Considerable doubts and a host of unanswered questions have surrounded the Estate Agents Act since it was rushed to the Statute Book in 1979 during the dying days of the last Labour administration. Most agents — and indeed the landed societies themselves — looked on the legislation with a certain complacency, considering that their methods and professionalism were well ahead of the minimal standards laid down to regulate the unqualified and inexperienced.
Any complacency, however, was rudely shattered last year, when it was revealed that the Office of Fair Trading had issued warning orders against some estate agencies and partners for alleged breaches of section 18 of the Act, which requires agents to give their clients advance notice of any charges that may become payable. The full gravity of the situation struck home when it was realised that any further transgression of the Act — not merely a repetition of the alleged offence — could mean that the agents were regarded as “unfit to carry on estate agency work”. The practical effect might be that the firm would be closed down, lock, stock and barrel.
In the case of Burling Morrison, the Sale-based chartered surveyors whose appeal decision was reported earlier this month,(*) the shadow has been lifted, but only after the machinery had dealt remorselessly and at great length with matters that to many people appeared trivial. The agents had specified a limit of £150 as reasonable out-of-pocket expenses to cover the advertising of a house they were to sell; in the event, after the transaction was successfully concluded, the detailed account came to £124.83. Most clients would surely have been delighted — certainly there does not appear to have been any overcharging — but a complaint was laid, and upheld by the original adjudicating officer. The grounds were that the client was not told beforehand how many times an advertisement would be placed in the local press, nor how many circulars of the property would be distributed. Taken to this extreme of detail, the practical difficulties of itemising charges in advance are almost insurmountable if the agent is to be given the correct scope to use his judgment in the light of market reaction once a property is launched.
Sanity has returned with the decision of the Secretary of State for Trade and Industry — following a rehearing of the case by a tribunal of three “appointed persons” on appeal — that the warning orders should be cancelled. It would be completely inequitable if a minor offence laid a firm open to being banned from doing business: there had been no attempt to deceive, nor had the client suffered in any material respect. Thus there has been a victory for common sense, but the Secretary of State has gone further by accepting that the agents were guilty of no breach of section 18. This view, though undoubtedly a bonus, nevertheless has negative overtones. It gives some idea of what does not constitute a breach, but it gives no constructive guidance as to what actions would contravene the legislation, nor the steps which should be taken to avoid committing an offence.
Neither has there been any official recognition of the invidious position of the agents entangled in this web. As Burling Morrison found to their cost, the stigma of a warning order, once the news became public, weakened their position considerably, for if a client queried any detail of a transaction the firm was likely to give in — no matter how strong their arguments — rather than risk a scrap that could end up with another complaint to the OFT. For the moment, however, the decision is one that the profession at large will welcome with heartfelt relief; the Office of Fair Trading decided to mount a case on what has proved to be shaky ground, and has deservedly received its come-uppance. For the immediate future, the priority is to remove the grey areas of doubt. A year ago this column argued that “it is up to the professional societies to move quickly and agree with the OFT an accepted standard of practice in line with section 18, for the uncertainties of the present position are in no one’s interest”. The events of the intervening 12 months have only intensified the need for action.
(*) See our issue of March 8 at p916.
