Referral Fee clampdown confirmed for lettings agents too

The clampdown on referral fees, until now concentrated on the sales sector, will extend to letting agents too.

James Munro, head of the National Trading Standards Estate and Letting Agent Team, told the NAEA conference yesterday the call for transparency over fees would be extended to lettings.

The clampdown was originally introduced in February 2019 following a call by the then-housing minister Heather Wheeler for greater transparency. She wanted sales agents to voluntarily tell customers of their fees - if they didn’t, she threatened banning the fees completely.

Munro’s report on referral fees, based on the 12 month trial, is almost completed and will be sent to government next week. He admits it will “take a while” for government to decide next steps.

However, he says the expectation of transparency - even before a firm government decision - will be extended to the lettings sector from now on; this will also include the fees earned by agents who sell the growing number of deposit alternatives to tenants.

The guidance states:

Failure to disclose referral arrangements may render an estate agent liable for criminal prosecution under the CPRs and/or action by NTSEAT for warning or prohibition under the Act.

Ultimately, only a court may decide whether any particular set of circumstances amounts to a breach of the CPRs. However, NTSEAT offers the following recommendations as a statement of desirable practice:

An estate agent should disclose in plain terms

1. (a)  The price of its services, including any “compulsory” extras; and 
2. (b)  Where a referral arrangement exists, that it exists, and with whom; and 
3. (c)  Where a transaction-specific referral fee is to be paid, its amount; and 
4. (d)  Where a referral retainer exists, an estimate of the annual value of that retainer to the estate agent or its value per transaction; and 
5. (e)  Where the referral is rewarded other than by payment, an assessment of the annual value of the reward or the value of the reward per transaction. 

The guidelines were endorsed in early 2019 by NTSELAT and NAEA Propertymark, The Property Ombudsman, the Property Redress Scheme, the Guild of Property Professionals and the Royal Institution of Chartered Surveyors.