Estate Agents Act/Property Misdescriptions Act

Jo Swinson Excerpts

Thursday 13th September 2012 Written Statements

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

I am today publishing the Government’s response to consultations on amending the Estate Agents Act 1979 (EAA) and repealing the Property Misdescriptions Act 1991 (PMA). A limited deregulation of the EAA to take private sale intermediaries out of scope of the Act will provide clarity which the Government expect will also promote competition and potentially innovation, while retaining adequate consumer protection. Repeal of the PMA will remove duplication with the Consumer Protection from Unfair Trading Regulations 2008 (CPRs).

Amending the Estate Agents Act 1979

The amendment to the EAA arose from the disruptive business models theme of the red tape challenge process. It will end the perceived uncertainty, confirmed by the range of views in the consultation about the scope of the legislation, about whether the activities of intermediary businesses such as private sales portals fall within the strict legal definition of “estate agency work” in the EAA. Such portals provide a platform for private sellers to display property details, some provide information about the buying and selling process and some provide tools to allow the buyer to communicate with the seller.

The Government’s view is that some private sale portals may currently be in scope of the EAA, if they act on instructions of the prospective seller or buyer and provide a means for the prospective seller and buyer to make initial contact or to continue to communicate with one another. This is because although publishing advertisements and disseminating information is exempted from the scope of the EAA, facilitating such communication goes beyond this even though it may not amount to any of the services traditionally associated with estate agents.

Taking the consultation responses into account, the Government believe that a limited deregulation of the EAA would bring benefits to consumers and to the industry without reducing consumer protection. It should provide confidence to existing private sales intermediary businesses and potential new entrants, thereby stimulating competition and innovation leading to more consumer choice and better standards of service. The Government recognise that property sales are significant and occasional transactions for consumers with a risk of consumer detriment if businesses which influence or are directly involved transactions are not regulated. The Government believe that a limited amendment to legislation, combined with guidance, will provide clarity and draws the appropriate balance between the interests of businesses and consumers.

The Government have therefore decided to amend the EAA to take out of scope intermediaries such as private sale portals 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 Government recognise this is a limited amendment—many respondents have commented that the choice for consumers to sell property privately already exists—but the Government are concerned by the uncertainty and range of views as to the legal position of private sales portals that the responses demonstrated.

This amendment will enable the intermediary to provide a means for the seller and prospective buyer to contact one another, for example online, a branded for sale board to the seller to assist this process, and to pass on to a buyer solely the information provided by the seller in their advertisement, by whatever channel of communication. If, however, the intermediary offers any personal advice to a seller or a buyer or other ancillary services such as preparing property particulars or photographs or an energy performance certificate, then the intermediary will be in scope of the EAA and bound by its obligations.

Businesses outside the scope of the EAA will also be out of scope of the PMA (although see below). The Consumer Protection from Unfair Trading Regulations 2008 (CPRs) apply to all businesses that deal with consumers. They could therefore be relevant where a private individual uses a private sales portal to advertise a property. The degree of due diligence that the CPRs require from such businesses is proportionate to the level of service offered.

The definition of “estate agency work” is also incorporated in other legislation. The Money Laundering Regulations 2007 require estate agents to guard against and report any suspicion of money laundering. The Terrorism Act 2000 and the Proceeds of Crime Act 2002 incorporate the definition from the EAA in applying particular standards to “regulated sectors” which include estate agents. The limited amendment will also apply to these pieces of legislation.

The Government believe this limited amendment will strike the right balance between deregulating low risk services which do not actively involve the business in the property transaction and retaining the consumer protections of the EAA where agents act on behalf of a party to the transaction.

The next step will be for the proposed amendment to be subjected to parliamentary scrutiny and the Government intend to bring forward the amendment as soon as the parliamentary timetable allows.

Repealing the Property Misdescriptions Act 1991

The PMA makes it an offence to make false or misleading statements in the course of an estate agency or property development business about property offered for sale. The CPRs which came into force in 2008 implemented the EU unfair commercial practices directive in the UK. These regulations provide similar protections for consumers in a wider range of sectors and their introduction meant that consumers were protected by two broadly equivalent pieces of legislation.

The Government’s consultation elicited responses both for and against repeal. The Government understand the reasons why opponents to repeal of the PMA favour it over the CPRs. The PMA deals specifically with property and as such is easy to apply. The CPRs by contrast are not specific to the sector and, being principles-based, require traders to consider how they apply to their particular circumstances.

The Government remain of the view, however, that the CPRs provide broadly similar protection to the PMA. The queries and concerns raised are similar to those that were raised when the CPRs were first proposed and these fears do not seem to have materialised in other sectors. The Government believe this situation will continue so long as the PMA remains in place and that repealing the PMA would not significantly reduce levels of consumer protection. This is disputed by some stakeholders but not others and the Government do not find the arguments for a loss of consumer protection convincing.

The Secretary of State for Business, Innovation and Skills will therefore lay an order under the European Communities Act 1972 to repeal the PMA. The current intention is that this will come into force not before October 2013.

Revised guidance for businesses and consumers will be produced to cover these changes.