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Proposition to relax the Estate Agents Act met with disapproval

August 17, 2012 | Landlord News  

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Business Secretary Vince Cable’s Department for Business Innovation & Skills proposition to relax the Estate Agents Act 1979 (EAA) has been met with disapproval by UK estate agents.

In order to reduce the regulatory burdens on business, with the intent of stimulating economic growth, the Government introduced the ‘Red Tape Challenge’ process of scrutinising UK legislation to see where there may be scope for amendments or repeals. The proposal to amend the EAA is a part of this exercise.

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There was a great deal of uproar in the industry in the final 24 hours before the closing date of the consultation on changing the EAA (Friday 10th August) as there was so little awareness at what was about to take place.

The NAEA, RICS, and the Property Ombudsman have all attended meetings at the department.

Mark Hayward, president of the NAEA, said, “The NAEA are of course submitting a response to the Government’s consultation on the Estate Agent Act. We strongly oppose any measure that erodes vital consumer protection, which we believe these proposals will do.
We would be disappointed to see any government recommendations following this consultation which undermine consumer protection, and which do not take into account important issues for consumers such as including the lettings industry within the definition of the Estate Agents Act. We will be making this point very strongly in our submission.”


Peter Bolton King, global residential director of RICS, said, “The RICS are aware of these proposals and have had meetings with the relevant government department. Our balanced, yet robust, response has been submitted to the department, which will no doubt be made available by them in due course.

“Whilst we acknowledge that it is necessary to change the legislation, as it is out of date and produced before the advent of the internet, we are concerned about the way the Government are going about this and have expressed these concerns in our response.
These centre particularly on potential consumer detriment from a growth of unregulated on line agents, operating outside of the Estate Agents Act, with no requirement to provide redress arrangements


“We would prefer a more holistic approach and continue to influence the UK Government to bring about wider reform.”


However, there were a number of interested people within the industry who had not been informed of the proposed amendments, leading some to question the competence of the department responsible.

Nick Salmon FNAEA, managing director of Harrison Murray and ex-SPLINTA campaigner, said, “Regrettably, I was completely unaware of the proposal to change the EA Act and therefore also unaware of the consultation.

“Although it is not CLG handling these proposals, having seen at first hand with HIPs how government departments can botch a consultation, I am not at all surprised that this has not registered on the property industry radar.
It has all the hallmarks of a change that has not been thought through and which will be enacted in haste. Rushed legislation is very rarely good legislation.


“The department should acknowledge that they have not sufficiently publicised the proposals or the consultation and start the process afresh.”


Trevor Kent was another agent who was left in the dark; he commented, “I would have expected (and indeed suffered) such underhand skulduggery from the last administration, particularly on HIPs of course, but I had hoped to see the much-vaunted ‘openness’ from the Conservatives – but hollow promises as always.


“The politicians have, no doubt, been wound up by their civil servants too (HIPs again) but, most likely, this relaxing of the Act has been proposed, researched and directed by donor-friends such as Tesco.
Don’t forget, too, it’s always government policy to issue an anti-estate agent initiative whenever their own stock is low.”


Also concerned about the proposed amendments are Rightmove; a spokesman said, “The Estate Agents Act provides a definition of the role of estate agents, which we support, which provides legislative protection for consumers.


“We strongly feel that any changes to the legislation must maintain a suitable level of protection for the home-moving public.”


The Property Ombudsman (TPO) statement expressed the desire for the EAA to be tightened up rather than relaxed: “Both the council of TPO, through the Ombudsman, Christopher Hamer, and the board, through its chairman, Bill McClintock, and myself, have had robust discussions with BIS on revisions to regulations for estate agency,” said Gerry Fitzjohn, Chief Operating Officer of TPO.

“We have told BIS in a face to face meeting on July 11 that far from reducing consumer protection and introducing consumer confusion, BIS should be doing more to bring lettings agents within the scope of the Estate Agents Act 1979 because there are real consumer protection issues.

“In our written response, the Board makes it clear that its immediate impression of the proposals is that consumer protection will be eroded. We recognise that the Government is striving to reduce regulation and restriction on businesses, but the proposed amendments quite clearly open up opportunities for the consumer to stray unknowingly into an environment where the protection they might expect to have is not in fact available to them.

“Given the generally held negative view of agents operating in the property sector (albeit largely anecdotal but more evident in the lettings sector), it appears inconsistent for consideration to be given to diluting agents’ legal obligations.

“Whilst recognising that the government is opposed to broadening regulation, we continue to emphasise – and this view is supported by industry and consumer stakeholders – that is it possible to cite examples or reports / surveys supporting the view that legislating for letting agents should be a priority and therefore that broadening the scope of the legislation is what is required, rather than narrowing it.

“We are telling BIS that the current, well-established legislation is not a burden on business and serves consumers well. The existence of approximately 14,000 estate agencies in the UK also demonstrates the ease of entry to the industry.

“We do not believe that ‘estate agency work’ as defined in S1 of the EAA causes uncertainty about the scope of the act. There are numerous online estate agencies already trading, and many of the sites provide a matching service and are members of or registered with TPO.


“Consumers will not draw a distinction between an estate agent and somebody that looks and feels like an estate agent but isn’t. They should not be misled into a situation where, having paid money for a service to market their property and regardless of there being distinct difference in price, different laws and differing levels of consumer protection actually apply.

“The growth in the number of estate agencies since 1982 seems to suggest that the definitions are not problematic or off-putting.

“The Consumers, Estate Agents and Redress Act provides safeguards for the consumer with each sales agent required to belong to an approved redress scheme.

“The redress scheme requires compliance by the sales agents (in the case of the Property Ombudsman Scheme) with the consumer codes which are approved by the OFT. We believe that some organisations may see this as a barrier since they do not wish to comply with OFT approved standards.

“It is not clear whether agents that ‘escape’ EAA obligations have any responsibilities under the Money Laundering Regulations and whether this potentially creates a risk.

“TPO also thinks it is unclear what is meant by a ‘low risk’ service to buyers and sellers. There is potential for considerable issues. Sellers will have to work out their own asking price and may sell at below market value. Should this happen they would have no recourse to redress. Buyers could be at risk because sellers using a ‘passive agent’ website could be introduced to properties that have been dressed up for sale. An estate agent conducting business under EAA, PMA, CPR regulations could not allow this to happen. Buyers could be more, not less, confused.

“Existing agents may decide to start a new model outside the Act which would be confusing for consumers. Consumers will simply not understand the difference between an ‘EAA agent’ and the passive agent. They will assume the businesses act in the same way and that they, as consumers, are protected in the same way.

“We believe that all property sales should be inside the Act with the exception of private sales.

“We firmly believe that regulation should be strengthened, particularly in regard to letting agents who are currently not governed by the Estate Agents Act.


“The Act should be extended to cover letting agents in order to raise standards and provide consumer protection to this growing industry.”

The Independent Network of Estate Agents (INEA) has recently called on their Estate Agent members to oppose the amendment to the EAA, saying, “If passed, it is estimated that beyond 50,000 estate agency and related jobs are at risk. If your (estate agency) income is important to you, then we urge you make a stand.”

Jonathan Daines, Founder of LettingaProperty.com, an online letting agent established in 2008, offered an alternative view: “We fully support innovation in Estate Agency, an Industry that has not seen much change in the last 50 years. The internet has positively affected our everyday lives, we bank online, shop online, socialise online – why should there be barriers for consumers to sell or let houses online?”

With such an overwhelmingly negative response from the industry, will the government reconsider and welcome fresh input? We shall see.

 

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