|
Memorandum submitted by the National Association of Estate Agents (CEAR 06)
1. KEY POINT SUMMARY
1.1 The National Association of Estate Agents (NAEA) welcomes Part 3 of the Consumers, Estate Agents and Redress Bill which will require estate agents to join an ombudsman scheme. We support the aim to improve rights of redress for consumers, including compensation where they suffer from malpractice.
1.2 In order to achieve real consumer protection, however, we believe that the Bill should be strengthened by addressing the following two issues:
· Membership of an approved industry body. The Association believes that after-the-event compensation is not enough on its own to stop estate agency malpractice, and that prevention methods must be considered. The NAEA would like to see the Government make it compulsory for all agents to be a member of an industry regulatory body, such as the NAEA or RICS, so that they are bound by Rules of Conduct and meet minimum competency standards.
· Residential Lettings. The Bill does not legislate for redress with regards to residential lettings. The residential lettings market sees a much higher turnover than residential sales, which means there is more opportunity for things to go wrong. The NAEA would therefore like to see the redress legislation covering consumers who are renting property as well as those who are buying and selling.
2. ABOUT THE NAEA
2.1 The National Association of Estate Agents (NAEA) is the UK's leading professional body for estate agency personnel, representing the interests of over 10,000 members who practice across all aspects of property services both in the UK and overseas. These include residential and commercial sales and lettings, property management, business transfer and auctioneering.
2.2 The National Association of Estate Agents is dedicated to the goal of professionalism within high street estate agency. Our aim is to reassure the general public that by appointing an NAEA member to represent them they will receive in return the highest level of integrity and service in both sales and lettings. Each NAEA member is bound by a vigorously enforced Code of Practice and adheres to professional Rules of Conduct. Failure to do so can result in heavy financial penalties and possible expulsion from the Association.
3. REGULATION OF ESTATE AGENTS
3.1 Unlike most other countries, there are currently no restrictions on operating as an estate agent in the UK. Anyone can set up an estate agency business with no experience, no qualifications or insurance, and without belonging to a professional body and therefore having to abide by Rules and Codes of Conduct.
3.2 In 2004, the OFT reported that there was no need to further regulate estate agents, and argued that the industry should be controlled by negative licensing. This view, however, is not supported by the majority of the industry, the media, Which?, and most importantly the consumer, who all believe that it is better to prevent bad practice rather than have to punish it.
3.3 Unfortunately, the DTI missed a golden opportunity by supporting this report against the wishes of the industry. Four reasons were given for not supporting further regulation, all of which the NAEA believe are flawed.
· Regulation would restrict entry to the profession. The NAEA does not believe this to be the case. The Association has introduced a technical qualification as the minimum entry requirement, equivalent to a NVQ Level 3, and the NAEA are the awarding body on behalf of the QCA. Since starting these 3 years ago, 2,500 have passed and the average age of the NAEA has come down to 35 as a result. Rather than putting people off, the reverse has happened showing that those employed in the industry wish to have qualifications. Our higher level Diploma (equating to a foundation diploma) is also creating considerable interest.
· Regulation would increase costs. The NAEA believes that the considerable competition amongst estate agents would not allow this to happen.
· Negative licensing works. This is simply not the case. A redress scheme will only punish, rather than prevent the crime. There are numerous examples of bad practice where the OFT was not able to take action. The industry believes that positive licensing is the easiest, most effective method to check malpractice within estate agency.
· The OFT's International Study did not prove that licensing resulted in a drop in complaints. This study was fundamentally flawed. The question of whether there was a reduction in serious complaints does not appear to have been asked. Our contacts with other Associations around the world indicate that licensing, or some control, does have a benefit to the consumer.
3.4 Currently, NAEA members have to abide by rules and codes, and as required have professional indemnity insurance, Client Money Protection Insurance and provide an annual accountants certificate demonstrating that clients money is kept correctly. As from April last year, the NAEA are leading the industry by insisting that all our Principal, Partner and Director members belong to an independent redress scheme covering both the sale and lettings side of the business.
3.5 However, an agent who potentially brings the profession into disrepute will not want to belong to any professional body or the Ombudsman unless forced to. As a result, our members suffer from the lack of a level playing field, having to compete with those who have no rules or code to follow.
3.6 The NAEA has long campaigned for measures that would tackle the underlying causes of poor service and bad practice. The NAEA has previously supported two Private Members Bills, both called the Estate Agents (Independent Redress Scheme) Bill, which were introduced by Alan Williams MP and Lord Dubs in 2004/5 and 2005/6 respectively.
4. THE CONSUMERS, ESTATE AGENTS AND REDRESS BILL
4.1 Part 3 of the Consumers, Estate Agents and Redress Bill enables the Secretary of State to "require estate agents to join an ombudsman scheme and strengthen the regulation of estate agents through measures such as: requiring estate agents to keep records and allowing trading standards officers to inspect those records and expanding the circumstances in which OFT can take regulatory action against estate agents."
4.2 The NAEA welcomes the principle of making every agent belong to a redress scheme, as set out in the Bill. This at least starts to level the playing field, providing that the current codes, such as the NAEA's and the RICS', are not dumbed down.
Membership of an 'approved body'
4.3 However, redress can only be part of the answer, and should not be the final recourse. If all agents have to meet minimum standards and are controlled by an organisation such as the NAEA, one would hope that redress is required on fewer occasions. After-the-event compensation is not enough on its own, and prevention methods must be considered.
4.4 The NAEA believes that estate agents should be regulated in a similar fashion to other bodies that operate within the housing market, with a mandatory requirement for anyone practicing as an estate agent to belong to an organisation that has minimum technical entry standards, rules of conduct, codes of practice, independent redress and a disciplinary system.
4.5 There is no need for a new regulatory body and as such we are not calling for the heavy licensing of the profession. By requiring that all agents belong to an 'approved body', all the necessary requirements can be met and the industry can self regulate. If necessary the industry can consider the setting up of a new industry board to oversee this.
Residential lettings
4.6 The current proposal is that redress should be brought in by altering the Estate Agents Act 1979. Most in the industry consider that this Act is well past its sell by date and needs considerable updating. In particular, the Act only relates to residential sales and does not cover lettings. The majority of the queries and complaints that the NAEA receives concern the lettings sector.
4.7 Whilst the Government is putting in place the tenancy deposit protection scheme to help improve the regulation of the lettings sector, this scheme only applies to deposits and does not provide independent mediation for any of the other disputes encountered in the letting process.
4.8 A considerable proportion of enquiries that the NAEA receives relate to service issues rather than deposits. It is therefore important that residential lettings are placed on the same footing as residential sales.
4.9 The Bill will ignore a major section of the estate agency industry, and the NAEA would like to see the Bill amended to include residential lettings within its remit.
April 2007 |