The independent report, jointly
sponsored by the NAEA, the Royal
Institution of Chartered Surveyors
(RICS) and the Association of Residential
Letting Agents (ARLA), discusses the
future of the housing market in the
UK and seeks to identify opportunities
for improvements to the customer’s
experience of buying, selling, leasing
and renting property.
It pulls no punches in its assertion that the
market for buying and selling homes in
the UK is simply not working.
Sir Bryan called for ‘the professionalisation
of estate agency’ and said that the main
focus of his report was on two issues:
whether or not active regulation of estate
agents and other agents in the residential
property field should be introduced; and
whether action can be taken to improve the
efficiency with which a buy/sell transaction
is completed, particularly in getting from a
conditional offer from a prospective buyer
to full contractual certainty.’
He continued: “I first considered whether
the relevant markets for residential
property are working well. I have
concluded that they are not. I think that
the markets for estate agencies, letting
agencies and managing agencies are
not working well because clients are not
well informed about the qualifications
of different agents and about what to
expect from them in the way of service.
I think the market is not being effective
in finding better ways of completing
transactions because the processes
are complex and most consumers do
not understand the normal processes
or alternatives that may be more
expeditious. The common factor here
is information. Participants have to be
well informed if markets are to work
well. Professionals in the industry have
not been doing a good enough job in
informing consumers so that they can
exercise their choices effectively.
I think regulation can make a difference:
it can ensure that better information is
provided and it can create a “floor”
in terms of standards, below which a
complex, competitive market cannot
slip without regulatory consequences.”
Sir Bryan says that there is a great
deal of legislation that relates to
residential property but because it is
contained in several different Acts,
secondary legislation and amendments
it is complex and lacks a unifying set
of principles. He called for reform; not
only to provide coherent legislation but
to establish a regulatory system that
would provide better information and
thus better choice for customers.
Regulation… Qualification…
Redress
The Review was written in six chapters:
The case for comprehensive regulation:
comparing the current system of ‘negative
licensing’ which permits anyone to set up
an estate agency and only be ‘brought to
task’ when a customer makes a serious
complaint, with active regulation, which
would require estate agents to be a
member of an approved body.
Towards the assurance of a
professional service:
If light touch regulation requires an entry
qualification, there should be a legal
requirement for all those who give advice
to customers to obtain a basic qualification
demonstrating their knowledge of the law.
This would apply to agents handling sales,
lettings and management.
Redress:
Sir Bryan said that he welcomed the
Government’s initiative in establishing
a requirement for estate agents to be
members of a redress scheme but
believed that this requirement should be
extended to lettings agents, management
agents and landlords who do not use a
letting agent. Redress should be based
on a code of practice set down by an
appropriate standards body.
New build:
The review found that buyers of new
properties are not given the same level
of protection and redress as those
buying through agents. Developers and
builders (other than those in individual
private contracts) should be subject to
a similar regulatory scheme as estate
agents.
The buy-sell transaction:
Looking at the problems involved in
property sale and purchase, it was found
that the delays in searches, solicitors’
actions, leasehold documentation etc
caused the greatest concerns to customers
and recommended that more information
be given and more effort made to speed
up and secure the transaction process.
Speaking on HIPs, he said that the
introduction of HIPs has not helped;
“Some would summarise the position by
saying that the HIP provides the worst of all worlds”, but if the Government heeded
his recommendation (No. 26) to make
the commissioning of a HIP voluntary; the
HIP providers could develop a product
that would be seen to have real value and
would be willingly purchased by many
sellers.
Leasehold and property
management:
The review found a real need to
improve the simplicity and clarity of
the information supply to leaseholders
and tenants and that there is a need for
consistent enforcement and redress.
Recommendations
1 I recommend that a regulatory
body be established to administer a
regulatory regime to require those
offering agency services in the
property sector to provide better
information to consumers and to
deal with other matters as set out.
2
The regulatory body should take
active steps to ensure compliance
though it should normally use a light
touch approach.
3
I recommend that the powers to
exclude people from operating as
estate agents be transferred from
OFT to the new regulatory body.
This body could also exercise a
graduated, proportionate approach
to the application of lower levels of
sanctions.
4 I
recommend that landlords, letting
and managing agents should be
subject to appropriate regulatory
requirements in order to achieve
consumer protection, efficient
markets and cost effectiveness.
5
I recommend that the regulatory
body or bodies for letting agents and
managing agents should introduce
requirements for the protection of all
client money held by those agents.
6
I recommend that estate agents,
letting agents and managing agents
and landlords who do not use agents
should be required by legislation
to join a private sector regulatory
scheme. The regulatory bodies should
be required to promote the interests
of consumers as regards price, quality
and variety of service and to promote effective competition. They should be
required to put strong emphasis on
information provision and to show
that they have had regard for the cost
effectiveness of their measures.
