Yesterday the Property Ombudsman released their annual report covering the 2020 calendar year, the full report can be found here, the headlines are as follows.
- Enquiries increased year-on-year with a record 39,285 reported, up 29% on 2019
- 5122 of the enquiries received were accepted as complaints, up from 5106 the previous year
- 2473 complaints resulted in a financial reward
- Agents were instructed to settle total claims of £1.9 million
- Highest award paid by a sales agent £24,139
- Highest award paid by a lettings agent £20,838
So why are agents hard earned fees being eroded in this way?
Whilst the larger independent and corporate agents will have dedicated compliance departments a large proportion of the 25,000 plus estate agency businesses in the UK do not. Small business owners ware many hats and even with the best of intentions compliance is sometimes overlooked. It’s easy to understand due to the sheer volume of regulation. A recent study identified that lettings agents alone collect in the region of 110 data points just to get a property on the market, much of which falls under regulation ranging from KYC to the consumer protection act. If the agent then goes on to let the property and manage it as well the compliance burden continues to grow. The following is a list of the legislation (not exhaustive) that agents need to be aware of .
- Consumer Protection from Unfair Trading Regulations 2008
- Estate Agents Act 1979 + Regulations
- Money Laundering Regulations 2017
- Consumer Contracts (Info, Cancellation and Additional Charges) Regs
- The Property Ombudsman Code of Practice
- Companies Act/Business Names Act 1985
- The Energy Performance of Buildings (Certificates and Inspections) Regs
- Data Protection Act 1998
- Electronic Commerce (EC Directive) Regulations 2002
- Town & Country Planning (Control of Advertising) Regulations
- Unfair Terms in Consumer Contracts Regulations 1999
So where are agents falling down?
It seems many agents are getting into trouble right at the start of their relationships, with complaints relating to instructions/terms of business featuring second on the list for sales agents and third for lettings agents, with poor communication and record keeping coming in first and second respectively.
The importance of ensuring that T&C’s are clear and relate specifically to the customer and their specific circumstances can not be overstated. In addition gaining approval for agent produced marketing collateral is a must, it’s sometimes seen as an irritation and a delay to getting a property on the market but it is certainly best practice and a requirement for those agents who are Property Ombudsman members.
Is Tech the answer?
Tech can certainly help, there are a variety of great solutions available that can assist the agent / client relationship right from onboarding through to end of tenancy or sale completion. The key is ensuring you know your obligations and then choosing the most suitable solutions for your business.
An array of compliance tech will help but will not keep an agent safe if used poorly.
More and more agents are now looking to protect their position by not only making sure their teams receive the required training, but also ensuring they provide adequate instructions to ensure their team knows what to do, how to do it and when to do it.
To do this correctly, professionally and provide the required due diligence audit trail, agents need written instructions and this is best done by means of a Compliance Manual. This will combine a list of the legal obligations with the what, how, when. When creating such a document a review of the following items is recommended.
- Terms of Business
- Standard Letters & Documents
- In-house Procedures
- Auditing property files
This may sound daunting especially for those smaller businesses without dedicated compliance teams but as the fines show the regulators have teeth, so it’s probably a false economy not to have a formal compliance regime in place.
Staying compliant is a considerable task and one that is only set to grow. For those that have the time there are plenty of resources on line, Propertymark and The Property Ombudsman also offer comprehensive compliance services to their members.
For those who are perhaps looking for something more interactive consultancies such as EA Compliance can provide a bespoke service ranging from answers to a specific question to a complete compliance heath check.