The Office of Fair Trading (OFT) has just recently launched a consultation on their draft guidance to estate agents and others which aims to help them comply with the law - more specifically the application of the Consumer Protection from Unfair Trading Regulations 2008 and Business Protection from Misleading Marketing Regulations 2008 ("the Regulations").
Cavendish Elithorn, Senior Director of the OFT's Goods and Consumer Group is reported as saying that: 'Buying a property is one of the biggest purchases people make and can also be one of the most stressful. Unfair business practices can cause substantial consumer harm and this guidance has been designed to help estate agents and property developers understand what they need to do to comply with the law.'
The consultation follows the OFT's â€˜Home Buying and Selling' study, in which estate agents reported that the industry needed more legal guidance.
The guidance starts by expressly identifying asome familiar-sounding practices of some estate agents ranging from the "unfair" to the outright banned. They include:
Giving misleading information to consumers
- Making statements in their advertisements that exaggerate their sales record, or imply that they have a presence in a particular area when it does not
- Distributing leaflets to homes claiming that they have buyers lined up for the sorts of properties when this is not true
- Recommending an asking price in the market appraisal that is unrealistic given current market conditions (in order to acquire the seller's instruction)
- Claiming a potential buyer will be able to buy without need of a mortgage when they do not have evidence that this is the case (in order to
induce the seller to accept the offer), creating false offers, or misrepresenting the detail of an offer (for example whether it is a conditional offer)
- "Making a selling point when they have contrary information (for example 'secluded garden' when there is a public right of way through the
garden, 'peaceful area' when a bypass is planned close to the property, 'nice views of surrounding countryside' when there is a power plant next to
the property, 'off street parking' when the parking is on a public highway)"
- Quoting false high offers to induce a potential buyer to put in their own offer at a higher price (to outbid those 'rival' offers) or false low offers to
encourage a seller to accept a genuine offer that would otherwise be rejected as too low
Giving insufficient information to consumers
- Failing to mention significant non-standard features that they are aware of about property for sale (for example house is freehold but garage is
leasehold, public right of way through garden, shared ownership of parking area and path, property with short lease or high service charge,
property has a sitting tenant, major repairs that are necessary)
- Failing to clarify that something appearing in a photograph, which a potential buyer would reasonably assume to be included in the sale, was not included
- Failing to pass on (acceptable) offers (The Estate Agents (Undesirable Practices) (No 2) Order 1991 already requires that they pass on offers
promptly and in writing)
- Pressurising a seller to market the property at less than its true value
- Persistent and/or aggressive telephone calls aimed at pushing a buyer into acting quickly
- High pressure sales techniques, such as persistent and/or aggressive telephone calls, to induce the buyer to act quickly to finalise the sale and
- Pressurising a potential buyer to use associated services, for example to take out a mortgage through the in-house mortgage advisor
- For example, telling their prospective client (the seller) that they have sold similar properties recently for a certain price when they have not or
that they have potential buyers lined up when they do not
Breaches of professional diligence
- Falsely listing properties as 'Sold Subject to Contract' to create a false impression of their business's success selling properties
- Displaying a 'Sold' board outside a property they have not sold
Having then identified such practices which are in breach of the law, the guidance then directs that if estate agents do not comply they will face enforcement action from the OFT, Local Authority Trading Standards Services (TSS) and the Department of Enterprise, all of whom will have a duty to enforce the Regulations.
The OFT's consultation closes on 9 December 2011. After the consultation the OFT will publish their final guidance and a summary of responses received.