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Estate agents

Contents

Overview

Estate agents are regulated under the Estate Agents Act 1979 and its subsequent amendments. As at 1 October 2008, this Act requires all estate agents undertaking residential property sales work to be a member of a government-approved 'estate agent redress scheme'. The schemes can be used by consumers who have a complaint against an estate agent. In addition many estate agents now follow codes of practice produced by the aforementioned schemes or those of a professional organisation, such as the National Association of Estate Agents (NAEA).

Complaints

Reasons for complaining

You may have cause to complain against an estate agent for one or more of the following reasons:

  • Bad service or service level issues
  • Breach of your legal rights – such as not being informed of an offer made to purchase your property
  • Breach of contract – such as being asked to pay more than agreed
  • Failure to follow the estate agent's own rules and code of conduct
  • Being treated unfairly or discriminately

More information on the obligations that estate agents have to you, and your rights, can be found below under the heading 'Estate agent obligations and your rights'.

Pursuing a complaint

If you have a complaint against an estate agent, then we recommend that you should firstly attempt to resolve the problem by talking to the agent or the manager of the local office. If the matter is not resolved, you should write to the head office or the person who deals with in-house complaints, following the estate agent's complaints procedure. Ask them for details of their internal complaints procedure if this has not already been provided. Your letter should set out full details of your complaint including any relevant background facts, how it arose and what efforts you have made to resolve the problem. You should set a reasonable deadline by which you expect the matter to be resolved.

If the problem still persists or you are not satisfied with the remedies (if any) offered, and if you instructed the estate agent in relation to the purchase or sale of a residential (as opposed to a commercial) property then you should raise a complaint with the particular 'estate agent redress scheme' that the estate agent has joined.

However, if your complaint does not involve the sale or purchase of a residential property, e.g. a complaint about the letting or management of a property, the sale or purchase of a commercial or overseas property, then you should consider raising a complaint with your local Trading Standards department. You can also raise a complaint with any professional body (such as the National Association of Estate Agents) that the estate agent may have joined. To find your local Trading Standards department, visit the Trading Standards Institute website.

Estate agent redress schemes

The estate agent redress schemes deal with all complaints about the buying and selling of residential property including those about Home Information Packs (HIPs) and their Scottish equivalent, Home Reports.

Estate agents that have failed to join an approved redress scheme can:

  • Be subject to a £1,000 penalty charge, which can be repeated if necessary
  • Put at risk their fitness to operate as an estate agent and may ultimately be banned from carrying out estate agency work
  • Risk a criminal offence charge if they continue to practice after receiving a prohibition order

There are currently two operating schemes:

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

The Property Ombudsman

The PO has a code of conduct which its members may voluntarily agree to follow. You should check whether the estate agent you are complaining about has adopted the PO's code of conduct. If so, you may want to look at the code of conduct to check which parts of it have been breached. The PO can only deal with complaints if:

  • The estate agent is one of its members
  • The local complaints procedure of the agency has been exhausted
  • The claim is under £25,000
  • The act complained of occurred less than 12 months before a written complaint was made to the agent
  • The complaint is made within six months of having received a final offer from the estate agent
  • There are no court proceedings in place at the time of the complaint

The PO will inform their member of the complaint and try to settle the matter. If this is not possible, he or she will investigate the facts and come to a decision that they think is fair. If your complaint is well founded, the PO can dismiss the member from the scheme and/or order the estate agent to pay you up to £25,000 compensation towards any financial loss and/or any avoidable aggravation, distress and inconvenience caused to you over and above the general stress and inconvenience caused during the house buying/selling process. If you disagree with their decision, the only course available is to take the matter to court (Making a claim (England and Wales)).

The Surveyors Ombudsman Service

The SOS performs a similar role as the PO and has similar powers.

Estate agent obligations and your rights

When making a complaint in relation to an estate agent, it is important that you understand what your rights are. Estate agents have certain obligations to you and some of these are described below.

Contracts

Pre contract information

Before you enter into a contract to sell your home (and become committed to any liability to the estate agent), you are legally entitled to receive the following information in writing from the estate agent:

  • Details of the estate agent's charges for carrying out estate agency work (usually a commission based on the percentage of the sale price) which should include the circumstances in which you will become liable to pay and the amount to be charged (or how the amount will be calculated if not known)
  • A detailed breakdown of any other charges (such as expenses) which do not form part of the estate agent's remuneration for the sale, but which you may become liable to pay, and the amount (or an estimate if not known)
  • Details of any services which the estate agent is offering, or 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 the estate agent is offering or intends to offer which involves any person connected to the estate agent or any person whom the estate agent knows (such as an employer, employee or an associate of theirs ) or a third party where the estate agent or connected person would obtain a financial benefit from the use of their services

If the estate agent fails to provide this information to you then the contract between you and the estate agent will not be enforceable until the estate agent has obtained a court order allowing him or her to receive payment from you. The court could dismiss the estate agent's application or allow it, but reduce the amount the estate agent can claim for. The court must take into consideration the following factors before making its decision:

  • The degree of culpability of the estate agent's failure to comply with the legislation
  • Any detriment caused to you as a result

Information to be included in the contract

Probably the most important term in the contract relates to the amount of commission that you will pay if the estate agent sells your property. You should always consider negotiating this term. Market forces such as the number of houses on the market, competition in the area and the general state of the property market will be factors that will influence whether or not the estate agent will agree to lower his or her commission fee.

