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Estate Agents

See also: Letting agents; Property managers and property factors

Summary

Estate Agents:

* do not require a licence or qualification;

* are subject to conduct of business and client information requirements;

* if dealing in residential property must belong to an approved Redress Scheme;

* are subject to anti-money laundering regulation;

* frequently belong to a self-regulating professional body;

* should use up to date business methods including pre-contract information and terms of business complying with regulations, Redress Scheme and applicable professional standards, and reflecting case law

 

Introduction

Estate Agency work regulation

Information to be given to clients

Cases

Redress Schemes

Sale and letting signs

General marketing regulations

National Trading Standards Estate Agency Team

Anti-money laundering regulation

Enforcement

 

Introduction

Estate agents carry on the business of selling, renting or managing residential and/or commercial buildings and land (‘real property’). Estate agents deal with the marketing of property available for sale or letting. The legal aspect of the sale or letting of property is dealt with by solicitors or licensed conveyancers. In Scotland solicitors often also act as estate agents but much less so in the rest of the UK.

Letting agents, property managers and property factors are described elsewhere. A Steward or Bailiff may also carry out similar functions for large estates in parts of the UK.

Before the 20th century, an ‘estate agent’ would be a person responsible for managing a landed estate. Those engaged in the selling of houses were called ‘House Agents’ while agents who arranged the sale of land would be called ‘;Land Agents’. In the 20th century, ‘Estate Agent’ became the generic term.

Estate agents usually act for the property owner or landlord, although in commercial property the buyer or tenant may well engage an agent to represent his interests. The preparation of documents relating to registration of title or transfer of real property is reserved by law to registered legal practitioners [Legal Services Act 2007 for England and Wales and separate legislation in Northern Ireland and Scotland]. However in Scotland, solicitors often manage most of the sale process.

In the UK estate agents do not require a licence or any qualification. They are however regulated by the Estate Agents Act 1979 which provides for regulation of standards.

The Property Misdescriptions Act 1991 was repealed in 2013 as it had been in effect superseded by the Business Protection from Misleading Marketing Regulations 2008 (BPRs) and the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) which apply to traders generally not only estate agents..

Since 1 October 2008, the Consumers, Estate Agents and Redress Act 2007 and regulations made under it have required persons who engage in estate agency work in relation to residential property to be members of an approved redress scheme for dealing with complaints in connection with that work.

The Office of Fair Trading was formerly the regulator but since its abolition, the regulation of estate agents across the UK has been carried out by Powys County Council through the National Trading Standards Estate Agency Team.

Estate Agents are subject to anti-money laundering regulation and must be registered with HM Revenue & Customs.

A degree of self-regulation is exercised through professional and trade associations. Membership of such bodies is not legally required to carry on the business of an estate agent. However many if not most estate agents ar members of one of the professional bodies which include:

* the Royal Institution of Chartered Surveyors (RICS), the principal body for UK property professionals, dealing with both residential, commercial and agricultural property. Members, known as "Chartered Surveyors", are elected based on examination and are required to adhere to a code of conduct, which includes regulations about looking after their clients' money and professional indemnity insurance in case of error or negligence.

*.the National Federation of Property Professionals aims to promote the high standards of professionalism and integrity among those working within the property industry;it is the umbrella body for a number of property professions, including the National Association of Estate Agents, the Association of Residential Letting Agents and the Institution of Commercial and Business

Further reading

In addition to the following sections, further information may be obtained from:

* the National Trading Standards Estate Agency Team of Powys County Council

* House of Commons Briefing Paper: “Are Estate Agents regulated?”

Estate Agency work regulation

Estate agency work is regulated in the UK by the Estate Agents Act 1979 (as amended) (EAA).

Definition of estate agency work

For the purpose of the statutory regulation of estate agents, “estate agency work” is defined as things done by any person in the course of a business pursuant to instructions received from another person (the “client”) who wishes to dispose of or acquire an interest in land:

*  for the purpose of, or with a view to, effecting the introduction to the client of a third person who wishes to acquire or, as the case may be, dispose of such an interest; and

* after such an introduction has been effected in the course of that business, for the purpose of securing the disposal or, as the case may be, the acquisition of that interest.

