by Duncan Lamb
The Law Society has condemned as “useless” an estate agency code of conduct which is believed to be on the verge of receiving statutory backing from the Government.
In what seemed to be a controlled leak of information from the Department of Trade and Industry last weekend, rumours began to circulate that a new code with Government approval will be unveiled within the next few weeks.
However, the Law Society believes that, when published, the code will ignore “the most crucial issue — the conflict that sellers’ agents face in making money out of selling financial services to house buyers”.
It contends that some estate agents refuse to sell a house to a prospective buyer unless the buyer agrees to buy a mortgage or endowment policy via the agent first. Estate agencies are making an increasing proportion of their profits out of undisclosed commissions on the sale of endownment policies and other insurances, claims the society, and in some cases these commissions represent 25% of profits. It is this which the Law Society believes the new code will fail to address.
Spokesman Walter Merricks said: “Our member firms are appalled by what is going on in the house transfer market … They often have to explain to buyer clients that they do not need the expensive endowment policies that they have been sold.” He added that the society and its members would be “astonished” if the Government produces a code which is “supposed to deal with sharp practice but which ignores the most blatant and common abuse”.
Details of the new code are obviously still sketchy, but it is thought that it will deal with the “nuts and bolts” end of estate agency rather than the financial services element. The undesirable practices which are likely to attract disciplinary measures are: misleading descriptions of property; failure to declare a personal interest in a property; using associates of the estate agencies as sham buyers; and failing to disclose the use of box numbers to advertise for property.
Consumer affairs minister Eric Forth is currently considering the code and the correlating of prohibition orders. An announcement is expected shortly.
RICS president David Yorke said that as far as could be judged at the moment, the new code appeared to be a “step in the right direction”. While the RICS approved of a new code having teeth to deal with offenders, Mr Yorke said it would probably have to be expanded over time — “perhaps in the areas that the Law Society has identified”.
