How Will You Be Affected By The Consumer Protection Regulations?

In an effort to increase consumer protection within the property sector new regulations were implemented in 2008. Termed as The Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and The Business Protection from Misleading Marketing Regulations 2008 (BPRs) they are a move away from buyer beware to put more responsibility on both the seller and selling agent not to engage in what is seen as unfair practice. The secondary aim is to extend the protection to all consumers in the process and to cover referred service choices such as conveyancing. If you are found to be breaching these new regulations you could face a fine or even up to 2 years in prison.

The OFT has published guidance to help estate agents and others involved in property to understand their responsibilities under the Consumer and Business Protection Regulations.The OFT’s publication of guidance on property sales coincides with the announcement that there will be a repeal of the Property Misdescriptions Act (PMA) in 2013 as the CPR overlaps and extends an agents’ duty of care to all consumers. Therefore the Consumer Protection Regulations will be what all agents, be they in sales, lettings or property management, are required to adhere to.We have included the latest guidance from the OFT below to help you to understand your duties as an Agent under these new regulations. For example

• Ensuring that any information provided, whether in writing, in pictures or given verbally, is accurate when advertising for new business or when marketing property. Breaches of the regulations might include falsely claiming to be a member of a professional body, misdescribing a property for sale or making unfair comparisons with competitors.
• Not leaving out important information that consumers need to make informed decisions. For example, throughout the buying and selling process, businesses must provide the necessary information to enable informed choices to be made on viewing a property, making an offer or instructing conveyancers or surveyors.
• Not putting undue pressure on consumers to act quickly, for example to put in an offer, raise their price, skip the survey or exchange contracts.
• Having an effective customer complaints procedure that is understood and followed by all staff who come into contact with the public.

The ETSOS systems helps agents to adhere to  the new regulations by providing instant access to risk aversion tools including anti money laundering checks and our hazard checker report. This allows you to be completely transparent with you to be completely transparent when marketing a property avoiding unfair practise and minimise surprises that may cause the transaction to fall through at a later date.

The OFT have produced guidance for property professionals which references the full regulations and we have this included below:

The Consumer Protection from Unfair Trading Regulations 2008 (CPRs)

Numbers in square brackets below refer to relevant page numbers of the full Guidance (pdf 657kb).

Unfair commercial practices

The CPRs prohibit businesses from engaging in unfair commercial practices when they deal with consumers:

• ‘Consumers’ are individuals who are acting for purposes outside their business. This goes further than just actual or prospective clients or actual property buyers. For example, if the property sales business is acting for a seller, ‘consumers’ also includes potential buyers or even potential viewers of the property. 
• Commercial practices’ covers the whole range of business activities that may affect consumers, for example a property sales business’s practices when it advertise its services, offers pre-agreement advice to a client, describes property for sale, negotiates and makes sales, and handles complaints about its conduct. 
• Unfairness’ may arise from:
  - giving false or misleading information to consumers (‘misleading actions’) or – hiding or failing to provide material information to consumers (‘misleading omissions’) or – exerting undue pressure on consumers (‘aggressive practices’), or – not acting with the standard of care and skill that is in accordance with honest market practice and in good faith (failing to show professional diligence) or – engaging in one of the ‘banned practices’. Examples include displaying a trust mark (such as a logo) without authorisation and claiming falsely to be a member of a professional body or an approved redress scheme.

The ‘average consumer’ and ‘transactional decision’ tests

Apart from the banned practices (which are banned outright), CPRs’ breaches have a threshold: the commercial practice will be unfair if it affects or is likely to affect the transactional decision making of the average consumer.

• ‘Transactional decision’ is defined widely and is not simply a consumer’s decision to use a business’s services or not, or to buy a property or not. It could, for example, be a client’s decision to accept an offer, or a buyer’s decision to view a property, commission a survey or instruct a conveyancer.
• The ‘average consumer’ is someone who is reasonably well-informed, and reasonably observant and circumspect. For example, an average consumer would pay some attention to documentation given to them, but not necessarily to the small print unless key points in it are brought to their attention. An average consumer would check out publicly available facts for themselves where this is straightforward to do, although what checks they actually make will be influenced by the information that a business has given them.
• The important question is whether the business’s act or omission is likely to have an impact on the average consumer, not an actual consumer (who may be more or less well-informed, observant or circumspect than the average one).

