Proposal to amend Estate Agents Act

  • Proposal to amend Estate Agents Act

    The Government’s proposal to amend the Estate Agents Act, as part of its bid to reduce the regulatory burdens on business in order to help boost economic growth, has been slammed by the property industry.

    The Department for Business Innovation & Skills (BIS) issued a consultation in June entitled Encouraging New Business Models – Proposal to amend the Estate Agents Act 1979, asking various property professionals for their views on the proposal to amend this legislation. The BIS seemingly wants to exempt “passive intermediaries offering a limited, low-risk service”, to homebuyers and vendors from being regulated by the Act.

    What this effectively means is that passive enterprises, particularly SMEs, providing a communication platform for the exchange of information about properties for sale between vendors and purchasers, may be excused from certain laws in the Act.

    The aim is to help businesses to innovate and grow and allow new business models to emerge while ensuring that consumer protection is not unduly compromised. But the fear is that if the proposed amends to the Act are approved, there may be a surge in alternative agents with the ability to operate outside the rules of the Act. This could potentially have an adverse impact on transparency levels, placing industry reputation, jobs and consumer protection at risk.

    “We strongly oppose any measure that erodes vital consumer protection, which we believe these proposals will do,” said Mark Hayward (left), President of the National Association of Estate Agents (NAEA). “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.”

    Robert Bartlett, CEO of Chesterton Humberts, believes that the impact of the proposed changes could lead to an escalation in the volume of dodgy agents.

    He commented, “It will have a detrimental and negative effect on vendors and purchasers as these ‘passive intermediaries’ do not need to be regulated or licensed. The estate agency industry is not regulated enough and this potentially opens up the flood gates to rogue agents.”

    Whilst acknowledging the necessity to change the legislation, describing it as “out of date and produced before the advent of the internet”, the Royal Institution of Chartered Surveyors (RICS) says that it is concerned about the way Government are going about this and have expressed these worries in their response to the consultation.

    Paul McCormack, RICS regulation policy manager, wrote in a letter to BIS, “RICS considers that section 22 of the 1979 Act, requiring minimum professional standards for agents to start trading, should also now be enacted to create a statuary level playing field for all sales, letting and management agents operating in this field.

    “Many businesses operate in both sales and lettings, and the regulatory arrangements should reflect that fact. Such an approach would ensure minimum levels of consumer protection, and provide businesses operating in sales and lettings with a clear, simple and consistent approach that is lacking in the current unnecessarily complex regulatory arrangements.”

    The Property Ombudsman’s response to the consultation was far sterner.

    Ombudsman Christopher Hamer (left), writing both as Ombudsman and the independent Council to which he is accountable, said that his organisation does not believe that existing businesses are burdened, pointing to the existence of approximately 14,000 estate agencies in the UK, as evidence of the ease of the entry to the industry.

    He wrote, “We recognise that the Government is striving to reduce regulation and restriction on businesses but the proposed amendments do 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.

    “Whilst recognising that the Government is opposed to broadening regulation, we would continue to emphasise, and this view is supported by industry and consumer stakeholders, 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.”

    But not everyone is against the planned changes to the Act.

    Russell Quirk, founder of low cost online estate agent eMoov.co.uk, described the Estate Agents Act 179 as a “Dickensian piece of legislation that most agents have little regard for”.

    Whilst it sounds like a law to ban estate agents, it’s actually a law to protect them from competition,” he added.

    Mr Quirk continued, “We relish competition from all quarters as it can only serve to drive quality of service up and fees down. We therefore support the principle of any move to tear off some of the red tape within the house selling business as a positive step in providing more consumer choice amongst home sellers.”

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