The Property Lawyers Action Group(PLAG) have written an open letter to the Chair of the National Trading Standards(NST), which they claim is ‘on behalf of property lawyers’. PLAG have raised concerns about the new Material Information guidance outlined by the trading body and how that will affect the legal property sector.
The NTS say the new guidelines have been put in place to :cover all three phases of programme for sales, aim to help agents to meet their existing legal requirements under the Consumer Protection Regulations (CPRs) and material information guides are also available to support landlords, tenants, buyers and sellers.
Agents are already obliged under the CPRs not to omit any material information on property listings. Although material information is classed as any information that is important in helping an average consumer make a decision about a property, until now there hasn’t been a defined list of the basic information required.
The NTS say that this has left agents vulnerable to enforcement action, and the aim of this guidance is to help them meet their obligations and reduce this risk. By engaging conveyancers to help them prepare the relevant details at the start of the sales or letting process agents will reap the benefits, with shorter transaction times and fewer fall-throughs that result from important information coming to light.
Sellers will be advised to bring a conveyancer on board at an early stage to help ensure validated information is available to the agent for marketing and that issues like restrictive covenants or boundaries are addressed at an early stage. Buyers or renters will see new data fields appearing on portals and any left empty will be flagged and will have a link explaining what’s missing. This will help consumers understand the benefits of being fully informed before embarking on moving home.
NTSELAT will be monitoring take up on the portals over the next 12 months and agents can use free text to input information whilst waiting for any dedicated categories. As ever, under the CPRs any information can be deemed material if it impacts a consumer’s transactional decision so agents should continue to be mindful of this.
In addition to the guidance on its dedicated webpage, NTSELAT has published short guides for agents, sellers and landlords, also for buyers and tenants. It will also be delivering a series of webinars in partnership with steering group members.
Evidence from NTS surveys has ‘consistently shown overwhelming support amongst agents for the mandatory disclosure of material information’, with a survey of agents in 2021 finding that 91% agreed that a defined list of basic material information would help improve clarity for the industry.
Lesley Horton, Deputy Ombudsman, The Property Ombudsman, said:
“Buying or renting a property is one of the most expensive and important decisions a consumer can make. Our data tells us that consumers value transparent and relevant information to support their decisions. Availability of good quality information earlier in the process will benefit consumers and should support the reduction of fall-throughs. Agents will have more certainty about the information they are providing and will see the benefit of a reduced risk of failed transactions. NTSELAT has worked closely with industry members to provide detailed guidance that support agents and consumers alike. We look forward to working with our members and all our consumer and industry stakeholders as NTSELAT’s guidance beds in.”
In response to the new Material Information guidance PLAG have bitten back, saying the new measures ‘distort the source legislation beyond recognition.’
The letter explains the distortion occurs by ‘imposing the obligations on the seller’s agent, however, given that the agent acts on behalf of the seller, much of the responsibility for complying with the guidance would indirectly fall upon the shoulders of the seller themselves in practice’.
An Open Letter to: James Munro at National Trading Standards
Dear Mr. Munro,
We are writing to you in our capacity as members of the Property Lawyers Action Group (PLAG) who are a values-driven organisation comprising practising lawyers, committed to promoting the best interests and well-being of lawyers. We speak for property lawyers in particular and are interested in influencing decisions which affect the legal property sector generally. We feel that so far, our concerns about certain changes being imposed on our profession, are being ignored by stakeholders such as yourselves.
One of our main concerns at the moment is about the Material Information guidance (MI) imposed by National Trading Standards (NTS). It has been over four months since the guidance was issued having been partially in effect since June 2022. The Property Lawyers Action Group has been highly critical of the guidance for a wide range of reasons. Now that the initial impact of the guidance has had a chance to dissipate, we invite you to consider the following feedback:
Ultra Vires
NTS has pitched MI as “guidance” to ‘assist’ agents with complying with the existing Consumer Protection from Unfair Trading Regulations (2008) (CPRs). However, this is false. The ‘guidance’ in fact distorts the source legislation beyond recognition. The purpose of the CPRs is to protect consumers from unfair practices of traders. As you are undoubtedly aware, the term traders means “a person acting for purposes relating to that person’s trade, business, craft or profession, whether acting personally or through another person acting in the trader’s name or on the trader’s behalf”. Whilst there is no doubt that an estate agent could be classed as a trader in this context, perhaps an unforeseen consequence of the guidance is that MI, conversely, extends those obligations to the individual seller of a property, even if the seller is a consumer. It does this by imposing the obligations on the seller’s agent, however, given that the agent acts on behalf of the seller, much of the responsibility for complying with the guidance would indirectly fall upon the shoulders of the seller themselves in practice. The blurring of this distinction is already well illustrated in relation to the “BASPI”, produced by the HBSG which incorrectly states, that disclosures on the part of the seller are required under the CPRs and asks the seller to give a CPRs declaration. This is plain wrong.
