Ombudsman: Buying a home could be like purchasing dodgy second-hand car

 Thursday 20th September 2012
Changes to laws governing estate agency in Britain could leave some home buyers with no more protection than if they were buying a used car in a private sale.

The warning comes from the Property Ombudsman, Christopher Hamer.

He accused the Government, which he said is not prepared to make any attempt to change the Estate Agents Act to protect landlords and tenants, of “moving with unfamiliar speed to remove protection from home buyers”.

Under changes announced by Vince Cable’s Department for Business, Innovation and Skills (BIS), intermediary websites that advertise properties for private sellers, and can offer For Sale boards making them look like genuine estate agents, will be exempt from the provisions of the Estate Agents Act 1979.

In effect, says Hamer, home buyers would be entering into an entirely private arrangement with the seller, introduced by a website that would not be able to offer any type of help or advice with marketing or negotiations in order to remain within the constraints of the new rules.

He said: “Just like a purchase of a second-hand car on a private basis, there is the possibility that the buyer could be led to believe what they are buying is in a certain condition only to find out later that significant work is needed.”

Simultaneously, the Government is also planning to repeal the Property Misdescriptions Act (PMA) that forces estate agents to ensure that any promotional material they use accurately describes property for sale.

Instead, the Government intends they should be covered by the Consumer Protection from Unfair Trading Regulations (CPRs), which Hamer says are intended more to apply to general retail sales.

Intermediary websites will be exempt from the PMA until it is repealed, which BIS has said will be ‘as soon as the parliamentary timetable allows’.

Adherence to the CPRs will only be proportionate to the level of service that intermediary websites offer, which in effect means that the CPRs will offer little protection to the consumer.

Hamer believes consumers will have difficulty understanding the nature of some of the businesses they deal with, little realising that they have no comeback against these intermediary websites should things go wrong.

He said: “The changes to the EAA mean that intermediary websites are outside it and will therefore not have to offer any form of redress through one of the two approved Ombudsman schemes that all residential sales agents have been compelled to join since the Consumers, Estate Agents and Redress Act came into force in October 2008.

“I am also unclear as to how the intermediary business will be policed and how the possibility of such businesses crossing the line into full estate agency will be monitored.

“I am surprised that the Government has taken such steps.

“I, along with many other organisations, expressed a strong view that any changes to the EAA should bring about a tougher regime by way of the obligations placed on letting agents.

“The current economic climate has seen, and will see, more consumers moving into the private rented sector where significant amounts of money are being passed over.

“Despite strong evidence that consumers are at risk, the Government has claimed that regulation is not a priority.”

The consultation by BIS closed on August 10 and detailed changes to the legislation were announced in little more than a month on September 13.

Hamer and Gerry Fitzjohn, deputy chairman of the company that provides the Ombudsman scheme, both made submissions to BIS highlighting potential detriment for consumers in the proposed legislative changes.

Fitzjohn said the Government’s aim was stated as opening up estate agency to more competition and to make it easier for businesses to enter the arena.

He said: “With 14,000 estate agencies already in existence, according to Government figures, there was little apparent difficulty in entering the industry already.

“These changes do nothing to enhance the experience for consumers, who will have difficulty understanding whether they are dealing with an estate agency covered by the demands for redress or an intermediary website that is outside the scope of every regulation.

“It may be a winning solution for people who want easy entry to the property sales arena but it’s a backward step because it puts every consumer potentially at much greater risk through lack of advice and the inability to seek free-of-cost redress via the Property Ombudsman when things go wrong, as I believe they inevitably will.”