Misleading omissions

The CPRs‘ prohibition on misleading actions is very similar to the prohibition on making false or misleading statements provided by the Property Misdescriptions Act 1991.

However, the CPRs’ prohibition on misleading omissions places an additional duty on property sales businesses: to provide the ‘material information’ that the average consumer needs, according to the context, to make an informed transactional decision. 

• The average consumer who is thinking of signing a contract with a property sales business is likely to need to know such things as: what services they will provide, their fees and charges, their terms of business, and any tie-in period.
• The average consumer who is considering whether to view a property is likely to need to know, as a minimum: the asking price, location, number and size of rooms, and whether the property is freehold or leasehold.
• In the most straightforward sales, the material information that a property sales business should give to potential buyers may be quite basic (little more than the information described in the bullet above). However, depending on the circumstances of each sale, material facts could include the length of the lease, the level of charges payable under a lease, uncertainties known about title, major structural defects, lack of connection to mains services, etc.
• At the outset of the marketing process, a property sales business is not expected to research issues that are outside its line of business, for example, where its business is marketing property and the issues are ones that a surveyor or conveyancer would investigate. However, should it become aware of such information later on, it cannot ignore or suppress it. If the information is material, it will need to disclose the information.

The Business Protection from Misleading Marketing Regulations 2008 (BPRs)

The BPRs prohibit businesses from engaging in misleading activities in their dealings with other businesses. Their advertising to attract new clients is covered as well as their advertising of property for sale. The BPRs also set out the conditions under which businesses are allowed to make comparisons with their competitors.

What happens to businesses that breach the regulations?

Businesses that treat their consumers, business customers and/or competitors unfairly may face civil and/or criminal sanctions. For example they may face enforcement action by their local authority Trading Standards Service or by another consumer enforcement body. 

If a business is convicted of committing a criminal offence under the CPRs or BPRs the penalties are:

• on summary conviction in the Magistrates Court (Sheriff or Justice of the Peace Court in Scotland), a fine not exceeding the statutory maximum – currently £5,000
• on conviction on indictment in the Crown Court (Sheriff Court in Scotland), an unlimited fine or imprisonment for up to two years, or both.

In respect of advertisements, both online and in print media, businesses could be subject to a published adjudication of the Advertising Standards Authority.

If they belong to a professional body, they may face disciplinary procedures and/or expulsion from membership of the body.

They could also lose customers, some of whom may have the right to take legal action against them. If a consumer complains to an approved redress scheme, and the complaint is upheld, the business may be required to pay compensation or make an apology. 

What will help property sales businesses to comply?

Businesses need to treat consumers, business customers and competitors fairly. It will help if they can show that they act diligently, in keeping with any professional standards and taking reasonable steps to avoid committing a breach. For example:

• They take care in gathering and presenting the information that they will use to advertise their services and market property.
• They have systems and safeguards in place to ensure that their marketing information is accurate, balanced and does not leave out material facts.
• When they see or hear something that puts them on notice that there might be a problem, they take reasonable steps to establish the facts for themselves. For example, they ask questions, carry out their own checks and/or consult official sources, as necessary.
• They act promptly to correct or update their marketing and to pass on information whenever new information becomes available.
• Where they have exhausted the steps that they can reasonably be expected to take, they are open about any remaining gaps in their knowledge.
• They avoid pressurising their consumers to act quickly to put in an offer, raise their price, skip the survey and finalise the sale and/or exchange contracts.
• If they treat their consumers, business customers and competitors fairly, they are unlikely to breach the regulations. However, if they treat them unfairly, they may face criminal or civil enforcement action.