Conflicts of interest. Confronted by lawyers and accountants, ducked by the property industry. Until now, that is.
“Double-dipping” has been a source of growing concern among agents and clients for some while. Many will argue that a firm of advisers acting for multiple bidders on the same deal – or acting for both seller and potential buyer on the same deal – is and should stay routine in this business. It’s how off-market deals happen, how best value is established. Some will insist that the perception that some less scrupulous advisers will fail to act in clients’ best interests is merely perception, with little to no evidence of its existence. In professional services, though, perception matters as much as reality. Ask any accountant.
So this week’s guidance from the Investment Property Forum on conflicts in investment deals is welcome. It balances recognition of the way the property market functions with acknowledgement that it cannot operate unchecked.
Equally welcome is the degree to which the new IPF protocol has already been embraced by the industry. Agents – including eight of the largest – have signed up. The likes of Hermes, Legal & General and Standard Life are believed to be among the endorsing principals.
In truth, the protocol is modest in scope, calling for greater transparency and early disclosure of potential conflicts. It stipulates that agents can act for multiple bidders only with client consent and only if they can maintain confidentiality through a barrier policy.
But it is important to recognise that this is a starting point. The protocol requires more signatories. And the IPF has no enforcement powers, though the RICS is supportive here.
What the protocol will do is bring greater focus to the issue of conflicts of interest in property investment. Could it result in a gold-star system where advisers boast of being signatories to the protocol and clients begin to demand it? Perhaps in time. Will the greater focus result in the emergence of a handful of cases where there are real conflicts, not just perceivable ones? Almost certainly.
That would result in a tougher approach. And if the experience of lawyers and accountants is anything to go by, all of the above will come to pass.
• Will the chancellor overhaul business rates in his autumn statement next week? I doubt it, based on previous form. But that hasn’t dissuaded the industry’s lobbyists from again calling for root and branch reform. “UK retail property industry makes last ditch attempt at reform for ‘archaic’ business rates system,” screamed a BCSC press release this week. Last week the BPF urged “politicians to commit to a package of fundamental reforms in the next parliament”. Earlier this month the Local Government Association, it won’t surprise you to hear, demanded business rates be set by local government.
There’s unison and sense in the arguments. But the chancellor has previous when it comes to ignoring them. What’s different this time is his genuine and welcome commitment to devolution. If he can devolve income tax to Scotland, why not business rates to local authorities? Conversely, he may well feel he has gone far enough on redistributing power. We will find out next week. It may be now or never.
• The Smith Commission on devolution also recommended the management of the Crown Estate’s assets in Scotland, and the revenue they generate, be transferred to the Scottish parliament. From the seabed to urban assets and rural estates to mineral and fishing rights, it will all go (though Scotland will have to write an appropriately sized annual cheque to Her Majesty itself, of course).
In truth, this seismic constitutional change matters little financially to the Crown Estate. Its assets north of the border generate just 4% of its income. But given the disproportionate attention given to the matter during the referendum debate, the management time that will be freed up by the separation may be far more valuable.
damian.wild@estatesgazette.com
