1 Workshop on common causes of complaint in sales transactions What are the agent s obligations? What is a fair and reasonable outcome in the circumstances?
2 Do I have the right to park? Consider this scenario Mr and Mrs Baker instruct an Agent to market their Property. The Property has a driveway which the couple currently park on but the kerb outside the driveway is not dropped. The Agent notices this. The Agent creates the Sales Particulars and describes the Property as benefitting from off-road parking. Mr and Mrs Baker approve the Sales Particulars and the Property goes on the market. Mr and Mrs Park-a-Lot view the Property and make an offer which is accepted. After purchasing and moving into the Property they realise that members of the public often park at the end of the driveway preventing their access to and from it. Mr and Mrs Park-a-Lot make the relevant enquiries and realise that they do not have a legal right to cross the pavement with a vehicle in order to access their driveway. They contact the Agent and complain that they have been misled by the Sales Particulars.
3 What has the Agent done correctly/incorrectly? Has the Agent acted in accordance with the TPO Code of Practice? Do the Complainants have a supportable complaint? If so, what level of award would you make?
4 What does the TPO Code of Practice for Residential Estate Agents say? Paragraph 7i: You must by law comply with the Consumer Protection from Unfair Trading Regulations These Regulations require you to disclose any information of which you are aware or should be aware of in relation to the property in a clear, intelligible and timely fashion and to take all reasonable steps that all statements that you make about a property, whether oral, pictorial or written, are accurate and are not misleading. All material information must be disclosed and there must be no material omissions which may impact on the average consumer s transactional decision and where information is given to potential buyers or their representatives, it must be accurate and not misleading. See the TPO Code (August 2014 version) for definitions of material information, average consumer and transactional decision.
5 What does the TPO Code of Practice for Residential Estate Agents say? Paragraph 7j: The written details of a property (sales particulars) must be agreed with the seller to confirm that the details are accurate. Paragraph 7k: You will be liable if you include anything in the sales particulars which you have reason to doubt is correct.
6 Conclusions The Agent should not have described the property as having off road parking as they were aware that there was no dropped kerb. The lack of a dropped kerb ought to have put the Agent on notice that there could be potential problems with parking on the drive. This was a potential breach of the CPRs. The Agent was not entitled to solely rely upon the fact that the seller had approved the Sales Particulars as a defence. The CPRs place an obligation on agents to fully and accurately disclose information about a property. This is a wider obligation than that which existed under the Property Misdescription Act (which was repealed on 1 October 2013).
7 Award An approximate award would be around 500 depending on the circumstances. For example was parking a key selling point for the Complainants? Did they ask the Agent about the dropped kerb and were given incorrect information? Had the Agent marketed the property before and this problem arisen should they have known better? However, the Agent is unlikely to be liable for the cost of installing a dropped kerb.
8 What if The agent had verbally explained to the Complainants during the viewing that there was no dropped kerb and the implications of this? The Complainants had viewed the property several times and parked on the drive? How else could the agent have explained the parking situation at the property on the Sales Particulars?
9 I can t do what with my property? Consider this scenario Mr Jones instructs the Agent to market his Property. The Property is a flat in a block that has a Residential Leasehold Management Company. The Agent views the Property, accepts the instruction and produces Sales Particulars which describe it as being ideal for investment. Mr Jones signs these. Mr Big Bucks, a wealthy landlord, makes an offer for the Property which is accepted and the conveyancing process gets underway. It is subsequently discovered by Mr Big Bucks solicitor that there is a restriction in the lease which prevents the Property from being rented out. It is, therefore, no longer suitable for Mr Big Bucks. He complains to the Agent that the Sales Particulars were misleading.
10 What has the Agent done correctly/incorrectly? Has the Agent acted in accordance with the TPO Code of Practice? Do the Complainants have a supportable complaint? If so, what level of award would you make?
11 Paragraph 7i: What does the TPO Code of Practice for Residential Estate Agents say? The Consumer Protection from Unfair Trading Regulations 2008 require you to disclose any information of which you are aware or should be aware of in relation to the property in a clear, intelligible and timely fashion and to take all reasonable steps that all statements that you make about a property, whether oral, pictorial or written, are accurate and are not misleading. Paragraph 7j: The written details of a property (sales particulars) must be agreed with the seller to confirm that the details are accurate. Paragraph 7k: You will be liable if you include anything in the sales particulars which you have reason to doubt is correct.