Excluded activities

 The regulation of estate agents does not apply to things done:

* in the course of his profession by a practising solicitor or his employee;

* in the course of credit brokerage;

* in the course of carrying out any survey or valuation under a contract distinct from the estate agency work;

* in connection with specified planning matters;

 * in the course of employment by an employee of an intending buyer or seller of an interest in land;

 * in relation to any interest in any property by the receiver of the mortgage income or his employee;

The regulation of estate agents also does not apply to the publication of advertisements or the dissemination of information by a person who does no other acts which amount to estate agency work:

* publishing advertisements or disseminating information; or

* providing a means whereby a person who wishes to acquire or dispose of an interest in land can, in response to such an advertisement or dissemination of information, make direct contact with a person who wishes to dispose of or, as the case may be, acquire an interest in land and they can continue to communicate directly with each other.

The National-Estate-Agency-Standards Team (see below) has guidance on the extent of activities covered by the EAA.

Legaleze comment:

The last exemption was extended with effect from 1 October 2013 [Enterprise and Regulatory Reform Act 2013 s.70] in order to update and clarify the impact of estate agents regulation on private sales portals and to deregulate those businesses in providing services which simply allow buyers and sellers to find and communicate with one another, provided they do not otherwise participate in the transaction for example by advising, negotiating or providing other services.

Overseas property: the legislation almost certainly does not apply to non-UK property because of the technical definitions of “interest in land” in the Act which are apt only to UK land.

Information to be given to clients

Before an estate agent enters into a contract with a client under which the agent will engage in estate agency work, the agent must give the client to the client particulars of:

* the circumstances in which the client will become liable to pay remuneration to the agent for carrying out estate agency work; and

* the amount of the agent’s remuneration for carrying out estate agency work or, if that amount is not ascertainable at the time the information is given, particulars of the manner in which the remuneration will be calculated;

* the amount or estimate of any payments which do not form part of the agent’s remuneration for carrying out estate agency work but which, under the contract will or may in certain circumstances be payable by the client to the agent or any other person, the amount

[Estate Agents Act 1979 s.18]

In addition, regulations have been made under the EA, namely the Estate Agents (Provision of Information) Regulations 1991 (EAPIR) and Estate Agents (Undesirable Practices) (No 2) Order 1991. Matters regulated include:

 * Information to clients regarding fees and services;

 * Declaring a personal interest;

 * Handling negotiations;

 * Handling clients' money

What's new

09/04/2018 Estate agents to be required to meet professional standards

As part of its response to the consultation “Improving the home buying and selling

Process”, the Government has announced its intention to introduce a requirement for estate agents to hold a professional qualification backed up with a programme of Continuing Professional Development.

Estate agents are currently regulated under the Estate Agents Act 1979 and enforced by a small national enforcement team, the National Trading Standards Estate Agency Team. Currently there are no minimum professional standards required to practise as an estate agent. A further consultation will be carried out with regard to the creation of a mandatory professional qualification for estate agents.

The practice of seeking and accepting referral fees from conveyancers and mortgage brokers, and the case for banning them, will also be examined, particularly for new build properties.

 

Sole selling rights, sole agency and ready, willing and able purchaser

If any of the terms (or similar expressions) set out below are used by an estate agent in the course of carrying out estate agency work, he must give a written explanation of those terms to his client in the form and content set out in the EAPIR:

* sole selling rights;

* sole agency;

* ready, willing and able purchaser

If the agent does not comply with the requirements of the EAA and EAPIR to provide information to the client, the contract is not enforceable against the client unless the court orders otherwise.

The National-Estate-Agency-Standards Team (see below) has guidance on the above requirements.

Legaleze comment

There has been criticism within the trade of the use of sole agency agreements and suggestions that they may infringe consumer protection legislation; see articles in Estate Agent Today.

