Landlords who buy or let properties through an estate agent will soon have to be told if a recommended third-party supplier such as an inventory firm or builder has paid a referral fee to the agent.

This follows an announcement by Trading Standards that, following a long investigation, it found that many agents continue to hide referral fees from their customers.

A critical report has now been published by the Trading Standards Estate and Lettings Agency Team after being passed to ministers in February.

It says: “In some situations, customers may be pressurised to use a referred provider despite the fact it does not meet the needs of the customer or provide best value.”

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The report recommends that the government should:

  • Make transparency of referral fees mandatory.
  • Require a warning to be given to customers that they should consider shopping around.
  • A public awareness campaign to warn consumers about hidden referral fees.
  • Further industry guidance, and work with the professional bodies and redress schemes to encourage compliance in the property sector.

Ministers have backed the report’s findings although it is now up to them whether new legislation is introduced or existing consumer protection legislation is more strictly enforced, including a ban for errant agents.

“It is unacceptable that unscrupulous practices are still taking place where consumers are not being made aware of referral fees when buying or selling a property,” says housing minister Christopher Pincher (left).

hooker

Sean Hooker (left), Head of Redress at the Property Redress Scheme, says: “I was on the working group with the MHCLG and NTSELAT along with TPO, Propertymark, RICS and the Guild that helped draw up guidance for agents as part of a voluntary trial of disclosure and transparency.

“Whilst the guidance was followed by many businesses, the NTSELAT report shows that more is needed to be done and whilst they have fallen short of recommending a full ban, the introduction of mandatory disclosure is required.

“This is the correct and proportionate response to protect the consumer and reduce the complaints against agents.”

Mark Hayward (left), Chief Executive of NAEA Propertymark:“New legislation which will require agents to display referral fees is a step forward, providing clarity to agents that they mustn’t fall foul of the law but importantly ensuring greater transparency for consumers to avoid any confusion about what agents are charging for.”

Read the report.

Find out more about redress when things go wrong with your agent.

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