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Surprising de-regulation in estate agency services proposed

The Business Innovation and Skills (BIS) department recently announced a proposed amendment to the Estate Agents Act 1979. Crucially, this amendment will mean that new businesses will be permitted to operate within the Estate Agency sector without having to comply with regulatory rules and sanctions. In particular, this lets in internet based businesses and other so called ‘passive intermediaries’. These intermediaries advertise only and do not perform other crucial roles during the sales process, such as giving advice. More crucially to Scotland and in conjunction with this amendment, the BIS has also announced that the Property Misdescriptions Act 1991, which provides detailed consumer protection in the house selling process, is to be abandoned. In Scotland, most sales are handled by Solicitor Estate Agents, whose work is specifically excepted to that regulated by the Estate Agents Act 1979. However, they are still subject to the rules contained in the Property Misdescriptions Act 1991 and this means there has been strong reaction to the news and major concerns raised as to how this will affect the average buyer and seller of property in Scotland. Estate Agents who are not Solicitors must also take heed of the new changes.
The BIS hope that the amendments, which will allow online agents to operate in the market, will ensure that new business models will not face disproportionate costs as a result of old regulation intended for traditional Estate Agents.  The new Consumer Affairs Minister, Jo Swinson, has stated that “these intermediaries help buyers and sellers contact each other at a low cost, but don’t engage in other estate agent activities, so it’s unfair to expect them to go out and check all the property details of all the sellers on their websites. Reducing the regulations for these businesses will open up the market and increase choices for consumers looking to save costs when buying or selling a property.” The measures are also being backed by Sarah Beeny, the famously televised property developer known for her involvement in shows like “Property Ladder”. Sarah operates the largest of these property intermediaries, Tepilo, which allows users to list their properties for free. Sarah also contributed to the BIS consultation this summer on the proposed changes and has commented that “Good agents should have nothing to fear and should be happy that they can prove the value they add” but also that “you can’t ignore that the internet is here and people want to do things in a different way.” 
The lack of control over these passive intermediaries and the quality of service they will provide to consumers is a very real concern for most property professionals. Estate agent groups have warned that sellers could be misled into thinking that passive intermediaries are genuine Estate Agents and that the repercussions of this could be awful for sellers and buyers alike. The National Association of Estate Agents has stated “we are concerned and disappointed that the Government has pushed forth with its plan to repeal the Property Misdescriptions Act; it is a decision we feel will lead to reduced levels of consumer protection for homebuyers as they make what may be one of the biggest transactions of their life”. They have also stated that the Misdescriptions Act is key in the unregulated world of estate agency, and there is little to be gained from its repeal. Instead, Government is effectively giving rogue, unprofessional agents an opportunity to mislead consumers. Many potential home buyers are already struggling to buy a home, and it would be remiss for them to be further penalised due to lack of protection.
It is true that reform of Estate Agency processes in the UK have long been required. However, many industry professionals as well as the Royal Institute of Chartered Surveyors (RICS) have objected that the BIS amendments take passive intermediaries out of the scope of the current Consumer Protection Regulations and the remit of the Office of Fair Trading (OFT). The BIS announcement has, in some opinions, actually caused more debate and confusion in a sector already desperately seeking clear regulation. The scrapping of the Property Misdescriptions Act has further added to this confusion, as it is seen by many as the main mode of protection for homebuyers and consumers. 
The biggest issue raised against the passive intermediaries is that they are not specialists who can provide specialist advice. Estate agents provide a more comprehensive service than intermediaries, including offering complaint processes and redress if needed. The concern is that the average seller will not be able to distinguish the professional from the cowboy and that this could leave them with increased costs and no proper management of their sale transaction when things go wrong.
It remains to be seen what will happen next, but in a difficult market where sale and purchase transactions are tricky enough to see through to a conclusion, there is no substitute for a personal service.
For further information on this, please contact Ken Robertson.