Outcome regulation for Estate Agents

The OFT have recently announced a consultation on draft guidance to improve the regulation of estate agents. The guidance arises from the study carried out by the OFT last year into the buying and selling market. The OFT found that the “industry’s understanding of the Consumer Protection from Unfair Trading Regulations 2008 (“CPRs”) may be limited.” and that there was the potential for “substantial consumer harm”. The CPRs arise from, of course, EU legislation, in this case the Unfair Commercial Practices Directive.
Estate agents are already partially regulated by the Estate Agents Act 1979 and the Consumers, Estate Agents and Redress Act 2007 but the CPRs are consistent with the essence of modern regulation, regulating how things are done not  who can do them.
The CPRs prohibit traders from engaging in unfair business practices which are defined as falling with  5 broad categories.:- giving misleading information, giving insufficient information, acting aggressively, engaging in unacceptable trading practice and finally breaching one or more of the 31 specifically banned practices.
The CPRs are relevant for all businesses but it seems that the OFT intend to adopt the CPRs as the centrepiece of their regulatory regime for estate agents selling property and in due course for lettings as well.  The strict enforcement of the CPRs in estate agency could lead to a review of (in particular) current referral fee practice.
If an estate agent encourages a seller not to instruct his previous conveyancer but to instruct another firm and in doing so fails to disclose that they will receive a referral fee it may be conducting an unfair business practice by giving insufficient information and if an estate agent recommends a conveyancer who they say is cheap or efficient, without objective evidence to back the assertion they could be providing misleading information.
The enforcement of CPRs is carried out by local Trading Standards Departments and the OFT and a successful prosecution could lead to up to 2 years imprisonment for the person in charge of the business, an employee or an associate.
For further details go to http://www.oft.gov.uk/OFTwork/consultations/current/estate-agents/ and responses can be sent to or by email to david.hart@oft.gsi.gov.uk by 9th December 2011.
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