trading standards officers and the Office of Fair Trading (with any criminal prosecutions being conducted by the Crown Office or Procurator Fiscal Service on behalf of the Lord Advocate).
In principle a compensation order may be made to cover any personal injury and, in particular, any alarm or distress caused directly to the target of the unfair practice. Few such compensation orders have however been made.
The Regulations apply to “business-to-consumer” dealings. They do not apply to dealings purely between businesses or purely between consumers. They identify five unfair practices:
1. misleading actions;
2. misleading omissions;
3. aggressive practices;
4. a blacklist of examples of 31 practices which are always unfair; and
5. practices which are contrary to the requirements of professional diligence.
An unfair practice must be such as to be likely to affect an average consumer’s decision to enter into the transaction concerned. The blacklist of 31 examples mentioned above will always be unfair. Unsurprisingly this blacklist covers fairly extreme tactics: for example “falsely stating that a product will only be available for a very limited time, or that it will only be available on particular terms for a very limited time, in order to elicit an immediate decision and deprive consumers of sufficient opportunity or time to make an informed choice.”
This Note now turns to look at what the OFT Guidance says about the Regulations as they apply to estate agents and property sales.
OFT Guidance on property sales (which may be found here: http://www.oft.gov.uk/shared_oft/estate-agents/OFT1364.pdf)
The Guidance is lengthy: 65 pages in all. This Note does not attempt a summary of the whole thing. It simply looks at each of the five “unfair practices” in the Regulations (as listed above) and gives – only -one or two examples for each which the OFT views as being a breach of the Regulations.
1. Misleading actions
- Advising a likely selling price in the market appraisal that is not based on a fair and honest assessment of current market conditions (but is quoted, for example, as a tactic to acquire the instruction).
- Using phrases like “new instruction” when the property for sale has already been on the market for some time, or has been taken off the market previously for only a very short period.
- Using photographs that do not depict the property accurately.
- Telling a seller who is the estate agent’s client that a potential buyer will be able to buy without a mortgage when the agent does not have evidence that this is the case.
2. Misleading omissions
- Failing adequately to highlight or draw to a prospective client’s attention unusual or surprising conditions in the estate agent’s terms and conditions.
- Failing to clarify that something appearing in a photograph, which a potential buyer would reasonably assume was included in the sale, was not included.
- Failing to mention significant non-standard features that the estate agent is aware of about the property for sale (for example shared ownership of parking area and path, or roof space being leased to a solar panel provider).
3. Aggressive practices
- Pressurising a potential buyer to use associated services, for example to take out a mortgage through an in-house mortgage advisor or to use a particular firm of solicitors.
- Pressurising (for example by persistent and/or aggressive telephone calls) the buyer to act quickly to put in an offer, raise their price, finalise the sale).
- In order to make commission quickly, pressurising a seller to accept an offer at a lower price than is reasonable for their property.
4. Blacklist of 31 practices that are always unfair
- Telling a prospective seller client that the estate agent has sold similar properties recently for a certain price when this is not so or that there are potential buyers lined up when this is not so.
- Telling a prospective buyer that other properties have sold for a particular price, or that other potential buyers are interested in the property when this is not true.
- Using a broad guide price (such as “£150,000 to £200,000”) when the estate agent has reason to believe that the seller has no intention of accepting an offer at the lower end of the range.
5. Practices contrary to the requirements of professional diligence
- Leaving details of properties the estate agent has sold on the agent’s website or in the office window or other display for a long period of time (to create a false impression that the agent is selling more properties than is actually the case).
- Providing inadequate information to a seller about the legal requirements for a Home Report (energy report, single survey and property questionnaire).
- Failing to provide adequate information about the legal requirements to include details of Green Deal installations in the Energy Performance Certificate.
- Not carrying out reasonable checks on the adequacy and truthfulness of information that is used in marketing.
Note: This material is for information purposes only and does not constitute any form of advice or recommendation by us. You should not rely upon it in making any decisions or taking or refraining from taking any action. If you would like us to advise you on any of the matters covered in this material, please contact Ian Ferguson: Ian@mitchells-roberton.co.uk.