Advice for estate agents

Guidance

Property Sales

This guidance updates and replaces the previous Office of Fair Trading ‘Guidance on Property Sales’. It has been produced by the National Trading Standards Estate Agency Team of Powys County Council in its role as the UK’s lead enforcement authority for the Estate Agents Act 1979. The guidance is intended to help property sales businesses to comply with the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and the Business Protection from Misleading Marketing Regulations 2008 (BPRs) when carrying out activities in the UK.

Download the Guidance on Property Sales (September 2015) pdf document

Redress

Supplementary guidance - The requirement to join a redress scheme

 

 

Information for people who are working as an estate agent - what you must do to meet your legal obligations.

The Estate Agents Act 1979 regulates your work as an estate agent. Its purpose is to make sure that you act in the best interests of your clients, and that both buyers and sellers are treated honestly, fairly and promptly.

Why this information is important

  • If you don't comply with the law, you could be banned from working as an estate agent
  • If you ignore a ban, you could be prosecuted and fined.

In this section:

Estate agency work

The Estate Agents Act 1979 is specific about:

  • Who is an estate agent
  • Who cannot be an estate agent

If you are doing estate agency work, the law applies to you whether or not you:

  • Call yourself an estate agent or describe yourself in some other way
  • Work for yourself or for someone else.

Who is an estate agent?

By law, you are an estate agent if:

  • You deal with people who want to buy or sell freehold or leasehold property, throughout the UK: this includes commercial and agricultural property
  • You do this as part of a business
  • You act on instructions from a client.

But there are some important exceptions to this - see ‘activities not controlled by the Estate Agents Act’.

Who cannot be an estate agent?

You cannot be an estate agent if:

  • You are an undischarged bankrupt (but you can work for another estate agency, as long as it is not your own company)
  • Powys County Council bans you from this work.

 

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Internet property retailers

When is a property retailer acting as an estate agent? 

Although this guidance deals primarily with property retailers who only use the internet as a means of operating, the same principles will apply to other businesses which use other methods of operating but which, by virtue of their activities, fall within the legal definition of estate agency work. 

 

Definition

Under section 1 of the Estate Agents Act 1979, the legal definition of what constitutes estate agency work is very wide and even if you don't call yourself an estate agent you may be seen to be one in law when you do certain things. Subject to certain limited exceptions you will be engaging in estate agency work if, in the course of business and acting on instructions from a third party (your client) who wishes to either buy or sell property (an interest in land), you do either (or both) of the following: 

  • things for the purpose of, or with a view to, effecting the introduction to your client, of someone who either wishes to buy or sell property, or
  • things after such an introduction has been made by you to secure the sale or purchase of the property. 

The law also only requires you to do things for the purpose of, or with a view to introducing your client to a buyer or seller in order for you to be acting as an estate agent. It is not necessary for you to actually introduce your client to a buyer or seller in order to fall within the legal definition of estate agency work.

 

Exemption

If you are merely 'publishing advertisements or disseminating information', such as in a newspaper or similar publication, then you will not be acting as an estate agent.  The exemption also includes intermediaries such as internet property portals for private sales, which merely enable private sellers to advertise their properties and provide a means for sellers and buyers to contact and communicate with one another. The exemption applies provided the business does nothing else covered by the general definition of estate agency work (see above).then you will not be acting as an estate agent. However, this exemption is a very narrow one.

 

Activities of those acting as estate agents

Below is a non-exhaustive list of examples of the types of activities typically carried out by property retailers that we consider would take them beyond the exemption of merely publishing advertisements or disseminating information. If you engage in such activities, you will be, or are likely to be, engaging in estate agency work:

  • Sending out property particulars and arranging viewings
  • Offering personal advice to potential sellers or buyers
  • Receiving and fielding queries from potential sellers or buyers and passing on details to your clients
  • Providing  an energy performance certificate or arranging for it to be provided
  • Providing clients with a 'For Sale' board and/or putting it up outside their property where the board contains your contact details and you deal with potential buyers on behalf of the seller.

