Skip to main content

Estate Agents (Regulation)

Volume 453: debated on Monday 20 November 2006

This Government are committed to a robust and effective consumer and competition regime—one that is fair to consumers as well as business.

We believe that the key to successful, fair, and competitive markets are confident, knowledgeable consumers who know what their rights are. We have a duty to give consumers:

The right information to spot a good deal;

the knowledge to tell when they are being disadvantaged; and

the enforcers empowered to catch those who break the law.

These are the principles driving new, key legislation.

It is the Government’s aim to ensure that the UK has the best framework for competition and consumer empowerment and support by 2008.

That is why the Government have today published the Consumers, Estate Agents and Redress Bill. This Bill contains a range of important provisions that will:

Create a new, stronger more coherent consumer advocacy body offering savings of around £9 million a year;

introduce redress to the energy, postal services and estate agency sectors; and

improve regulation of estate agents and doorstep selling.

As regards doorstep selling, on 7 September we announced our intention to extend the cancellation and cooling-off rights currently available for unsolicited visits to solicited visits as soon as parliamentary time allowed. (http://www.dti.gov.uk/files/file33819.pdf). Furthermore, on 17 October we published the Government response to our consultation on “Consumer Voice” which set out our proposals to be taken forward in legislation. (http://www.dti.gov.uk/files/file34655.pdf)

However this statement focuses on the estate agents provisions in the Bill and explains developments since the Government published their response to the OFT’s report in 2004.

Buying or selling a home is one of the most important transactions that any person undertakes—and many people will be looking to sell and buy at the same time. For most people, buying a place to live is the most expensive purchase they ever make—and the process can often be stressful, for buyers and sellers alike.

The Government are committed to ensuring that this process takes place as smoothly as possible, and the Housing Act 2004, which the Government are in the process of implementing, will make the housing market more efficient and put in place important safeguards for both sellers and buyers of residential property.

A major role in the transaction process lies with estate agents, who facilitate deals and bring buyers and sellers together. Their role is crucial to transactions running as smoothly as possible. Over 90 per cent. of people buying and selling a home in England and Wales use estate agents, who often have a keen understanding of local conditions and issues.

It is vital that the market for estate agency services, and the underlying housing market which it serves, work well and that consumers are adequately protected against unfair practices. Consumers must be certain that estate agents will deal honestly with them. And those estate agents that do operate honestly need to be sure that the law can and will be enforced effectively against those who do not.

The OFT recognised these issues in its study of the estate agency market published in March 2004. The OFT found that the market was generally competitive, and in most cases worked well for consumers, but that a significant number of consumers were not happy with the service they received. Problems ranged from serious abuses such as failure to pass on offers to concern about quality of service issues, such as poor administration by estate agents. The OFT made a number of recommendations to bring the 1979 Estate Agents Act up to date with modern enforcement practices, to ensure a baseline level of protection and to promote quality of service and redress.

The Government published their response to the OFT report, in July 2004. In the response, the Government went further than the OFT and stated that they wanted to make membership of a redress scheme mandatory for all estate agents in the UK. We amended the Housing Act so that complaints relating to home information packs could be subject to a redress scheme. The criteria for approving HIPS redress schemes are available on the DTI website and the intention is to have at least one scheme approved so that all estate agents in England and Wales will be required to join a scheme for the purposes of HIPS related complaints by 1 June 2007. The Consumers, Estate Agents and Redress Bill published today fulfils the promise made in our response that redress should be available to all consumers in the UK who have a genuine complaint against an estate agent dealing in residential property.

The Bill also implements a number of the other recommendations in the OFT report. The Bill will improve the audit trail for transactions by requiring estate agents to make and keep records, including records of offer letters, for a period of six years. The Bill provisions will give the OFT and local authority trading standards officers greater teeth by giving them powers to require access to premises and onsite production of records in a wider range of circumstances; enabling them to investigate breaches of the 1979 Act, not just criminal offences. Finally the Bill will expand the circumstances in which the OFT can consider the fitness of an estate agent to practice and consequently take regulatory action against them under sections 3 and 4 of the 1979 Act. The OFT will be able to consider banning an estate agent not only when they have been convicted of a criminal offence but also where there is sufficient evidence that an offence has been committed, even if there is no conviction. Furthermore, the OFT will be able to consider banning an estate agent where an enforcement order under the Enterprise Act or a statutory undertaking has been breached. These changes are needed to bring the 1979 Act into line with modern enforcement practice, where civil or informal action is generally used as a cost-effective and proportionate alternative to criminal prosecution.

Not all of the recommendations which the Government supported in their response are included in the Bill. Some of the measures do not require primary legislation. For example, we will be consulting in due course on how estate agency contracts can be made more transparent, which can be achieved through secondary legislation. Regarding the recommendation to widen the circumstances in which estate agents have to disclose their personal interest in property transactions, it is now considered that a combination of the Unfair Commercial Practices Directive, the Fraud Bill and Common Law in Scotland, will target the relevant mischief that was the target of the proposal, for example, an estate agent accepting a bribe to “ring-fence” a sale. In terms of encouraging codes of practice, the industry code of practice, currently followed by the 60 per cent. of estate agents who belong to the ombudsman for estate agents voluntary redress scheme, was approved under the OFT codes approval scheme in 2004.

Finally, regarding the recommendation to consider redefining what constitutes acting as an estate agent, the OFT has taken steps to address the two problems which were the primary source of its concern at the time of its report. In December 2005 the OFT issued guidance on the types of activities carried out by internet property retailers which are likely to lead to them falling within the definition of ‘estate agency work’ contained in the Estate Agents Act 1979, and this provided some clarity on this issue. In October 2005 the OFT obtained statutory undertakings to comply with the Estate Agents Act 1979 from a business using option contracts. These actions have helped to clarify the scope of the 1979 Act and have sought to provide protection to consumers when dealing with new types of estate agency businesses. Therefore we have no plans to change the definition of ‘estate agency work’ in the 1979 Act at present.