The CPRs however, are concerned with traders who “omit”, “hide” or provide misleading information. There is no coherent interpretation of the legislation that infers an obligation on the part of the seller, trader or not, to proactively obtain information which the seller does not already have (i.e. due diligence). The “guidance” however, does seek to impose such obligations on the seller.
There is a crucial distinction between estate agents who knowingly mislead prospective buyers, which would of course be a breach of the CPRs notwithstanding NTS’ “guidance”, and agents who openly and honestly provide what information they have available and invite buyers to undertake their own due diligence as they feel appropriate in the usual way. There is nothing wrong or unlawful with the latter category whatsoever.
We therefore suggest that NTS has wildly exceeded its remit by reinterpreting the law and its purpose in this way and re-engineering it in order to try and fit the requirements of those stakeholders such as HBSG seeking to redirect the law for their own interests. When the law was passed it was not intended for sellers to be under these obligations as, after all, they were aimed at traders, not private individuals trying to sell their properties. We have heard the argument advanced that MI is nothing new, it has been in existence for several years and you are just seeking to ensure compliance however this seems disingenuous when you have extended the reach of the law by the introduction of the guidance.
Low hanging fruit
Unfair business practices and consumer exploitation are unquestionably rife in the property sector.
For example, we believe that:
• Referral fees are regularly paid by conveyancing firms to estate agents without fully disclosing the arrangement to clients. These factory-style firms in particular pay huge amounts every month in referral fees to buy their share of the conveyancing market. The result is that they are artificially busy as they would not have won that work if they did not buy it in. As a consequence, buyers and sellers are experiencing tremendous delays and a poor service from these companies who, because they are paying for the work, cannot make a profit without cutting corners. Therefore, the public is being served by unqualified, unsupervised and inexperienced staff.
• Conditional selling also appears to be rife in the estate agency industry. This is most commonly recognised as a situation where an estate agent or sales rep pressures or incentivises the consumer (by saying it will be quicker or cheaper when this isn’t necessarily true) to use their own mortgage broker, financial adviser, solicitor, or in-house services. First-time buyers in particular, who are unfamiliar with the process can be caught up in this sharp practice which is terrible for any consumer, but particularly bad for a first-time buyer who needs extra help and guidance with their purchase from the outset. As a result of this bad practice, first time buyers and others are caught in a spiral where they are purchasing a property from an agent who has recommended they use the in-house conveyancer and mortgage broker which is a recipe for delays and inefficiency for the consumer.
NTS could, in our view, use its authority and influence to accomplish a tremendous amount of good such as dealing with the two issues above. Disappointingly however, it has decided instead to attempt to ‘solve’ a problem that does not exist.
Mr. Munro, when you were asked in 2023 what NTS can do about conditional selling and referral fees in the property sector, you said that it could do nothing. How then, can you justify this guidance when resources are apparently so limited? In 2022 you were asked, why not simply enforce existing consumer protection legislation? You replied, to paraphrase, that you would rather not.
It should come as no surprise then that, at least so far, estate agents have treated the guidance with as much seriousness as NTS apparently treats consumer protection. In a recent poll, less than 1/3 of estate agents said they had taken any measures whatsoever to update their procedures due to MI.
HIPs
MI is simply a reinvention of the ill-fated HIPs project that was rightly scrapped in 2010 due to being “expensive and unnecessary” and causing “cost and hassle” for consumers and “stifling a fragile housing market”.
Simply put, MI is not an original or innovative idea, it is an unwanted sequel to a box office bomb. It will inevitably fail again, either due to being largely ignored as it is being at present, or there will be a necessary intervention, undoubtedly causing great embarrassment to NTS and harm to its credibility.
