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June 2009

Come gather round, people — why the times they are a-changing at the OFT

COMMENT by DAVID PERKINS

How the realities of a new era were brought home by a ‘frightening experience’

IT seems the times they are a-changing at the Office of Fair Trading.

Admittedly that impression is based on a relatively small sample but I have had two estate agents independently report on their attendance at a recent seminar where Roger Young, the director of the OFT responsible for estate ageny enforcement, must have delivered a fairly powerful and, to these estate agents at least, frightening presentation.

In the case of one agent, it was more the speaker’s attitude rather than his presentation which made the bigger impact. He described it to me as: “Behave, or else we will get you!”.

If this were indeed a fair outline of Mr Young’s talk, then it serves to demonstrate how significantly the new OFT differs from the original organisation which disappeared overnight when the first part of the Enterprise Act 2002 came into force.

In many ways, the most important aspect of this legislation was to introduce a totally new constitution for the Office.

As I have often remarked, the only aspect which remained the same after the transition was the name and logo: the powers and the operational approach were all totally new.

The Office calls these wide-ranging changes important reforms designed to crack down on abuses which harm consumers and fair-trading businesses alike.

This ‘new’ OFT retained its regulatory role under the Estate Agents Act 1979 but these powers are being significantly extended by the Consumers, Estate Agents and Redress Act 2007.

The part dealing with estate agency has introduced new schedules to the 1979 Act but does not rewrite the approach entirely which is what the Office was hoping the Government would do as it was one of the primary recommendations in the Second Estate Agency Review conducted in 2001.

This was because the Estate Agency part was only dropped into the draft legislation at a late stage in proceedings.

The primary aim was to make estate agency membership of a redress scheme – usually but inaccurately referred to as an Ombudsman – mandatory for all firms although it includes other provisions which will be introduced following the current OFT review and round of consultation.

One of these was a requirement to keep copy letters for a minimum of five years to have them available for inspection by an Authorised Officer if required.

Frankly, when we were drafting the Estate Agents (Provision of Information) Regulations and the Estate Agents (Undesirable Practices) Order back in 1989 and 1990, it never occurred to any of us on the Working Party that estate agents would comply by sending the necessary information to their clients promptly and in writing, only to fail to keep a copy on file or available for retrieval from their computer system.

Turning to the Ombudsman situation, here matters are currently in a state of flux with the Residential Property Standards Board working at revisions to the Code of Practice, while various initiatives are under consideration for registration, or licensing, or some other form of closer control of the business than is presently the case.

Perhaps the most significant changes, envisaged by the new legislation, relate to the overall regulation of the industry by the authorities – led by the OFT and various Trading Standards Departments – increasingly referred to as Consumer Protection.

At one stage, those two titles, trading standards and consumer protection, were largely interchangeable with some councils using one and some the other.

Then trading standards officers had more of a mediation role aiming to resolve complaints amicably, working with traders in an advisory role.

But no longer. Today, few businesses regard TSOs as neutral, impartial, or even helpful. It is more a ‘them and us’ situation as Officers see their role as very much representing consumers and on the side of the complainants. This leaves business people to look after themselves.

One long-standing complaint TSOs had about estate agents generally was that they had no right of access under the EAA unless they had quite specific reasons to suspect a criminal breach of the legislation had occurred.

And since the only provision carrying criminal sanctions related to deposits, this was of fairly limited value once estate agents, almost universally, gave up taking deposits!

Perhaps the word complaint, in that paragraph, is an understatement. I recall speaking at a National Conference for TSOs in Glasgow.

The chairman, a senior man then Secretary of their Institute, said (and this is an accurate quote): “Gentlemen, why do you waste your time chasing used-car dealers when the greatest crooks in your High Streets masquerade as estate agents?”

This drew a burst of laughter and then applause from the 250 or so senior TSOs present – not for the joke, but because they agreed with the sentiment! I have faced hostile audiences before but this lot really were something else!

Most of the other provisions relating to possible breaches of the EAA could only be addressed by the OFT and then only in specific circumstances where the estate agent had committed what is known as a ‘trigger’ offence.

True, in quite extreme circumstances the Office could take pre-emptive action, but in all normal circumstances these restrictions were too cumbersome, time-consuming and bureaucratic which probably accounts for the small number of estate agents who faced disciplinary action over the years.

Often this was down in single figures, although matters aappear to be beginning to change, even before the CEARA comes fully into force.

As the OFT was preparing for its revised role as a national commercial police force, it advertised a new post for a Policy Director charged with co-ordinating enforcement generally.

The job went to Christine Wade, previously Chief Trading Standards Officer for Essex, which I had come to regard as one of the most hard-line authorities when it came to enforcing the Property Misdescriptions Act 1991. And I can back that claim with a number of tales of PMA cases in Essex which would make your toes curl often in horror!

Regular readers will recall that last month we were looking at the new Consumer Protection Regulations which have largely replaced the Trade Descriptions Act and a number of other associated Regulations.

The CPR is both shorter and easier to operate than the previous provisions.

More significantly, the CPR makes no unduly favourable distinctions for estate agents, from every other type of business activity. These CPR provisions are so quick and so flexible it makes most of the enforcement provisions in the EAA virtually irrelevant.

Back in the late 1970s, when we were discussing plans for the Estate Agents Bill, many estate agents had a real concern that TSOs would involve themselves in their sales work and hinder free open-market price negotiation.

Even today, some Officers do not realise that recently concluded ‘sales’ still very much ‘subject to contract’ are far from being sales in the otherwise accepted sense.

Most will hold together and get past exchange but many will not. And I am yet to be convinced that Home Information Packs have made any impact in this respect.

Hence the need for safeguards to limit the circumstances which could ‘trigger’ real disciplinary action.

Now, 30 years down the line, I am prepared to concede that these concerns were unwarranted and many of the provisions written into that earlier legislation unnecessarily cautious.

Nevertheless, estate agency is still a unique type of sales activity and totally unlike the many other business activities which TSOs are more used to investigating.

Looking at the way the world is going, it might seem strange to say that we, as estate agents, are still agents for the owners of the property and not impartial intermediates or brokers with any duty of care to prospective buyers. But we are not – legislators, please note!

Indeed, one of my more fundamental objections to the HIP regime is the fact that it weakens this concept and requires estate agents to become involved in work which conventionally, and to my mind properly, should be undertaken by a solicitor, or some other representative of the buyer.

Certainly, they should not be the responsibility of the sellers’ agents.

That said, here lies a dead horse if ever I saw one, and I fear that this fudging of such critical and quite fundamental issues will continue.

With luck, the next administration may repeal the HIP Regulations, although, of course, Energy Performance Certificates are not going to go away.

However, I am sure the commitment to EPCs will be heavily qualified with a time-honoured let-out – those four simple words: “When Parliamentary time permits”.

David Perkins can be contacted
at PO Box 333, Carterton,
Oxon, OX18 3WZ,
on 0870 350 1865 or at:
david@david perkins.co.uk.