 

Misleading claims

You will be misleading consumers if you state that you are not doing estate agency work when you are. If you are acting as an estate agent, you must comply with your legal duties such as providing your clients with information on their prospective liabilities (e.g. be clear and upfront about charges) and declare to buyers and sellers any personal interest that you or a connected person (such as a business associate or a relative) may have in any properties detailed on your website.
 

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Clients

Your client is usually the person selling a property, but the Estate Agents Act 1979 also applies when you are instructed to find a property for a buyer. 

You must give potential clients information about:

  • Fees and charges
  • Services to potential buyers
  • Your terms of business.

You must do this in writing as soon as possible, and it must be done before you agree to act for the client.

 

Fees and charges

This is the essential information that you must give potential clients in writing in advance:

  • All the circumstances in which you will charge an agency fee. This includes any fees or charges that you will make if the property is taken off the market without a sale
  • The amount of your fee. If you aren't sure at the time, then how you will calculate it
  • Details of any other charges on top of your agency fee
  • Any other circumstances in which the client would have to pay an additional fee
  • The amount of any additional fee or, if you don't know it, an estimate, plus details of how you will calculate it.

Where you are publishing a general advertisement

  • quoting a percentage agency fee, this should include VAT
  • quoting a fixed agency fee – this should be inclusive of VAT

Where you have been instructed by a client

  • a percentage agency fee should include VAT and should also include an example based on the agreed marketing price, e.g. ‘if your house sells for £300,000 you will pay a fee of £3600 (1.2% inc VAT)’
  • a flat rate agency fee should include VAT 

Note: transactions of a commercial nature only may quote VAT exclusive fees.

 

Additional charges

You must provide your client with a detailed breakdown of any additional charges, even if they are estimated rather than actual. You cannot just show a total figure.

If you find it difficult to cost some items, you can estimate them. For example, you might not be sure about your advertising costs, because they will depend on how long it takes to sell the property. In this case, you could give your client an estimate. Your client may not always accept an estimate and may prefer to have a firm quote.

 

Producing an estimate of charges

Your estimate must clearly state what it is for, and it should give your client a rough idea of the maximum amount payable. When you put your estimate in writing, you can say that it is 'an estimate of £X, that will not exceed £Y, without client approval'.

For example, if you produce a special brochure for a client, you must tell them how much it will cost to produce a specific number of copies. If you need extra copies, then you must ask your client to approve the additional charge.

 

Getting client approval to changes

If you have to make an additional charge, you must write to your client to get permission first.

If there are any changes to other important information, you must write as soon as possible and get your client's agreement.

 

Services to potential buyers

You must tell a potential client if you or a connected person might offer any services to the property buyer. This must be done in writing before you agree to act for the seller.

You don't have to tell the seller how much you will be paid for services to the buyer.

You will have to be specific about the service you might offer a buyer. For example, you might arrange:

  • A mortgage
  • Insurance
  • The sale of the buyer's property
  • A removal service.

If you or a connected person will benefit from services offered by any other person in connection with the sale, then you must tell your client about the service. For example, if you get a commission from someone you recommend to the buyer, you'll need to write to your client. Again, you don't have to reveal how much you will be paid.

 

Terms of business

You will have to write to your client to explain what these terms mean, if you plan to use them in your contract:

  • Sole selling rights
  • Sole agency
  • ready, willing and able purchaser.

If you use different words that have the same meaning, you should still use the relevant definitions to explain your terms to the client.

 

Definitions

We recommend that you use the relevant definitions in full. If they could be misleading for any reason, you must make sure that any alternative definitions accurately describe the client's liability to pay.

