Who regulates the estate agents?

In Gibraltar, no one does. We are left to our own devices to look after client money as we see fit, administer tenant deposits without recourse to any redress scheme, offer properties with limited consumer protection and issue tenancy agreements without any guidelines.

Until April 2014, the Office of Fair Trading (“OFT”) in the UK regulated the 500,000 or so UK estate agents. However, the OFT was closed down last year, with its various administrative tasks distributed to other regulatory bodies. Somewhat bizarrely, Powys County Council and Anglesey Trading Standards (both in Wales) acquired the task of running the UK National Trading Standards Estate Agents Team, taking on some of the powers previously held by the OFT, including assessing whether Britain’s estate agents are fit to carry out their work within the terms of the Estate Agents Act 1979.

Roughly at the same time that the UK OFT was disbanded, Gibraltar announced the introduction of its own Office of Fair Trading. The Command Paper stated that the main functions of the local OFT would be to, amongst other matters:

(a) keep under review the carrying on of commercial activities which relate to services supplied to consumers ….. with a view to it becoming aware of, and ascertaining the circumstances relating to, practices which may adversely affect the economic interests of consumers in Gibraltar;

(b) collate evidence becoming available to the OFT with respect to the above activities which appear to it to be evidence of practices which may adversely affect the interests … of consumers in Gibraltar; and

(c) promote good practice in the carrying out of activities which may affect the economic interests of consumers in Gibraltar,

Time will tell how the introduction of an OFT in Gibraltar will impact the estate agency industry here. I’m hoping it does.

In my opinion, it is in Gibraltar’s best interests that estate agents comply with a certain set of standards. Shoddy practices in any industry can give a jurisdiction a bad name. Who is checking, for example, estate agent’s ring-fencing and proper accountability of client money?

Estate Agency Act 1979

In the UK, the Estate Agents Act 1979 (the “Act”) remains the principal source of the rules. By law, you are an estate agent if you deal with people who want to buy or sell freehold or leasehold (residential or commercial) property as part of a business. This includes high street and internet only based agents (but not portals).

If you are acting as an estate agent, you must comply with your legal duties such as providing your clients with information on their prospective liabilities (for example, be clear and upfront about charges) and declare to buyers and sellers any personal interest that you or a connected person (such as a business associate or a relative) may have in any properties detailed on your website.

Terms of Business

Furthermore, an estate agent must give potential clients their terms of business in writing as soon as possible and it must be done before agreeing to act for the client. Terms such as ‘sole selling rights’ and ‘sole agency’ must be defined.

Personal interest

An agent must reveal promptly and in writing any personal interest that they or a connected person have in a transaction. A ‘connected person’ has a wide definition. An agent must not seek or receive a deposit for the sale of a property in which they have a personal interest without prior declaration of the interest in writing.

Negotiations and misleading information

Under the Act, an agent must give their clients written details of all offers received from potential buyers. This information must be passed on promptly.

It is illegal to mislead buyers or sellers in any way. Specifically, an agent must not give misleading information about: offers for a particular property; existence or status of any potential buyer; or invent bids.

Agents must avoid misleading statements, for example, an agent cannot claim to have first time or cash buyers, or any potential buyer for that matter unless they can show why they think this is true.

An agent cannot make a false or misleading statement about a property, or withhold information which would be of material interest to a potential customer. This is an offence under the UK Consumer Protection from Unfair Trading Regulations 2008.

Handling clients’ money

The Act has specific requirements about how to handle clients’ money. An agent must put a deposit in a special account, called a ‘client account’, which is set up for this purpose at a bank, or other financial institution. Monies in a client account are and must remain ring-fenced from the estate agent’s own money. Detailed records of all transactions relating to a client account must be kept and be available for scrutiny by a qualified auditor.

Enforcement

The law can be enforced by alocal authority Trading Standards department or The National Trading Standards Estate Agency Team (“NTSEAT”). This team can issue warnings and prohibition orders that could stop an estate agent from practising. The NTSEAT can require anyone, including clients and potential buyers, to give information or produce documents before deciding whether or not to issue an order or carry out other enforcement activities.

NTSEAT is currently re-drafting the Office of Fair Trading’s ‘Guidance (for the estate agency industry) on Property Sales’ which was last issued in 2012. The new guidance is expected in April 2015.

I would hope that Gibraltar’s OFT could use this document as a template for the setting of standards for the estate agency industry here. We would all benefit.