We have asked ourselves why NTS is intent on going down this route without adequate consultation with those of us at the coal face of conveyancing. We can only conclude that certain members of the steering group can reap considerable profits at the expense of NTS’ reputation, and more importantly the unsuspecting public and property market generally by continuing this course of action. It is interesting that there now seems to be talk about the regulation of estate agents, something that some have been requesting for decades. However, it is only now that your members have decided that they wish to follow the house market process undertaken in Norway, that this is being considered. It is interesting that in Norway, it is the estate agents rather than lawyers who process property transactions. Could it be that the regulation of estate agents is the first step in diluting further the role of property lawyers? In our opinion, there is a lot more work closer to home that could be undertaken by NTS if they genuinely want to speed up conveyancing transactions and it starts with a root and branch review of referral fees and conditional selling. If those two issues were removed from the conveyancing process, that would speed up the delays in transactions by months.
Counterproductive
It is our opinion that MI of itself will not achieve its stated goals of reducing transaction times or fall-throughs. Nor, in most cases, will it encourage buyers and sellers to instruct lawyers earlier in the transaction. Sellers, for example, often need, or at least will want, to know how much their property is worth before they make the decision to sell. A lawyer cannot tell them this. Therefore, the estate agent will naturally always be the first port of call. Also, the full implications have not been thought through because even if the seller instructs the lawyer at an early stage to interpret legal information who is going to pay for the lawyer’s time in checking the title? Sellers often like to dip their toes into the market before fully committing to a sale. By insisting on the provision of MI there has to be an associated cost, unless you are expecting lawyers to work for free, which we would hope would not be the case. In the situation described above, where MI has to be produced before the property can go on the market, the seller will be liable for fees before they have secured an actual sale of the property. Should they not be lucky enough to secure a sale, and then decide to withdraw from the market altogether, they will be out of pocket compared with the situation as it is now. This is a throwback to the situation which occurred when HIPS were introduced and given that the HIPS experiment failed, we see no good reason to revert to that way of working.
In our experience, most delays and fall throughs are not caused by anything that MI would prevent. There are a whole plethora of reasons why sales and purchases become abortive. Sometimes the reason is as simple as “I’ve changed my mind” and no amount of MI will change that. In addition, virtually no buyer is sufficiently au fait with legal information to interpret the significance without the assistance of a lawyer. Indeed, by forcing the estate agent to delay putting the property on the market whilst the information is obtained, MI risks delaying transactions rather than making them progress faster.
Moreover, we anticipate there will be at least some sellers who are deterred from marketing their properties altogether due to the additional expenses and red tape, some of which may have been entirely unnecessary. This has potentially disastrous consequences for the fragile housing market which is already regularly short of supply.
Summary
The Property Lawyers Action Group encourages NTS to reconsider its flawed and unwelcome intervention into the property market. We are aware that some of the members of the steering group advising NTS purport to either be property experts or to represent the profession, however they are not and do not. Most are simply vested interests. The Conveyancing Association for example represents only approximately 1% of conveyancing firms in England and Wales, and the HBSG represents no one. Sadly the Law Society does not speak for the vast majority of solicitors anymore; it has lost touch with the ‘conveyancing coalface’.
If NTS wishes to help buyers and sellers, it should focus its attention and resources on rooting out exploitative practices such as referral fees, conditional selling, ‘dodgy’ developers and so on. We appreciate that this would be far more challenging than the present course, however, it would bring the most benefit to consumers and, unlike MI, conveniently falls within NTS’s existing remit.
Mr. Munro, we are therefore strongly encouraging NTS to change course and scrap the current version of the guidance as soon as possible.
Yours sincerely,
NTS say that they have received the letter and will provide a ‘comprehensive response’ to PLAG’s concerns to the MI changes.
Munro, Senior Manager of the National Trading Standards Estate and Letting Agency Team, responded to the letter directly, telling Today’s Conveyancer:
“The progress made to improve material information has been widely welcomed and I’ve been encouraged by the overwhelming positive response the new guidance has received. The Property Lawyers Action Group (PLAG) is quite right to point out that efforts to improve the provision of material information have been worked on for some time – and change has been long overdue.
“87% of people who have recently moved or are looking to move soon agree that property portals should include all key information about a home in their property listing. 41% assume that missing information means something must be wrong with the property. This guidance is good news for the industry, which is demonstrated by the evidence we received from agents who expressed support for the mandatory disclosure of material information. Benefits agents cited included a reduction in unnecessary enquiries, swifter sales and fewer transaction fall-throughs. These improvements – for consumers and agents – are why successive governments have continued to back the programme.
“We have worked closely with a wide range of industry groups to develop and refine the guidance – including the legal profession – and we always welcome any new information, evidence and ideas that continue to improve compliance and raise standards in the sector. We received the letter from PLAG on 18 March 2024 and will provide a comprehensive response.”
