EA Act should be beefed up not weakened, says Ombudsman

This is The Property Ombudsman statement in full, underlining that it wants the Estate Agents Act to be tightened up to include letting agents, and not loosened.

The Property Ombudsman scheme (TPO) is providing responses to the Department of Business, Innovation and Skills (BIS) with regard to proposals to amend the Estate Agents Act 1979.
 
However, as TPO is a redress scheme and not a trade body, it was for BIS to invite responses and for trade bodies who have been consulted separately from TPO to invite industry members to comment, said Gerry Fitzjohn, Chief Operating Officer of TPO.
 
“Both the council of TPO, through the Ombudsman, Christopher Hamer, and the board, through its chairman, Bill McClintock, and myself, have had robust discussions with BIS on revisions to regulations for estate agency,” said Gerry Fitzjohn. The TPO responses, via both the board and council, will be delivered to meet the Friday deadline set by BIS.
 
“We have told BIS in a face to face meeting on July 11 that far from reducing consumer protection and introducing consumer confusion, BIS should be doing more to bring lettings agents within the scope of the Estate Agents Act 1979 because there are real consumer protection issues.
 
“In our written response, the Board makes it clear that its immediate impression of the proposals is that consumer protection will be eroded. We recognise that the Government is striving to reduce regulation and restriction on businesses, but the proposed amendments quite clearly open up opportunities for the consumer to stray unknowingly into an environment where the protection they might expect to have is not in fact available to them.
 
“Given the generally held negative view of agents operating in the property sector (albeit largely anecdotal but more evident in the lettings sector), it appears inconsistent for consideration to be given to diluting agents’ legal obligations.
 
“Whilst recognising that the government is opposed to broadening regulation, we continue to emphasise – and this view is supported by industry and consumer stakeholders – that is it possible to cite examples or reports / surveys supporting the view that legislating for letting agents should be a priority and therefore that broadening the scope of the legislation is what is required, rather than narrowing it.
 
“We are telling BIS that the current, well-established legislation is not a burden on business and serves consumers well. The existence of approximately 14,000 estate agencies in the UK also demonstrates the ease of entry to the industry.
 
“We do not believe that ‘estate agency work’ as defined in S1 of the EAA causes uncertainty about the scope of the act. There are numerous online estate agencies already trading, and many of the sites provide a matching service and are members of or registered with TPO.
 
“Consumers will not draw a distinction between an estate agent and somebody that looks and feels like an estate agent but isn’t. They should not be misled into a situation where, having paid money for a service to market their property and regardless of there being distinct difference in price, different laws and differing levels of consumer protection actually apply.
 
“The growth in the number of estate agencies since 1982 seems to suggest that the definitions are not problematic or off-putting.
 
“The Consumers, Estate Agents and Redress Act provides safeguards for the consumer with each sales agent required to belong to an approved redress scheme.
 
“The redress scheme requires compliance by the sales agents (in the case of the Property Ombudsman Scheme) with the consumer codes which are approved by the OFT. We believe that some organisations may see this as a barrier since they do not wish to comply with OFT approved standards.
 
“It is not clear whether agents that ‘escape’ EAA obligations have any responsibilities under the Money Laundering Regulations and whether this potentially creates a risk.
 
“TPO also thinks it is unclear what is meant by a ‘low risk’ service to buyers and sellers. There is potential for considerable issues. Sellers will have to work out their own asking price and may sell at below market value. Should this happen they would have no recourse to redress. Buyers could be at risk because sellers using a ‘passive agent’ website could be introduced to properties that have been dressed up for sale. An estate agent conducting business under EAA, PMA, CPR regulations could not allow this to happen. Buyers could be more, not less, confused.
 
“Existing agents may decide to start a new model outside the Act which would be confusing for consumers. Consumers will simply not understand the difference between an ‘EAA agent’ and the passive agent. They will assume the businesses act in the same way and that they, as consumers, are protected in the same way.
 
“We believe that all property sales should be inside the Act with the exception of private sales.
 
“We firmly believe that regulation should be strengthened, particularly in regard to letting agents who are currently not governed by the Estate Agents Act.
 
“The Act should be extended to cover letting agents in order to raise standards and provide consumer protection to this growing industry.”