While recent days may not have seen much constructive progress in the reform and effective regulation of estate agency, there has certainly been a great deal of well-intentioned activity. In last week’s “Opinion” column it was argued that the controls proposed by the Department of Trade and Industry, though welcome as far as they go, lacked the essential cutting edge that only legislation can provide. Section 22 of the Estate Agents Act 1979 must be implemented. The Government’s attitude is that the defining of minimum standards of competence and experience would jeopardise freedom of entry into agency, thereby tarnishing Mrs Thatcher’s picture of the “enterprise economy”. Instead of biting the bullet and finally admitting that discipline has to be backed by effective sanctions, the option of using the Office of Fair Trading has been selected — a poor choice for two reasons. First, the OFT’s procedures are essentially reactive in that they are triggered by complaints: minimum standards are proactive in that they should reduce the causes of complaints at source. Second, the OFT’s lethargic record in issuing banning orders under the 1979 Act holds out little promise of the swift and decisive action needed.
In reacting to the Government’s plans to “clean up estate agency” the Law Society focuses its attention on what it terms “the main market abuse” — agents who act for both the seller in disposing of the property and the buyer in providing financial services. This is by no means a new problem but one that has grown to significant proportions with building societies and insurance companies having taken a major stake in residential agency. There is growing evidence, though much of it is necessarily anecdotal, of a vendor being informed of an offer by the agent only if the prospective purchaser is willing to take out a mortgage with the firm. The Government intends to stamp out this practice by introducing an order under section 3 of the 1979 Act — and not before time. But purchasers may also lose money by cashing-in perfectly acceptable endowment policies on the advice of an agent and taking out a new one, when only a top-up may be necessary. The Law Society recommends the seller to go to an independent practice and the purchaser to seek impartial financial advice.
The Institute of Trading Standards Administration also weighed in last week, with a comprehensive report on agency following complaints to trading standards officers from house buyers in many parts of the country. The examples of malpractice cited included the loss of deposits, failure to disclose an interest in a property, and convicted fraudsters and bankrupts acting as agents. In ITSA’s view, a self-regulating code of practice will not be effective and it calls for far more stringent statutory measures, including the immediate introduction of the compulsory indemnity provisions of section 16 of the Estate Agents Act and amendments to section 3 so that any breaches of a code of practice become “relevant matters” and thus subject to official scrutiny.
From several directions, therefore, the Government is being urged to abandon its weak and negative approach to agency and to introduce comprehensive legislation. The suggested code, according to the DTI, will “apply only to members of those associations which agree to its terms with the Director General [of Fair Trading]”. But these are the very people who least need regulation. It is the fringe operators, the cowboys and the unattached who should be controlled. “I hope that non-members of the trade associations and those who are not subject to the Estate Agents Act … will follow the principles of the code”, says the DTI junior minister, Eric Forth, limply. Without the necessary sanctions, sir, it has to be said that you are taking an unjustifiably optimistic view of human nature.