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Declaring a personal interest

You must reveal promptly and in writing any personal interest you or a connected person have in a transaction. A ‘connected person’ (which includes partnerships, companies and unincorporated associations as well as individuals), means any of the following:

  • your employer or principal
  • your employee or agent
  • any associate either of you or of any of the persons mentioned above

Note that ‘associate’ includes any business associate, as well as a person’s spouse and relatives and the spouse and relatives of a person’s business associate.

If you have an exisitng personal interest you must declare this in writing before you begin negotiations.

If you or a connected person are seeking to acquire an interest in your client’s property you must tell the client in writing as soon as possible. You should do the same if you or a connected person are selling your property to the client.

You must not seek or receive a deposit for the sale of a property in which you have a personal interest.

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Handling negotiations

Under the Estate Agents Act 1979, you must make sure that everyone is treated equally, fairly and promptly when:

  • Informing clients about offers
  • Informing clients about your services to buyers

 You must not:

  • Make misleading statements
  • Falsely describe a property
  • Show bias against potential buyers

 

Informing clients about offers 

You must give your clients written details of all offers received from potential buyers. This information must be passed on promptly. It can be sent by hand, email, post or fax.

You should keep a written record of all offers that you receive.

If your client tells you in writing that it isn't necessary to pass on certain offers, you don't have to write in those circumstances. For example, this could happen if the client doesn't want you to write with offers below a specific price level. This exemption should be treated carefully and should only be used to exclude offers which the client has expressly told you they don’t wish to receive.

If you have filed a Suspicious Activity Report (SAR) in relation to an offer made by a prospective purchaser, you must not pass on details of that offer to the vendor until you have received a defence from the National Crime Agency, or 7 working days has lapsed (whichever is the sooner).

 

Informing clients about services to buyers

You must write promptly to your client when you or a connected person are asked to provide services to a buyer.

You will have to be specific about the service you will offer a buyer. For example, you might arrange:

  • A mortgage
  • Insurance
  • The sale of the buyer's property
  • A removal service.

If you or a connected person will get some benefit from services offered by any other person, then you must tell your client about the services. For example, if you get a commission from someone you recommend to the buyer, you'll need to write to your client about it. You don't have to tell your client how much you will be paid.

 

Making misleading statements

It is illegal to mislead buyers or sellers in any way. Specifically, you must not give misleading information about:

  • Offers for a particular property, or invent bids
  • The existence or status of any potential buyer.

 

A statement that is factually true might be presented in a misleading way. You must take care to avoid this.

Examples of misleading statements:

  • You cannot claim to have first time or cash buyers, unless you can show why you think this is true.
  • You cannot advertise or claim that you have potential buyers, unless you can prove that this is true.

 

Falsely describing a property

You must not make a false or misleading statement about a property, or withhold information which would be of material interest to a potential customer. This is an offence under the Consumer Protection from Unfair Trading Regulations 2008.

 

Avoiding bias

You must not discriminate against potential buyers because they don't want, or might refuse, to take services from you or a connected person.

 

For example, you must not:

  • Refuse to provide information about a property to these buyers
  • Take longer to send property information to these buyers, compared to others
  • Set additional requirements, as a condition of passing on an offer, e.g. forcing them to have a mortgage survey before you will pass on their offer to your client.

 

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Handling clients' money

The Estate Agents Act 1979 has specific requirements about how to handle clients' money. You'll need to know about:

  • Deposits
  • Payment of interest
  • Keeping client accounts.

You may be asked to hold money in the form of a deposit. This means that you are holding money on trust, and you will need to account for the client's money in a very precise way.

We recommend that you talk to your accountant about the detailed requirements for handling clients' money.

 

Deposits

There are two types of deposit:

  • Pre-contract – a deposit is paid before the exchange of contracts in order to show a serious intention to buy
  • Contract – a deposit is paid at the exchange of contracts.

You must put the deposit in a special account, called a 'client account', which is set up for this purpose at a bank, or other financial institution.