The meaning and legal effect of expressions used in agency agreements such as “payable upon exchange of contracts”, “sole agency” and “purchaser introduced” among others have been interpreted by the courts. Some of the recent cases follow:

Cases

Foxtons Limited v Thesleff [2005] EWCA Civ 514

Seller’s agent entitled to 3% per cent commission payable on exchange of contracts; purchaser exchanged but failed to complete; seller forfeited deposit and resold property; county court ruled agent not entitled to commission as sale not completed; agents appealed; Court of Appeal agreed by common law commission was normally payable upon completion of the sale but rule may be displaced by express agreement as in present case; court upheld agent’s claim to commission.

Foxtons Limited v Pelkey Bicknell & Anr [2008] EWCA Civ 419,  

Seller appointed sole agent by agreement providing for commission payable if contracts exchanged with a purchaser introduced by agent during the period of sole agency or with whom agent had negotiations about the property during that period or with a purchaser introduced by or offering via another agent during that period; agent introduced party but did not purchase; seller terminated sole agency and appointed another agent who re-introduced same party; Court of Appeal ruled purchaser not “a purchaser introduced by” first agent so not entitled to commission.

The Great Estates Group Ltd v Michael John Digby [2011] EWCA Civ 1120

Seller appointed agent on sole agency agreement; “sole agency” not defined in agreement; seller accepted offer from party found by seller; seller then engaged another agent to conclude sale; seller’s appointment of second agent possibly in breach of sole agency; first agent claimed damages for breach; court found first agent did not warn seller potential liability in damages if agreement breached; court ruled agent failed to comply with EAE information requirements; therefore agent could not enforce damages claim.

The County Homesearch Company (Thames & Chilterns) Limited v  Cowham [2008] EWCA Civ 26

Agent engaged by a purchaser client; agent entitled to commission based on price of property “introduced to you” during agreement or within one year after of termination; “introduced” defined to mean purchaser having received the property particulars from [agent] directly or indirectly…”; client received particulars of a property but not interested; client’s planning consultant introduced client to owners of same property and negotiated the sale to the client; agent claimed commission in county court; court ruled no term could be implied into agreement that the agent had to be effective cause of transaction; court found agent not effective cause of purchase but held agent was entitled to commission on wording of agreement; client’s appeal dismissed by Court of Appeal.

Redress Schemes

The Consumers, Estate Agents and Redress Act 2007 (CEARA) amended the EAE to include a new requirement for estate agents to belong to an approved redress scheme. Independent redress schemes which are currently approved include:

* The Property Ombudsman

* Ombudsman Services: Property

* Property Redress Scheme

CEARA also implements measures to improve the regulation of estate agents by:

• requiring estate agents to make and keep records, including records of offer letters, for a period of six years;

• giving the NTSEAT and local Trading Standards officers powers to require access to premises and on-site production of records in a wider range of circumstances; and

• expanding the circumstances in which the NTSEAT can consider the fitness of an estate agent to practice and issue prohibition or warning notices under the EAA 1979

Sale and letting signs - planning control - All transactions

Without specific planning permission, any advertising sign (such as ‘For sale’, ‘Sold' or 'To let' signs) may only be displayed outside the property for a maximum period of 14 day after the completion of the sale or letting [Town and Country Planning (Control of Advertisements) Regulations 1992 Sch.par.3A(3) states].

There are restrictions on the size, location and font size depending on the nature of the property. Further information is available on the Planning Portal.

General marketing regulations

The Property Misdescriptions Act 1991 (PMA) was repealed on 1 October 2013 [The Property Misdescriptions Act 1991 (Repeal) Order 2013 SI 2013 No. 1575]. The Government considered this was appropriate due to the existence of the Consumer Protection from Unfair Trading Regulations 2008  and the Business Protection from Misleading Marketing Regulations 2008 - see below. Opponents of repealing the PMA felt the PMA provided clarity for the trade and argued that it was well understood by estate agents, enforcers and consumers alike; they expressed concern about the applicability of the CPRs to property matters and the lack of case law.

The CPRs and the BPRs have a much wider application than the PMA and apply to all traders.

