December 2009/January 2010

Even if UKIP were to win...

WE have previously looked at plans by the newly-constituted Property Standards Board to start sorting out, simplifying and hopefully agreeing a single residential Estate Agency Code of Practice – one that addresses what estate agents do and how it should be done.

Hopefully it means going back to basics, dropping the bells and forgetting the whistles.

Personally, I rate that as good news – provided the initiative does not get hijacked and the PSB asked to do too much.

When we drafted the first Estate Agency Code, it was a single sheet of paper with a simple 12-point framework just setting out essential professional points and principles.

When circulated around the main Whitehall departments, it came back accepted by all of them within just a few weeks.

This year has seen further market collapse while plans to regulate what is left of estate agency have multiplied. There are almost more plans than there remain estate agencies! I did say ‘almost’.

If, as seems increasingly likely, Home Information Packs are withdrawn next year that will be good news – as much for conveyancing solicitors as estate agents.

HIPs gave solicitors a great shock to their collective system as they thought their conveyancing monopoly was safely enshrined in legislation.

Those who wanted to remain in the business had to make difficult decisions, such as to keep their internet access switched on all day and use e-mail rather than E2R mail. No more reading the e-mails each morning before switching the system off again!

The question, of course, is once HIPs go, what next? In any case there are lots more estate agency regulations in the offing which a change of Government in May is unlikely to reverse since most will be too far down the line.

As far as estate agency regulation is concerned, a change of Government will have very little influence as the Office of Fair Trading is now virtually a law unto itself. Statute law can be changed, but administrative law is unstoppable.

I do not know of any estate agents actually welcoming the new Estate Agency Register the OFT is currently preparing.

After February 1, 2010, the OFT could prosecute an unregistered agency seeking a sentence of up to two years in prison and/or an unlimited fine. No change of Government will reverse this – barring possibly an outright victory for UKIP!

But our friends at the OFT have much more than this in mind. Firstly, they are finalising further Regulations under the Consumer Estate Agent and Redress Act 2007.

Mandatory Ombudsman membership was rushed through first, now come revisions to the original Estate Agents Act 1979.

While these stop short of totally rewriting the 30-year old legislation – which is what the last OFT Review recommended – they will require more administration, more paperwork and all your offices will be open to full inspections as and when the OFT or local Trading Standards Department deem to necessary.

Effectively, the original EAA ‘trigger’ safeguards provisions have gone.

Then the EAA was a fairly modest measure designed to fit around day-to-day practice. The first OFT’s Review of Estate Agency, conducted in 1989, was a modest affair – our Report to the Secretary of State ran to about 35 pages although the three Orders and Regulations in 1991 were the outcome.

The second OFT Review was somewhat larger – a team of outside consultants, led by Paul Bland, was under the auspices of the Markets and Policy Initiatives Division of the newly-enlarged, reconstituted and more powerful OFT.

Bland found that the estate agency market was ‘not uncompetitive’ while the number of rogue practitioners (inevitably labelled ‘cowboys’ by the media) was ‘small’. I could have told them that – quicker and for less money!

However, the Bland Report firmly dismissed calls for compulsory licensing of the 11,000 estate agencies in England and Wales arguing that international investigations – covering Australia, Denmark, Ireland, the Netherlands, Scotland, and the USA – revealed ‘similar levels of customer dissatisfaction’ to those revealed in the UK’s Consumer Review.

Again, Government took notice. One maxim caught on: “If estate agents do not subscribe voluntarily to an Ombudsman then thought must be given to making membership mandatory.”

Describing the EAA as ‘tired’, Bland wanted replacement legislation to be more easily enforced with greater obligations for everything to be recorded in writing and disclosed to all and sundry.

Again, under the CEARA, that too is coming. These Regulations will be through in 2010 even if UKIP are in charge! What did I just say about administrative law?

But already the third OFT Review is underway, bigger and better and more comprehensive than the first two put together.

Last month the initial results of the ‘Home Buying and Selling Market Survey’ were published. These come in sections. One deals with reactions from the Trading Standards Service and runs to a mere 45 pages while the estate agents warrant twice the size with a 91-page report!
The trouble with all such exercises is that only dedicated trouble makers respond so any analysis can be distorted. I see no immediate answer to that, save to ask you to bear it in mind.

Of the TSS 39 per cent had replied. With the estate agents, 13,849 requests were sent out – and just six per cent replied.

However, certain figures collated from the TSS can be multiplied up pro-rata. This suggests about 2,500 inspections of estate agencies were undertaken in 2008. Worryingly, in 24 per cent of these cases, the estate agents were found not to be complying with the relevant Regulations.

Most complaints were resolved by negotiations and warnings rather than disciplinary action under the Property Misdescriptions Act 1991 or the Consumer Protection from Unfair Trading Regulations 2008 although that still implies about 25 PMA cases were taken during the year. About 60 per cent of the complaints were regarded as criminal activities.

Taken overall, these are not large numbers but with the amount of time I spend in trying to help estate agents ‘get it right’, that is more than I would have anticipated.

What I found especially interesting was that a large majority of the TSS wanted to keep the PMA – with 93 per cent regarding it as ‘effective’, while 77 per cent disagreed with the idea that it could be repealed to rely on just the CPR in future.

That is interesting as the CPR has to all intents and purposes replaced our old friend, the Trade Descriptions Act 1968 and is very popular with TSOs.

The results of the estate agency survey, while a longer document, are more predictable. Or, to put that another way, the first reading told me little that I found either new or that surprising. For example: “Buyers’ solicitors are the largest single source of delays” – real earth-shaking revelations!

Finally, for the record, the Department of Business Enterprise and Regulatory Reform is also conducting its own estate agency review.

Whether this is to shadow the work of the OFT and provide an independent overview of the eventual Report, due out next year, I am not sure. If it were thinking of repealing the PMA, that suggestion will not be easily implemented as TSOs mount a powerful lobby.

However, it is this last review which I expect will be the least influential. The OFT may be a law unto itself able to act on many of its own recommendations but by the time any BERR review reaches Ministerial level I expect a new attitude of consolidation and deregulation will be in place.

Especially, of course, if UKIP were to win!