Legal changes to how homes are transacted are usually controversial – the acrimonious campaigning over home information packs is a case in point – but the industry is undergoing a quiet revolution which, so far, has attracted little attention.
In the second half of 2013, the government is repealing the 1993 Property Misdescriptions Act, which attempts to guarantee the accurate marketing of homes in brochures and on websites. It will be replaced by existing legislation, until now applied only to the broader retail sector – the Consumer Protection from Unfair Trading Regulations of 2008.
That may sound a dull change but the effects are wide-reaching.
Protecting consumers
Whereas the PMA guided solely on the accuracy of online and hard copy documentation, the CPRs oblige agents and developers to “comply with laws that protect consumers in the UK from unfair sales and marketing practices”, according to the Office of Fair Trading.
This extends beyond written documentation to include verbal information conveyed during telephone or face-to-face conversations and property viewings. Critically, it also places the onus on agents providing information, which, hitherto, would not have been revealed at all under the caveat emptoror “buyer beware” principle.
For example, the proximity of a fast food store or a busy A-road – which may previously have been avoided in a carefully cropped photograph and omitted in written details – may now have to be revealed to prospective buyers.
Likewise, a structural problem with a house, revealed on surveys for recent buyers who then withdrew from the deal, may have to be explained to future prospective purchasers.
The acid test, says property law firm Pinsent Masons, is whether inaccurate, misleading or omitted information “materially impairs an average consumer’s ability to make an informed decision, causing him to make a decision he would not otherwise have made”.
Estate agency institutions have greeted the change with muted enthusiasm.
“Difficult” details
The National Association of Estate Agents has welcomed enhanced consumer rights, while The Property Ombudsman, Christopher Hamer, has issued examples of what sort of “difficult” details about a property should or should not be revealed to potential buyers.
Individual agents, however, have been more overt with their concerns, especially over the interpretation and context of information to make a deal “fair”.
Strutt & Parker’s Annabel Clery says: “Agents now have a duty of care to all consumers: buyers, potential buyers and sellers, even though they are paid by the seller. If a seller would like us to minimise or even conceal a potential issue, we’re no longer able to do so.”
She adds: “The context is also material. A first-time buyer will have different requirements and expect to receive different information to, say, a person downsizing to their final home and accustomed to dealing with solicitors and mortgage providers.”
Different agency sectors will also be affected in different ways.
“Letting is different,” says Dan Channer of Finders Keepers, an Oxfordshire lettings agency. “If there are problems with the property and we are managing it, then it becomes our problem to deal with it. Happy tenants make happy property managers. It’s different with estate agents as they have little financial incentive to minimise post-purchase buyer dissatisfaction, beyond maintaining their general reputation.”
But Channer and many other agents in sales and lettings say the biggest problem will come when a vendor accidentally or intentionally does not come clean about a problem.
“Expect some vendors to be economical with the truth and the agents will get the blame,” he says. “Plus, the vendor or landlord may not be bothered by something that is material for the buyer or tenant. We had a tenant complain about noise on one of the quietest streets in Oxford and we have had people living on busy roads who don’t notice traffic.”
Stephen McOwan of rural estate agency Smiths Gore goes even further. “It will potentially open the floodgatesfor buyers who decide not to proceed with their purchase and see the legislation as a loophole to renege on the transaction. There may be less due diligence undertaken as CPRs are seen as a catch-all fallback position,” he says.
First case
The first case against an estate agency under this legislation has already been heard. Beresford Adams, part of Countrywide, was challenged by Wrexham council’s trading standards team and found guilty of failing to tell prospective buyers of a home about a nearby mineshaft. This was despite the agency allegedly knowing a previous purchaser withdrew after finding out about the mine through a survey.
Magistrates fined the firm £3,500 and ordered it to pay £5,000 costs plus £515 in compensation for the complainant’s survey; however, Beresford Adams had the decision overturned on appeal because of a technicality – the council had not put the findings to the agency directly before initiating legal action.
Now other estate agents believe the industry may have to sharpen its practices to avoid future legal action.
“Standardised floorplans, for example, are vital. Some agents produce plans routinely larger than other agents,” warns Ed Mead of London estate agency Douglas & Gordon. Nicola Merry, lettings manager at another London agency, Kay & Co, says so-called hidden renewal fees to landlords and administration charges to tenants need to be tightened as “it’s been left a little vague on what agents can and cannot get away with”.
Unless, of course, the home information pack is resuscitated to eliminate these problems before a property comes to market. But no one has suggested that – at least, not yet.