Certain marketing regulations of general application should be mentioned in relation specifically in relation to estate agents. See this Site’s sections on Selling and Marketing, in particular the Provision of Services Regulations 2009 (“PSR”) which require service providers to give recipients certain minimum information about the provider and the service, and access to a complaint procedure.

Other general statutory regulations apply to Business to Consumer contracts or to Business to Business contracts.

Business to Consumer contracts

Estate agents dealing with clients dealing as a consumer (i.e. broadly those clients not dealing in the course of a business), the following should be noted:

* Consumer Protection from Unfair Trading Regulations 2008 SI 2008 No. 1277 (CPRs): comment: the CPRs are much wider in scope in relation to estate agents compared with the old Property Misdescriptions Act 1991 (PMA); the CPRs control descriptions used by estate agents and create criminal offences for traders who breach the regulations; the CPRs do not prevent the estate agent from acting in the vendor’s interests by presenting property in the best light, provided that any matter by its presence or omission does not mislead the purchaser; use of disclaimers may not be effective in avoiding the commission of an offence.

* Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 2013 SI 2013 No. 3134: apply to “on-premises”, “off-premises” and “distance” contracts entered into by a trader with a consumer;  require certain information to be given to clients before a contract is entered into, and give a client certain cancellation rights in the case of off-premises and distance contracts.

* Consumer Rights Act 2015: applies to supplies of services to consumers; implies terms that supplier will carry out the service with reasonable care and skill and within a reasonable time, and information about the trader or the service treated as binding; requires contract terms not to be unfair.

Business to Business contracts

The Business Protection from Misleading Marketing Regulations 2008 SI 2008 No. 1276 (BPRs) apply to misleading practices when dealing with other businesses, for example, when liaising with other estate agents about marketing. The BPRs also regulate comparative advertising which is required to be fair, objective and substantiated.

Guidance on CPRs and BPRs for estate agents

The National Trading Standards Estate Agency Team has Guidance about Property Sales which offers guidance on the application of the CPS and the BPRs to estate agents.

National Trading Standards Estate Agency Team

The Office of Fair Trading (OFT) was formerly the regulator with responsibility for enforcing the EAE and Redress Scheme regulations. Since the OFT’s abolition, the regulation of estate agents across the UK has been carried out by Powys County Council through the National Trading Standards Estate Agency Team (NTSEAT).

NTSEAT is responsible for:

* issuing individual banning or warning orders under the EAE and maintaining a public register of such banning or warning orders;

* approving and monitoring consumer redress schemes;

* providing specific advice and guidance to businesses and consumers about their rights and obligations under the EAE.

Anti-money laundering regulation

Estate agents are subject to anti-money laundering regulation as ‘relevant persons’ under the Money Laundering Regulations 2007. Estate agents must be registered with HM Revenue & Customs and comply with the ‘customer due diligence’, record keeping and other requirements of the regulations.

For the subject generally:, see Anti-money laundering and in relation specifically to estate agents, see aml relating to Estate Agents.

Business processes

Legaleze comment: estate agents should use up to date business methods including pre-contract information and terms of business complying with regulations, their Redress Scheme and applicable professional standards, and taking account of case law on the meaning of common agency agreement clauses. Guidance on these aspects is available from some of the Redress Schemes and professional bodies, e.g. those of The Property Ombudsman.

Enforcement

Civil enforcement

Estate agency work: NTSEAT may prohibit a person from doing estate agency work or give a final warning. The NTSEAT maintain a register of such orders. There is a right of appeal to the First-tier Tribunal (Estate Agents). Tribunal decisions may be searched and viewed on the Tribunals Judiciary website.

Redress Scheme: failure to be a member of an approved redress scheme may incur a civil penalty of £1000.

Conduct of business and information requirements: failure to comply may render a client agreement unenforceable without an order from the court.

Criminal enforcement

Estate agency work: a person who fails without reasonable excuse to comply with a prohibition order is liable on conviction on indictment to an unlimited fine. There is a due diligence defence and provision for directors’ liability.

[Page updated: 10/04/2018]

 



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