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Estate agents

Contents

Estate agents are regulated under the Estate Agents Act 1979 (and later amendments). This Act requires all estate agents doing residential property sales work to be a member of a government-approved 'estate agent redress scheme', such as the Property Redress Scheme. Many of these schemes follow codes of practice. You can refer to these codes if you have a complaint against an estate agent.

If an estate agent provides letting and property management services, they must also be registered with a government-approved property redress scheme for those services.

The Estate Agents Public Register has details of estate agents who are currently banned from engaging in estate agency work or who have received a formal warning under the Estate Agents Act 1979. In April 2014, the Powys County Council took over the responsibility for the Act from the Office of Fair Trading.

Estate agent obligations and your rights

Estate agents have certain obligations to you, such as telling you when an offer is made to buy your property. Some of these obligations are described below.

Contracts

The estate agent must explain the meaning and effect of the terms discussed below if they're used in the contract. The same applies to similar terms using different words.

You should also be aware of any terms that impose a fee for advertising, marketing or other services provided by the estate agent whether or not a sale occurs.

Pre-contract information

Before you enter into a contract to sell your home and become liable to pay an estate agent's fee, the agent is legally obliged to give you the following written information:

  • Details of their charges (usually based on a percentage of the sale price), the circumstances when you'll be liable to pay and the total fees (or how they'll be calculated if unknown).
  • Breakdown of any other charges (such as expenses) that you may be liable to pay, like expenses. An estimate may be given if an actual sum is unknown.
  • Details of any services that they're offering, or are intending to offer, to any prospective buyer (such as a mortgage, insurance, or the sale of the buyer's property).
  • Details of any services that they're offering, or are intending to offer, that give a financial benefit to anyone connected or known to the estate agent (like an employee or an associate) or a third party.
If they don't give pre-contract information

If the estate agent doesn't give you this information then they won't be able to claim payment of their fees until they've got a court order to receive the payment.

The court can grant the order for the full amount or a reduced amount, or can refuse to give the order. The court will consider how much the estate agent is to blame for failing to comply with the law and for any damage caused to you as a result.

Information to be included in the contract

An important term in the contract relates to how much commission the estate agent will get if they sell your property. Consider negotiating this term to a lower fee - market forces, like the number of houses on the market and the general state of the property market, will influence the commission fee.

Other important terms can be included in the contract. You must be aware of them, including whether the contract relates to:

  • A 'sole agency' – this means you're free to find a buyer yourself, but you can't appoint another agent for a certain period of time; or
  • 'Joint or multiple agencies' – this means 2 or more estate agents are used to find a buyer. The agent that finds the buyer earns the commission. Ensure that the contracts you enter into with each estate agent are on a 'no sale, no fee' arrangement.
Terms relating to commission

You should be cautious if the following terms are used in the contract:

  • 'Sole selling rights' - this means that the estate agent is entitled to a commission whether or not they introduce the buyer while they have the sole right to market and sell the property. The commission is payable even if the eventual buyer was found by someone else. A commission will also still be payable after the sole selling rights have expired if the property is eventually sold to a buyer who the estate agent had previously introduced.
  • 'Sole agency' – this means that if, at any time when the estate agent has the sole right to market and sell the property, you appoint another estate agent who introduces the buyer of your property, you'll have to pay a commission to both agents. You'll also have to pay a commission after the sole agency period expires if the property is eventually sold to a buyer previously introduced by the estate agent (even if the buyer eventually came through another estate agent).
  • A 'ready, willing and able purchaser' - this is a buyer who is willing and able to sign an unconditional contract to buy your property. A commission will still be payable if the estate agent introduces such a buyer, but you withdraw from the sale for any reason.
Declaring a secret profit and personal interests

The estate agent must tell you of any fee or payment that they get from third parties relating to the sale. In other words, they mustn't make a secret profit. This may include, for example, receiving a commission from someone they've recommended to you. The estate agent must get your express consent for this, but they're not obliged to reveal how much they'll be paid. If they fail to get your consent, you may be able to recover the payment that they've received and any commission you've paid them. This applies even if the agent hasn't acted improperly or you haven't suffered any loss yourself.

If the estate agent has any personal interest in your sale, they must tell you this promptly in writing. The same applies to a connected person or someone known to the estate agent, like an employee, friend or acquaintance).

These interests may include buying your property, or selling their property to you.

