The media like to report that the Estate Agency market is unregulated, in fact, that couldn’t be further from the truth. While you may not need any formal qualifications, government regulation actively protects businesses and consumers. Failure to adhere to these standards could result in a prison sentence!
What are the regulations?
Property Mis-descriptions Act 1991
- For over 20 years, Estate Agents have been required to be truthful and accurate when preparing property details (property descriptions, details and measurements). This encouraged more consistent good practice and an increase in consumer confidence.
Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and the Business Protection from Misleading Marketing Regulations 2008 (BPRs)
- In 2008, much greater clarity arrived, both for consumers and businesses, extending regulation far beyond property details and embracing all aspects of Estate Agency. At the heart of the new rules was the need to Treat Consumers Fairly (vendors and prospective property purchasers) and act with Professional Diligence.
The greater emphasis on professionalism further enhances the Duty of Care owed by Agents to their clients, and, in turn, clarity that breaches of this duty of care could result in civil action and increased Professional Indemnity Insurance exposure.
The Key issue - Treating Customers Fairly
The CPR’s prohibit firms from acting unfairly by:
- Providing or giving false or misleading information
- Hiding or failing to provide material information
- Exerting undue pressure on consumers
- Failure to act and demonstrate professional diligence
- Engaging in ‘banned practices’ such as property baiting
What is Property Baiting?
The use of “Baiting” or “Bait Advertising" is not just confined to the property market and is clearly prohibited under CPR and BPR regulations.
Any form of marketing or advertising, which could be deemed to be making false or misleading claims to attract potential buyers could fall foul of these rules.
Typical examples include:
- Leaving a “For Sale” board or web advert up after a property has been sold to falsely attract buyers to leave information or to give the impression that an agent has more properties for sale. This practice is known as Flyboarding and is also forbidden by Town and Country Planning legislation.
- Advertising attractive “Guide Prices” which the vendor would have no intention of accepting. (e.g. new flats from £100,000, when the minimum the seller will accept is £145,000.
- Limited time offers – For Sale, this weekend only discount type offers, which could encourage buyers to make an impulsive or irrational decision.
Civil or Criminal Proceedings
Local Authority Trading Standard Services (TSS) and other consumer bodies must enforce these regulations. The severity of the breach will determine the punishment but could result in a Crown Court conviction, an unlimited fine, and/or up to two years imprisonment.
Professional Indemnity Insurance
Estate Agents Professional Indemnity cover provides protection against claims for negligence resulting from a breach of duty of care.
As an “expert” in your field, the law dictates you have an increased duty of care to your clients. This applies to the advice and services provided by agents in the course of their occupation.
Where a business or consumer suffers a financial or physical loss as a result of the Agents actions they can seek rectification or compensation and Professional Indemnity Insurance can assist in defending actions and ultimately cover the cost of any liabilities.
PI cover will not extend to cover deliberate acts but will provide protection for accidental breaches of the CPR and BPR regulations. For complete peace of mind, speak to your Business Insurance Broker to ensure you have the correct level of cover and full civil liability protection in place.
Estate Agents Insurance Review