  • You can pay money from a connected contract, such as money used to buy carpets or curtains, into a client account.
  • You cannot pay any other client money, such as rents, into this account.

 

Payment of interest

If the interest on a deposit of over £500 amounts to more than £10, you must pay it to the client.

 

Keeping client accounts

These are the basic rules for client accounts:

  • You must keep detailed records of all transactions relating to a client account
  • You must give detailed receipts for all money you receive
  • Your accounts must be examined and reported on by a qualified auditor within six months of the end of your accounting year
  • You must produce your latest auditor's report, if asked to do so by an authorised person, such as a trading standards officer
  • You must keep the accounts and records for six years after the end of the accounting period to which they relate
  • If you take over the accounts and records from someone else, make sure that they are completed to the end of the transaction, and are kept for six years.


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Enforcement of the Act

Enforcement action that can be carried out under the Estate Agents Act 1979 includes:

  • Warning orders
  • Prohibition orders 

The law can be enforced by:

  • The National Trading Standards Estate Agency Team
  • Local authority Trading Standards departments
  • The Department of Economic Development (Northern Ireland).

 

Powers of the National Trading Standards Estate Agency Team (NTSEAT)

The NTSEAT can issue warning and prohibition orders that could stop you working as an estate agent. The NTSEAT can require anyone, including clients and potential buyers, to give information or produce documents before deciding whether or not to issue an order or carry out other enforcement activities.

 

Making warning and prohibition orders

Warning and prohibition orders can be made against individuals, partnerships or companies, and anyone employed by them.

The NTSEAT will issue a 'Notice of Proposal' before making an order. This gives the affected person at least 21 days to explain why the proposed order should not be made.

 

Warning orders

The NTSEAT can issue a warning order if you break the law relating to:

  • Information on charges
  • Definition of terms
  • Your personal interest in a sale
  • Information to clients about offers
  • Information to clients about services provided to buyers
  • Misleading statements
  • Bias against buyers
  • Interest on clients' money.

If you breach the warning order, this could be proof that you are not considered fit to be an estate agent. You could be banned from further work under a prohibition order.

 

Prohibition orders

These orders can ban someone from all, or some aspect of, estate agency work. A prohibition order can be made if you have:

  • Breached a warning order
  • Committed an offence of fraud or other dishonesty, or violence
  • Committed racial or sexual discrimination during your work as an estate agent
  • Committed certain specified offences
  • Committed certain offences under the Act
  • Breached certain provisions of the Act
  • Engaged in a practice declared undesirable under the Act.

A prohibition order can be issued whether or not a warning order was made previously. If you don't comply with a prohibition order, you have committed a criminal offence, and you could be fined.

 

Appeal against prohibition orders

You can appeal to the First Tier Tribunal and then, on points of law only, to the High Court. In Scotland you can appeal to the Court of Session.

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Activities not controlled by the Estate Agents Act

Some property-related work is not controlled by the Estate Agents Act 1979. This includes:

  • Work done by solicitors or their employees as part of their work as solicitors
  • Surveys or valuations carried out independently of any other estate agency work
  • Work connected with planning applications and matters covered by the Town and Country planning legislation
  • Arranging rentals or property management
  • Businesses providing advertising space for property, with no other estate agency function – for example, newspapers
  • Intermediary businesses, such as property portals for private sales, which merely enable private sellers to advertise their properties and provide a means for sellers and buyers to contact and communicate with one another
  • Overseas property transactions
  • Work done in the course of arranging mortgages.

 

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Estate Agents Redress Schemes

From 1 October 2008 it is a requirement for persons engaging in estate agency work in residential property to be a member of an approved estate agents redress scheme.

Details of schemes that are currently approved and available for estate agents to join are on the our Redress Scheme pages.

Further details of the approved estate agents redress schemes, including how to join, are available on the redress schemes' own websites or by contacting them direct.

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More Information

Trading Standards business advice

Business Companion (external website)

 

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