The Money Laundering Regulations 2007 were enacted to ensure that businesses at risk of being used to launder money have controls in place to minimise such risks. Under the regulations, the Office of Fair Trading was initially appointed as the supervisory authority in relation to estate agents (although HM Revenue and Customs have now assumed responsibility instead).
The 2007 regulations empowered the Office of Fair Trading to establish a register of “estate agents”. It decided to do so on 1 July 2009 and, as a result, all estate agents were required to register with the Office of Fair Trading within six months. Businesses that continued to trade thereafter without registering risked fines and prosecution. In addition, the regulations stated that businesses that did not register were prohibited from carrying on business as estate agents.
RTA (Business Consultants) Ltd v Bracewell [2015] EWHC 630 (QB); [2015] PLSCS 89 concerned a contract made by consultants who did not register their business transfer agency until the registration requirements were brought to their attention in 2012. The Office of Fair Trading did not try to impose any civil penalty, or to prosecute the consultants. However, the owner of a business that was offered for sale by the consultants before they became registered claimed that the consultants’ failure to comply with the registration requirements rendered their contract for the supply of estate agency services to him illegal and unenforceable.
The judge rejected the consultants’ argument that the requirement to register was a comparatively trivial administrative regulation. He ruled that whether breach of a statutory provision renders a contract illegal is a matter of construction of the provision in question – and agreed that the court should be cautious when considering whether a breach of a statutory provision should result in a contract being illegal.
There was obviously a public interest in ensuring that businesses potentially handling significant amounts of money comply with their obligations under the 2007 Regulations by subjecting themselves to supervision by relevant authorities and a prohibition on carrying on business, unless registered, provided a more powerful incentive than a civil penalty or a fine in the case of a limited liability company.
In order to carry on the business of providing “estate agency work”, an estate agent needs to enter into contracts with those wishing to sell, or buy, property. Without such contracts, there is no business. The 2007 Regulations were trying to prevent businesses from acting as “estate agents” by prohibiting them from entering into contracts to supply estate agency services if they were not registered with the authority that supervised estate agents. In the light of this, the judge concluded that the estate agency agreement made by the unregistered business transfer consultants was illegal and unenforceable.
Consequently, the seller was not liable to pay the consultants any commission that would otherwise have become payable under their estate agency agreement following the grant of a lease which the seller had arranged himself in the light of the business consultants’ failure to find a purchaser for his café, restaurant and public house.
Allyson Colby is a property law consultant
