The Bribery Act and Property Transactions - A Cause for Concern?

The Bribery Act 2010 (the ‘Act') is due to come into force on 1 July 2011. This article focuses on the direct effect on property transactions. In particular, what impact is the Act likely to have on the behaviour of property professionals, including agents, surveyors and developers, during their usual course of business?

The offence of bribing another person

The ‘general' offence under S1 of the Act has been well recited, and readers are likely to be familiar with its provisions.

In brief, S1 states that a person will be guilty of an offence if they offer, promise or give a financial advantage to another person which intends to bring about, reward or constitute an improper performance of a relevant function or activity.

An ‘improper performance' is one which breaches a relevant expectation. The test is an objective one - i.e. does the performance go beyond what a reasonable person in the UK would expect?

A ‘relevant function or activity' is defined very widely and includes, amongst other things, any function or activity which is performed in connection with a business. It is hard to envisage a commercial transaction where this definition will not apply.

There is no requirement for intent under the Act.

Application to property transactions

Potential risk areas in the property industry are, amongst others, corporate hospitality and incentives, both of which are considered below.

Corporate hospitality and entertainment - Can I still take my client / referrer to watch the rugby?

The Adequate Procedure Guidelines, published by Transparency International, state that in order to prevent committing an offence, an ‘enterprise should prohibit the offer or receipt of gifts, hospitality or expenses whenever they could affect or be perceived to affect the outcome of business transactions and are not reasonable and bona fide.'

Incentives - Can I give or receive them?

It is not unusual for a developer or seller to offer an incentive to a purchaser. Examples include free legal advice or SDLT payments. These are all part of the commercial bargain which take place and should not be seen as bribery, unless such incentive results in an improper performance by the recipient or another party. An example of this would be where, for example, a developer offers to pay for legal advice and then places undue pressure on the legal adviser to push a deal through, with the offer of further work and a future financial advantage. This would clearly fall within the Act where the undue pressure would result in a view being taken which would not otherwise be the case. Equally, if the pressure results in a quick transaction for all where all relevant issues are dealt with, then there would be no issues under the Act - the incentive would instead have aided the transaction and progress for the benefit of everyone involved.

Summary

Property transactions are based on a series of relationships between different parties. A standard sale or acquisition would normally involve, for example, a seller, purchaser, estate agent, surveyor, bank, financial adviser and solicitor. Often the relationships between these parties are already established before the transaction commences and may continue into the future with repeat business and referrals. The question of what is considered reasonable in the circumstances is therefore fundamental in applying the ‘improper performance' test and assessing whether or not an offence is likely to be committed. As mentioned above, the guidance acknowledges that certain incentives are part of the normal course of business, but each situation will need to be judged on its own merit.

This article focuses only on the offence defined in cl. 1(2) and 1(3) of the Act and does not consider the public office offence or its application.