12 Conclusions Agents are not expected to obtain and review title documents prior to putting a property on the market. However, if an Agent describes a Property in a certain way then they should take steps to verify that this description is accurate. In this case, the Agent could have telephoned the Management Company or have asked the Seller if he was permitted to rent out the Property. Describing the Property in this way without verification was misleading and a potential breach of the CPRs. The Agent is not entitled to solely rely upon the fact that the Seller had approved the Sales Particulars as a defence. In this case, the Seller may not have realised the implications of marketing the Property as ideal for investment.
13 Award In these circumstances it is likely that any costs incurred by Mr Big Bucks during the conveyancing process would be returned to him as part of the award. This is because he would not have even viewed the Property or made an offer had the Sales Particulars contained accurate information.
14 What if The Agent is aware that a sale has previously fallen through due to restrictions on the title of the property regarding use or another legal matter that needs resolving but will take time? Should they disclose this? The Agent is informed by a third party that there is an ongoing dispute over one of the boundaries of the Property. The Property has a loft extension which the Seller is using as a 4 th bedroom. Should the Property be described as a four bedroom property?
15 CPRs key points to remember The obligations placed on Agents under the CPRs are wider than those that previously existed. The days of buyer beware are past. Description - Don t describe a Property in a manner that you are unable to verify. If you make a claim about a Property then you should have taken reasonable steps to ensure it is accurate and have evidence to back it up, or at least no evidence to the contrary. Be honest if viewers are misled by being given incorrect information or by information being withheld this may initially secure a quicker sale but could also lead to the chain falling apart later on (this does not benefit the agent or the seller) or an angry new purchaser making a complaint to us or the courts about the agent. Get the Seller to approve the Sales Particulars and don t include anything in them which you have reason to doubt (even it the Seller is persuasive). Disclose all material information, especially if you think it will have an effect on an average consumer s transactional decision. Put yourself in the consumer s shoes would you want to know?
16 Can the Buyer afford it? How available are his assets? Consider this scenario Mr and Mrs Leave-Now instruct an Agent to sell their property. Their daughter is expecting her first child and they are keen to move up North to live close to her as soon as possible. They have already found a property to purchase so want to find a buyer who can proceed to exchange of contracts quickly. Mr Smith views the Property, loves it and makes an offer. The Agent passes this offer to Mr and Mrs Leave-Now and informs them that Mr Smith is a cash buyer with nothing to sell, as this is what he had informed them. After some negotiation, Mr and Mrs Leave-Now accept Mr Smith s offer and solicitors are instructed. The Memorandum of Sale records that Mr Smith is a cash buyer. Mr and Mrs Leave-Now immediately instruct their solicitors to carry out searches, instruct a surveyor, and raise enquiries relating to the property they are purchasing. After they receive the searches and survey results, they ask their solicitor when he expects exchange of contracts to take place. He informs them that Mr Smith has made his mortgage application but has not yet received an offer. Mr Smith is subsequently refused a mortgage offer. Mr and Mrs Leave-Now contact the Agent and complain that they were given incorrect information regarding Mr Smith s ability to proceed. They want the Agent to cover their search costs and their survey and conveyancing fees.
17 What has the Agent done correctly/incorrectly? Has the Agent acted in accordance with the TPO Code of Practice? Do the Complainants have a supportable complaint? If so, what level of award would you make?
18 What does the TPO Code of Practice for Residential Estate Agents say? Paragraph 10a: At the time an offer has been made and is being considered by the seller, you must take reasonable steps to find out from the prospective buyer the source and availability of his funds for buying the property and pass this information to the seller. Such information will include whether the prospective buyer needs to sell a property, requires a mortgage, claims to be a cash buyer, or any combination of these. Such relevant information that is available should be included in the Memorandum of Sale having regard to the Data Protection Act Paragraph 10b: You must put all offers to your seller client even if the prospective buyer has not been financially qualified at that stage. Paragraph 10c: These reasonable steps must continue after acceptance of the offer until exchange of contracts (In Scotland, conclusion of missives) and must include regular monitoring of the prospective buyer s progress in achieving the funds required, and reporting such progress to the seller.