Deposits

Estate agents can hold deposits on your behalf and are subject to strict rules about how they're handled.

There are 2 circumstances when a deposit might need to be paid to an estate agent:

  • Before contracts are exchanged - the buyer might pay a deposit to demonstrate that they seriously intend to buy the property. This is often paid in exchange for you temporarily taking the property off the market or not allowing any other potential buyers to view it. The conditions of the deposit should be contained in a written agreement. In Scotland, it's illegal for an estate agent to charge a pre-contract deposit.
  • On exchange of contracts - this is when a deposit is usually paid normally to your solicitor, but it can be paid to your estate agent (though this is rare).
General rules for holding of deposits

Estate agents holding a deposit must:

  • Give a receipt;
  • Hold the money in a separate bank account called a 'client account';
  • Keep detailed records of all transactions going through the client account;
  • Pay you interest earned on the deposit if it's more than £500 and if more than £10 interest has been earned on it (unless you and the estate agent have agreed another arrangement); and
  • Have an insurance policy covering their liability to pay you the total held in their client account on your behalf.
Other laws that apply to estate agents

Supply of Goods and Services Act

Estate agents must provide their services with reasonable care and skill, within a reasonable time and at a reasonable cost. The 'care and skill' that you can expect would be the same that can be expected from a reasonably competent estate agent. Although not all of the terms in this Act are covered in Scotland, Scottish common law offers similar protection.

Unfair Contract Terms Act and Unfair Terms in Consumer Contracts Regulations

Consumer contracts can contain terms that restrict or exclude a supplier's liability for breach of contract but only if they can show that the term is reasonable. The courts decide whether a term is reasonable. If a term is challenged, it's for the supplier to prove to the court that it's reasonable.

Suppliers often use standard terms that aren't negotiated with a consumer. A standard term is unfair if it creates a significant imbalance between the parties' rights under the contract, to the detriment of a consumer. All the terms of the contract must be in plain and clear language, otherwise they're open to being challenged as unfair.

Business Protection from Misleading Marketing Regulations and Consumer Protection from Unfair Trading Regulations

These regulations state that an estate agent must not make statements that are false or misleading about land or property offered for sale. There is no obligation to disclose information (good or bad), but the information that is provided must be accurate and not misleading. Although it is not possible to regulate the description of the decoration in a property, there are objective matters such as the number of bedrooms, for example, that must not be misleading. Breaches can be a criminal offence. If a misstatement is due to the carelessness or negligence of the estate agent then it may be possible to sue them, but in practice most estate agents will disclaim any liability in the terms of their contract.

Complaints

You might have cause to complain against an estate agent for:

  • Bad service
  • Breach of contract
  • Breach of your legal rights
  • Being discriminated against
  • Failure to follow the estate agent's own rules or code of conduct
How to complain

If you have a complaint against an estate agent, you should first try to resolve the problem by talking to the agent or the manager of the office.

If the matter isn't resolved, write to the head office or the person who deals with in-house complaints, following the estate agent's complaints procedure. Ask for details of their internal complaints procedure if these haven't already been given.

Your letter should set out full details of your complaint including any relevant background facts, how it happened, what you've done to resolve the problem and what you want the estate agent to do. You should set a reasonable deadline for the matter to be resolved.

If you're not happy with the outcome of your complaint, and if you used the estate agent for the buying or selling of a residential (as opposed to a commercial) property, you should raise a complaint with the 'estate agent redress scheme' that the estate agent has joined.

If your complaint doesn't involve the buying or selling of a residential property, but involves the letting or managing of a property, consider raising a complaint with a government-approved property redress scheme. These schemes include the Property Ombudsman, the Ombudsman Services or the Property Redress Scheme. If you're still unhappy or if your complaint involves the buying or selling of a commercial property, consider contacting the National Trading Standards Estate Agency Team. You can also complain to your local Trading Standards department or any professional body that the estate agent has joined (such as the National Association of Estate Agents).

If you're still not happy

If 8 weeks have passed since you raised the complaint and you're still not happy, you can refer your complaint to an estate agent redress scheme, namely the Property Ombudsman, the Ombudsman Services or the Property Redress Scheme. These schemes deal with all complaints about the buying and selling of residential property.

Estate agents must join an approved redress scheme or risk penalties, such as a fine or a ban from carrying out estate agency work.

Before making a complaint to a scheme provider, you should check which scheme the estate agent has joined.