However, there are other terms in the contract which you must be aware of including, whether the estate agent has an exclusive right to market and sell the property and the circumstances in which the estate agent will be entitled to receive their commission.

Sole or multiple agency agreements

You should make sure whether the contract is either a:

  • Sole agency - This is where you are free to find a buyer yourself but you cannot appoint another agent during the period of the appointment (which can be set to a limited period of time).
  • Joint or multiple agencies - This is where two or more agents are instructed to find a buyer. The agent that finds the buyer earns the commission. You should ensure that each contract entered into with the state agents is on a 'no sale, no fee arrangement'). If there is no buyer then no commission is due however hard the estate agent has worked.

Terms relating to when a commission becomes due

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 he or she has introduced the buyer during a period when they have the sole right to market and sell the property. The commission is payable even if they did not find a buyer and the eventual purchaser was obtained by another estate agent, a third party or even by yourself. A commission will still be payable after the period of sole selling rights has expired if the property is eventually sold to a purchaser who was previously introduced by the estate agent.
  • 'Sole agency' – This means that if, during any period when the estate agent has the sole right to market and sell the property, you appoint another estate agent who introduces the purchaser of your property then you will be liable to pay both agents a commission. You will also be liable to pay a commission after the expiry of the sole agency period in the event that the buyer was introduced by the estate agent during that period (even if the buyer eventually came through another estate agent).
  • A 'ready, willing and able purchaser – this is a purchaser who is prepared and able to enter into an unconditional contract to purchase 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 whatsoever.

The estate agent must explain the intention and effect of the above-mentioned terms if they (or similar terms using different words) are used in their contract. Recent case law suggests that it is not enough for the estate agent to rely on the fact that they introduced a buyer in order to claim a commission and the courts may imply a term in the contract stating that the estate agent must have been the 'effective cause' of the sale.

In addition, you should be aware of any terms which impose a fee for advertising, marketing or other services provided by the estate agent whether or not a sale occurs.

Parties connected to the estate agent

The estate agent must inform you of any fee or payment that they may receive from third parties in connection with the sale, i.e. they must not make a secret profit. For example, this may include obtaining a commission from someone they have recommended to you. The estate agent must obtain your express consent for this, although they are not obliged to reveal how much they will be paid. If they fail to obtain your consent then you may be able to recover the payment that they have received and any commission paid by you to the estate agent even where the agent has not acted improperly or you have not suffered any loss yourself.

If the estate agent, or a connected person, has any personal interest in your sale then they must reveal this promptly to you in writing. This may include:

  • Planning to acquire an interest in your property
  • Selling their property to you.

The Estate Agent Public Register

The Estate Agents Public Register provides 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.

Deposits

Estate agents are able to hold deposits on behalf of their clients and are subject to strict rules related to how they are handled.

When a deposit may be held

There are two circumstances when a deposit may be paid to an estate agent:

  • Pre-contract – here a deposit may be paid by a buyer before contracts are exchanged to demonstrate that they have a serious intention to buy the property. Sometimes such a deposit is paid in consideration for the seller temporarily taking the property off the market or not allowing any other potential purchasers to view it. There should be a written agreement clearly setting out the circumstances in which the deposit will be paid to you or returned to the purchaser. Note that in Scotland it is illegal for an estate agent to charge a pre-contract deposit under the Estate Agents Act 1979.
  • On exchange of contracts - this deposit will usually be held by your solicitor as it is unlikely that the purchaser will agree to pay it to your estate agent.

General rules regarding the holding of deposits

Estate agents holding a deposit must:

  • Provide 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 monies in circumstances where the deposit is more than £500 and more than £10 interest has been earned on it (unless you and the estate agent have agreed another arrangement)
  • Ensure that they have insured their liability to pay you the amount held in the client account on your behalf

Regulations applicable to estate agents

In addition to an estate agent's obligations under the Estate Agents Act 1979, there are other regulations applicable to estate agents, as a profession that delivers services to the public. Some of these regulations are described below:

The Supply of Goods and Services Act 1982

This act applies in the same way to estate agents as it does to any other service provider. Estate agents are obliged to 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 that which can be expected from any reasonably competent estate agent. While not all of the provisions in this Act are covered in Scotland, Scottish common law offers similar protection.

Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contracts Regulations 1999

Any service provider providing a consumer with a service can only restrict or exclude their liability for breach of contract or allow themselves to provide an inadequate service if they can show that the term or condition satisfies the test of 'reasonableness'.

Generally, a consumer is not bound by a standard term in a contract with a seller or supplier if that term is unreasonable. Standard terms are those devised by a business in advance and not individually 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 the consumer. All the terms of the contract must be in plain, intelligible language, otherwise they are open to challenge as being unfair.

The courts decide whether or not a term is unreasonable - if a term were to be challenged, it would be for the party imposing it to prove to the court that it is reasonable.

The Property Misdescriptions Act 1991

This act states 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. The Act imposes a test of whether or not a reasonable person would be misled by the estate agent's description of the property. 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 of the act 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, although in practice most estate agents will disclaim any liability in the terms of their contract.