19 Definition of Cash Buyer Paragraph 18d: A cash buyer can only be described as such if he has realisable cash assets, that is; he has sufficient cash in the bank, building society or other investments, which can be realised in a reasonable time, that is, it will be available by the estimated or proposed exchange of contracts and completion dates; or he has actually sold a property, that is he has exchanged contracts (in Scotland, conclusion of missives) and is expected to achieve completion on his sale before exchange on his purchase and he does not require a mortgage to make up any difference in the purchase price of the new property.
20 Conclusions The Agent did not take reasonable steps to find out Mr Smith s source and availability of funds. They simply took his word that he was a cash buyer. Agents need to take steps to verify the information given to them by potential buyers. For example, obtain a copy of a mortgage agreement in principle, or evidence of sufficient cash assets. A Buyer should not be referred to as a cash buyer unless the Agent has verified the same and they meet the definition. If this verification has not been obtained at offer stage then the offer should still be passed to the Seller but they should be informed that, although the potential buyer says they are a cash buyer, it has not yet been verified by the Agent.
21 Award An award for aggravation and inconvenience would be made. Average However, generally awards do not cover the loss of legal fees, search fees and survey costs as the conveyancing process is too unpredictable and when a Seller accepts an offer they take the risk that the sale will fall through for whatever reason.
22 What if The potential buyer produces a bank statement evidencing that he is a cash buyer but subsequently he decides to use his money to travel around the world and take out a mortgage to purchase the property? The potential buyer is unable to produce the required information to verify his status? The potential buyer thought that his investments would release more cash to him then they actually do and he is forced to take out a mortgage to make up the shortfall?
23 Key points to remember Don t simply accept a potential buyer s word that they are a cash buyer. Ask them for evidence of this. Do not refer to a potential buyer as a cash buyer unless you have verified this and they meet the definition in the TPO Code of Practice. Remember you can tell the Seller that the Buyer claims to be a cash buyer and you are verifying the situation. If a potential buyer requires a mortgage then monitor their progress in obtaining this and keep the Seller informed. Effective and regular communication is the key to keeping all parties happy and allows them to make informed decisions. Think Money Laundering and stay alert to fraudsters!
24 When faced with a complaint ask yourself What were my obligations under the TPO Code of Practice? Have I acted accordingly? What is a fair and reasonable outcome in the circumstances? Remember the longer a complaint continues the more significant the aggravation caused. This increases awards in circumstances where the complaint could have been resolved easily at an earlier stage.
25 Causes of Complaints Sales Two agents claiming a fee Fixed fee v percentage related to sale price Lack of clarity about additional charges, e.g. withdrawal fee / EPC Sole Agency / Sole Selling Rights Financial evaluation Complaint handling
26 Causes of Complaints Lettings Referencing Holding Deposits Tenants damage Tenants requests for repairs Pre-contract conditions Complaints Handling NOT Tenancy Deposits
27 Legislation Existing Consumer Protection from Unfair Trading Regulations 2008 Recent ASA Ruling Enterprise and Regulatory Reform Act Consumer Contract Regulations TPO Codes of Practice
28 Consumer Protection from Unfair Trading Regulations 2008
29 Consumer Protection from Unfair Trading Regulations 2008 Bournemouth Echo 26 Dec 13: A submerged van in the overflowing River Stour at Ilford Bridge Home Park, near Bournemouth, where flooding has caused the evacuation of residents. Daily Echo 4 Jan 14: Ilford Bridge after the Christmas deluge. A total of 90 residents were evacuated from Iford Bridge Home Park at 4am on Christmas Day as the River Stour burst its banks and water was entering the site as they left. They were evacuated again on Thursday, January 2.
30 Consumer Protection from Unfair Trading Regulations 2008
31 Consumer Protection from Unfair Trading Regulations 2008 Manchester Blitz Firefighters putting out a blaze at a bomb site in Manchester city centre. The German Luftwaffe mounted consecutive attacks on the Manchester area on the nights of December 22/23 and 23/24, 1940.
32 Thank you The Property Ombudsman Milford House Milford Street Salisbury Wiltshire SP1 2BP Questions?