by David Perkins
While there is general agreement that a code of practice for estate agents would be advantageous, there has been considerable criticism of Consumer Affairs Minister Eric Forth for looking to a purely voluntary scheme. Your “Opinion” column of July 1 made this very point — yet how could a mere code be anything else?
What must be more significant and, in my opinion, welcome, is his decision to go immediately for more stringent and specifically identified “undesirable practices” which can be introduced by order under the provisions of section 3.1(d) of the Estate Agents Act 1979.
The minister could have wasted two or three years playing with a high-profile code before finding he had, after all, to resort to something stronger. That might have bought short-term media and professional appreciation, but such exhortation has conspicuously failed this far. Once these “undesirable practices” have been ratified by Parliament they will become as much a part of the Act as the existing regulations.
A code of practice may be superficially attractive, but on further investigation there are distinct drawbacks. The result could well be no more than toothless PR. The minister hopes that non-members of the professional bodies will voluntarily adopt the code; most I would expect to do just that.
The NHBC housebuilding warranty has no statutory recognition or enforcement, yet few builders would contemplate entering the housing market offering lower-standard property. Admittedly the sanction was then underwritten by the building societies refusing to mortgage non-NHB(R)C houses, but with the greater flexibility in mortgage finance these days that is no longer an overriding consideration. Selling to an educated public however, there is now little real danger that standards will actually fall back.
The same financial institutions and building societies now play a major role in estate agency. Collectively, they could influence the position more directly to the extent that they could, if they wish, make the code of practice into a high-profile charter to which any respectable estate agent would wish to add his name.
It is when one looks at the sanctions for breaching the code that the problems become apparent. For a start, there is no single control body in estate agency, nor any likelihood that the Government would sanction any move to establish one. Apart from which some 20% of estate agents are outside the influence of any professional body.
Even a section 22 entry qualification would merely require them to show a minimum period of practical experience, or alternatively membership of an approved body. Furthermore, it could only be a once-and-for-all stepping stone, not valid consumer protection.
Another complication with a code alone is one of definition. If the “statutory underpinning” — announced by Trade and Industry Minister Tony Newton in November — is merely going to be calling a major breach of the code a section 3 “trigger”, one is immediately up against possible questions of degree. Apart from which, in many cases, a vendor’s specific instructions must be able to override the voluntary code. And when is a major breach merely minor?
The third — and, in my view, final — factor militating against the code of practice as the main way ahead is the dual roles of the Director General of Fair Trading — as arbiter of consumer protection and custodian of competition policy.
First, for the code of practice to be officially recognised by the OFT, and to carry Sir Gordon’s endorsement, it would have to comply with the established criteria in terms of support. But, additionally, before this recognition could be confirmed, the DGFT must have been able formally to advise the Secretary of State that the code does not introduce any anti-competitive factors that cannot be immediately justified as in the public interest. Failing this clean bill of ineffectuality, the code would require reference to and consideration by the Restrictive Trade Practices Court, which not only takes for ever — as the RICS can verify having at one time sought a ruling — but a reference would cost considerable amount of money and in any case the “windows” are narrow.
Consequently, the best one could hope for from such a code is that it may include basic principles, and set out a broad framework of guidance. What it could never do is see real offenders run off the road!
In marked contrast, Eric Forth’s idea is for a number of specifically targeted “undesirable practices” to be defined. Each one — and there could be several — would relate to the various identified abuses of the professional duty of care and responsibility.
Furthermore, the DGFT says, on legal advice, that these can cross-relate, under section 3(1)(a)(iii), to breaches of other legislative requirements — Sir Gordon cited the Consumer Credit Act as an example — and this might well be the way to deal with estate agents’ “poetic licence” and present exemption from the Trade Descriptions Act, or the recently reported abuses of the Financial Services Act by “tied” estate agents.
Under the Act, no “undesirable practices” may be introduced until the Secretary of State has consulted widely with professional, consumer and other interests. Once agreed, however, they then become part of the law. They also gain universal application. All estate agents, regardless of their membership of one or other professional body, or freelance status, would have to comply.
The other important factor is that, following this route, Sir Gordon would not have to vet the provisions under the Restrictive Trade Practices Act. In other words the definitions could be clearer, and the requirements and regulations tougher and more straightforward. Surely that is what the professional bodies and critics of the profession have been seeking all along?
Certainly the idea of the code of practice was helpful in arriving at present thinking, but it could — once the various section 3 offences are determined — be left aside. However, the minister feels it would be better to keep it even if it is largely a PR exercise for the profession. He believes that a code could have genuine commercial advantage: the sudden spate of individual estate agency initiatives along these lines would tend to support his view. A code of good practice must have some value if only as a carrot to dangle ahead of the DGFT’s proposed new stick!
Trading Standards Officers, in conference in Glasgow recently, expressed considerable dissatisfaction with the present workings of the Act. Speaking at the conference, I emphasised that the most constructive contribution they could now make was to refer blatant examples of estate agency abuses to the OFT in order that Sir Gordon can better advise the minister. Sir Gordon took up and re-emphasised my point, telling the conference that he will not hesitate to recommend statutory enforcement if he considers that appropriate.
On balance, in my opinion, the review of the estate agency profession announced by the minister is a far more constructive and practical way forward than has yet been fully appreciated and, accordingly, I hope that all the professional bodies in estate agency, with the major players, will give the OFT their support and constructive advice. Eric Forth said: “My views are not set in concrete … I will take careful note of Sir Gordon’s report.” In my opinion this is good news: an important buck has been passed.
