News from the Residential Property Investor, the bi-monthly magazine for RLA members other artilces from the April / May 04 issue RPI news archive

OFT calls for greater controls on estate agents - April / May 2004

Greater controls on estate agents have been called for by the Office of Fair Trading in a report on the industry. Estate agency is a sector widely associated with high levels of consumer dissatisfaction, said the OFT. And 'it is clear that many consumers have legitimate bases for their grievances'.

A survey for the report ­ which did not cover rental agency activities ­ found that 21 per cent of sellers and 23 per cent of buyers believed they had experienced a serious problem with an agent and were able to identify specific practices to support their view. Shortcomings included 'a small number of very serious examples' such as failure to pass on offers, suggestions that a buyer would be more likely to be successful if they also used the financial services offered by the agent, and failure by the agent to declare a personal interest.

There were no obvious competition problems in relation to the structure of the market for estate agency services, said the OFT. 'However, price competition is limited, with sellers' concerns centring on factors other than fees, such as the sale price of their property. Consumers can and do benefit from shopping around and negotiating on fees. This should be encouraged'.

Widespread use of 'pricing points' was discovered, with the vast majority of fees being set at about 1 per cent, 1.25 per cent, 1.5 per cent, 1.75 per cent or 2 per cent. Average fees charged rose in proportion with sales value, a practice that did not reflect the costs involved and behaviour that 'reflects a lack of effective price competition'.

'Significant constraints' meant that the Estate Agents Act 1979, which is intended to regulate the work of estate agents, did not deal with very effectively with a number of practices. 'The Act needs to be made more enforce able', said the OFT. 'For example, much of the buying and selling process is conducted orally meaning little documentation is produced which can be used as evidence when investigating alleged infringements of the Act'.

It recommended 'a more robust method of record keeping should be required so that a clear audit trail is available'.

The Act also needed to be updated so as to cover changed working practices, including use of the Internet.

There were a number of existing voluntary codes of practice that aimed to set good standards of service by members and provide redress in certain circumstances. But these suffered from limited membership while awareness amongst the public was low, said the OFT. 'For the majority of consumers whose agents are not members of a scheme there are few options for gaining redress. Compensation can be gained through the courts, but this can be expensive'.

Availability of low cost, independent redress mechanisms was particularly important as these enable consumers to pursue their legal rights. 'Our first preference is for the industry to increase access to low cost redress mechanisms by opting into recognised schemes voluntarily'. But 'failing that, it will be necessary to consider introducing a statutory scheme'.
 

other artilces from the April / May 2004 issue

• Standard response
• Agents and lenders are in bullish mood
• Landlords advised to check small print
• Landlord and agent pay for safety lapses
• Private rented sector 'stable'
• Manchester students look at becoming landlords
• Landlords leaving London market
• Local Housing Allowance to include landlord safeguards
• Landlord training
• Council threatens evictions over own delays
• In brief
• OFT calls for greater controls on estate agents
• Chancellor freezes stamp duty rates
• Pension possibilities