7
I recommend that existing bodies should
be encouraged to develop regulatory
schemes under a legislative framework
and that OFT be given powers to
approve such regulatory bodies. If
legislation to require membership
of a regulatory body is not quickly
forthcoming, it would be beneficial
for existing bodies to move ahead to
establish a voluntary regulatory body
and promote the benefits to consumers
of dealing with agents who are members
of that body.
8
I recommend that, on the
establishment of a requirement for
membership of regulatory bodies,
the Government should undertake
a review of all existing legislation
affecting the residential property
market with the objective of simplifying
the statutory rules, eliminating those
that can be left to a regulatory body
and consolidating the remainder.
9
I recommend that all those who give
substantive advice to residential
property clients and customers
be required to obtain a basic
qualification demonstrating their
knowledge of the law.
10
I recommend that the qualification
for estate, block management and
letting agents should be pitched at
a basic level similar to that presently
adopted by NAEA.
11
I recommend that a new qualification
regime should include provisions for
grandfathering existing experienced
practitioners.
12
I recommend that the regulatory regime
should incorporate general requirements
for giving good information about
property transactions.
13
I recommend that regulators
should impose requirements to
improve transparency in residential
transactions, particularly to deal
with actual or potential conflicts of
interest.
14
I recommend that action should be
taken by the appropriate authorities
to ensure that lenders fairly describe
fees for applications and for
valuations.
15
I recommend that regulators should
be required, when setting regulatory
requirements, to be mindful of the
need to ensure that customers are
given clear information about pricing
and the regulations should apply to all
relevant business models, including
those that use electronic information,
to promote effective competition
among firms using different models.
16
I welcome the expected requirement
for estate agents to belong to a redress scheme and recommend that there
should be a similar requirement for
letting agents, managing agents and
landlords who do not use an agent.
Decisions about redress should be
based on a code of practice, which
should, in due course, be set down
by an appropriate standards body
and enforced by an appropriate
regulatory body.
17
I recommend that government and
industry should commit to working
together to produce a single structure
for all consumer property redress, with
a single ombudsman for each line of
business, which can be publicised
effectively to all property consumers.
18
Except in relation to specific building
contracts between a builder and a first
owner, I recommend that developers
and builders selling property directly
to the public should be subject to
a similar regulatory scheme to that
applying to estate agents, tailored
to the specific characteristics of the
transactions concerned.
19
I recommend that the regulatory
bodies give prominence, among
their objectives, to requirements
that agents should explain to their
customers, and other parties to
transactions, the various processes
involved in transactions and the
possibilities for improving the
transaction to obtain certainty at the
earliest possible time.
20
I recommend that the regulatory
regime should require estate agents
to give their clients information about
the various processes they could
adopt to expedite the achievement
of a committed sale and that this
should include the possibility of sale
by auction.
21
I recommend that the regulatory
regime should require estate agents
to advise their clients on the various
ways in which deposits may be used
to increase the level of commitment
at an early stage of the transaction.
22
I recommend that the regulatory
regime should require estate agents to
discuss with their clients ways in which
the use of lock-out agreements, buyers’
declarations and sellers’ information
packs can be used to expedite the
transaction.
23
I recommend that the proposed
regulatory body should consider
recommending a standard draft
contract to provide a basis for a specific
draft contract to be provided by sellers
to prospective buyers.
24
I recommend that the Land Registry
should consider increasing the scope
of the information it carries, so that it
has a comprehensive store of generic
information about leasehold blocks;
and that the regulatory body should
take action to improve the provision
of other relevant information.
25
I recommend that legislation should
be introduced to require the holders
of search information to provide that
information rapidly and efficiently to
all members who wish to have it, at
a reasonable price, with the objective
of electronic availability online as
soon as practicable. The legislation
should ensure that information holders
compete fairly with private search
companies.
26
I recommend that the Government
should amend legislation on Home
Information Packs to make them
voluntary.
27
I recommend that it would not be
helpful to introduce new measures
through legislation or regulation to
require the production of surveys,
home condition reports or valuation
reports at particular times. The
best approach is to encourage the
effective working of the market
through helping the people involved
in transactions to understand the
various possibilities.
28
I recommend that the Government
should undertake further work
to enhance the effectiveness of
measures to improve efficiency in the
use of energy.
29
I recommend that the bodies
established to regulate letting agents,
managing agents and landlords
who manage their own properties
should be entrusted with the task of
reviewing the provision of information
to leaseholders and tenants with
the objective of ensuring that the
information is communicated clearly
but that the required information is
not excessive in volume.
30
I recommend that decision makers,
legislators and regulators follow three
basic principles when formulating
proposals for the residential property
field:
- Simple, transparent
information for clients and
customers is a primary objective;
- Proportionate control over the
service provider rather than the
service should encourage and allow
innovation; and
- Consistent enforcement and redress should underpin all schemes.
