There is an opportunity for a change in the way conveyancers offer their services as a result of the introduction of the Material Information Guidance, suggests Head of the National Trading Standards Estate and Lettings Agents Team (NTSELAT), James Munro.
Speaking on the Today’s Conveyancer podcast, Munro says there is a “great opportunity for the conveyancing profession to get involved in a transaction at an earlier stage” and collaborate with estate agents to collaborate to create a “limited service” for home movers and estate agents to help them comply with the detail of the new guidance.
The Material Information Guidance has now been released in full by (NTSELAT) in conjunction with a steering group to provide clearer guidance on compliance with the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). In the podcast Munro explains the origins of the guidance lies in the challenge presented by the overarching CPRs which superseded the Trade Descriptions Act 1968 and, most importantly for the property industry, the Property Misdescriptions Act 1991 (PMA’s). Critically, reminds Munro, the regulations apply both at the outset, during and at completion of the sale. Tellingly, although the PMA’s were flawed (they prevented estate agents from marketing misleading information about a property, and therefore many property descriptions were devoid of detail) they were prescriptive and specific in what you could and could not say.
CPR’s, explains Munro, are not. And therefore it was felt due to the complexity of property sales, further guidance was required to support estate and lettings agents. The guidance is split into 3 sections, Part A, B & C. Part A was released in early 2022 and provided guidance on the non-optional financial information relating to property; information which would, says Munro, have a direct financial impact on a purchaser; asking price, tenure, ground rent, service charge, council tax band.
Parts B & C were originally envisgaed to be separate releases but in the end were released at the same time. Part B is information about the property, construction type, suppliers (electricity, water and sewerage). Part C includes things that affect the enjoyment of the property; building safety issues, restriction and covenants.
Part C is where Munro sees the biggest opportunity for collaboration. Pressed on whose responsibility it is to collate the information, Munro replies.
“It is not the agent’s job to interpret information, they simply need to establish material information. This is where a conveyancer might offer a limited service for home movers and estate agents who need support with complying with the guidance to go through these issues, interpret the issues properly, and come up with a pragmatic and informative way to disclose information that may be a little bit complex or details that the agent would not be in a professional position to display in that form.
Sometimes covenants (for example) can be quite straight forward, and others complicated. The message for conveyancers is where those flags in part C exist, estate agents should be advising vendors to instruct legal expertise.”
Munro acknowledges that any earlier involvement needs to take into account the capacity of the profession and current charging methods but suggests that a limited up front package might include a caveat that should the transaction move forward, the firm would act on the matter. “It’s something we’ve been in discussion with conveyancing bodies and associations about” says Munro.
The ultimate objective behind the guidance is to improve the information available to would be home buyers. Buyers are better informed, which reduces unnecessary enquiries, speeds up transaction times, reduces fall throughs, and reduces complaints to the redress schemes.
As part of the launch NTSELAT are working to provide public information campaign, working with local trading standards teams, and the estate agent redress schemes, and the property portals to enforce the guidance.
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7 Responses
“The message for conveyancers is where those flags in part C exist, estate agents should be advising vendors to instruct legal expertise.”
And what if the vendor refuses? The agent is the one whose neck is on the line since it’s their obligation to comply with these requirements. Is the agent then expected to refuse to market the property or seek legal advice at their own cost?
The arguments against the whole concept of material information (MI) have been well-rehearsed in recent weeks by The Property Lawyers Action Groups and others. MI has been constructed on a confected narrative:
if conveyancing were ultimately digitised from end to end, then the home-buying process would be accelerated thereby benefitting a ‘consumer’. First lawyers act for clients, not consumers. Secondly, MI is a distraction from some of the real problems slowing conveyancing.
So for example in recent weeks a leading law firm has been fined £100,000 not for money laundering but for failing to have in place sufficient AML/SOF controls. This is a huge fine that was levied on the law firm just for lack of AML controls. In recent months I carried out an AML controls audit of a law firm. The relevant guidance notes stretch to several hundred pages. No ‘lawtec’ exists which would significantly reduce the many hours taken by property lawyers to comply with these huge volumes of AML/SOF requirements. This regulatory torrent is causing significant delays across the sector
Then there is the problem not only of ‘overlegislation’ but badly drafted legislation like the Building Safety Act 2022. MI will not cure the delays caused by bad laws. Moreover, conveyancing standards have fallen significantly, particularly in some of the law factories, which means in practice that poorly trained fee earners take inordinate amounts of time to deal even with simple conveyancing. Ironically it is often these types of law firms that support MI.
But the elephant in the room is referral fees, which distort and taint the whole process. This should have been the priority for National Trading Standards. Not an unwanted back door re-engineering of conveyancing.
So why would lawyers want to collaborate with estate agents to facilitate a fundamentally flawed idea like MI?
If the vendor refuses to instruct legal expertise, despite the agents advice to do so, it is surely the vendors problem? The agent should however, keep a record of when that advice was given and how it was given.
Conveyancers don’t have to collaborate with agents if they don’t want to. They can however, offer a service (an additional service maybe) to vendors if they wish. Seems like a good business opportunity to me.
I see you have now mentioned referral fees Stephen, and that is a different topic altogether, and one that perhaps needs looking at separately.
MI presents no new opportunities for conveyancers, besides the opportunity to work at a loss. The opportunities are mostly for the lawtech providers, unregulated firms and perhaps the occasional factory firm.
If a conveyancer believes that UFI is the way forward and/or it is the way that they would prefer to work, then they should specialise in plot sales or auctions. Both already implement the process fully and there’s plenty of demand for such lawyers.
“If the vendor refuses to instruct legal expertise, despite the agents advice to do so, it is surely the vendors problem?”
I am not sure it is? Per the guidance:
“The CPRs make it an offence to omit or hide material information, or to provide it in a manner that is
unclear, unintelligible, ambiguous or untimely”
“Property agents should ensure that they proactively request material information to create the property particulars. Verification checks should also be carried out on the information that is provided to ensure that it is accurate ”
It seems to me that it is the agent who is responsible for vetting the information for the property that they are putting on the market.
Will NTS consider it an acceptable excuse that they did not do that vetting simply because their own seller did not want to pay for it?
I agree, Conveyancer. Surely the agent cannot ‘get around’ their obligations simply by saying that the seller won’t pay. It would be tantamount to getting around AML by saying that the seller refused to provide their ID. The only viable option for the agent would be to decline to market the property.
Or at least in theory – we will have to see what approach NTS takes regarding enforcement.