Agents warned that they must show all fees as inclusive of VAT

Agents have been warned that when showing fees in their adverts, they must show them as inclusive of VAT.

Agents must not show fees as being a sum or a percentage plus VAT.

Both Ombudsman Services and the Property Ombudsman sent a note out to all their members following new advice issued last Thursday by the Committee of Advertising Practice.

That in turn followed a ruling last November by the Advertising Standards Authority where an agent in Derby, IMS Residential, advertised their selling fee as 0.9% plus VAT.

The ASA said that the agent should have used a figure of 1.08%.

The new advice from the Committee of Advertising Practice says that percentage fees should be adjusted to include VAT.

So, for example, a percentage sales fee of 2.5% plus VAT should be advertised as 3%. It is, however, permissible to add that the fee is inclusive of VAT.

Flat rate fees should also be adjusted to include VAT. For instance, a sales fee of £495 plus VAT should appear as £594.

Letting agent fees should also be advertised as inclusive of VAT. Again, it is permissible to include an “inclusive of VAT” statement.

The ruling applies to all agents’ adverts including in mailings, text messages, own websites and social media.

It would appear that some agents including Purplebricks – which at the weekend was showing on its site as costing sellers £665 plus VAT, as below – will have to amend their adverts.

However, while letting agents are obliged to show fees along with rents, there is no legal obligation on sales agents to show their fees.

The CAO ruling therefore only applies to sales agents who advertise their fees.

To double-check that Eye’s interpretation was correct, we asked ombudsman Christopher Hamer, who confirmed that it is correct.

He said: “An ASA ruling in 2013 requires agents to display all non optional fees charged to tenants to be displayed along with the rental figure. The Consumer Rights Act just passed extend that so that agents must show their fees prominently in their offices and on their websites. It does not apply to sales agents.

“The latest CAP ruling applies when an agent is advertising their services. The TPO Code still applies in regard to how fees are shown in agency agreements.”

The CAP ruling is here

Purplebricks

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33 Comments

  1. smile please

    If agents do take note of this all I can see is further erosion of fees. Most are not strong enough to justify a good fee without including VAT!

    What about other parts of the industry Zoopla,  Rightmove, newspapers when ever you speak to them they sell it without mentioning VAT until you sign up.

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    1. Adam Day - Hatched.co.uk

      Because you can claim the VAT back, so the actual cost to you is net of VAT.

      However, the ‘man on the street’, cannot claim the VAT back, because it isn’t a business to business transaction.

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    2. PeeBee

      “If agents do take note of this all I can see is further erosion of fees.”

      Why, sp?

      If EVERYONE does it, all that happens is that the fees ALL ‘increase’ by 20%.

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      1. smile please

        I do not know what your market is like Peebee but round here it is tough as a VERY competitive market.

        We are 1.5% plus vat and advertise it as such.

        Most agents by me are week on fee cannot justify it, or at least their staff cannot.

        If it becomes mandatory to advertise X% INCLUSIVE of VAT i know the agents round me that are doing 1%PLUS VAT will change to 1% they are not skilled enough / brave enough to advertise a perceived fee increase.

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        1. smile please

          *Weak* – second time in as many post not read back before posing grrr

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  2. Mark Reynolds

    Why, can’t people count these days or use a calculator or ask a question – Next we will have to tell them that the white (or other colour) paper in the toilet on the holder is there for other things as well blowing your nose…

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    1. Adam Day - Hatched.co.uk

      Why should they? The price should be transparent and clear. It is when you go to the supermarket, or the petrol station.

      Using your logic, petrol stations should quote the price at the pump as say £62.80 and then while you walk to the cashier, you’d have had to calculate the 20% that you would have to pay on top (which would be £12.56). I think 99% of the population would be up in arms if the petrol stations did this.

      The other difference with estate agents fees is VAT runs into hundreds of pounds, if not thousands. It should be absolutely clear to the consumer the total they are paying

      It’s called transparency and this is why estate agents are one of the most hated ‘professions’, because very little transparency exists.

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      1. PeeBee

        Mr Day – right up to your last sentence I was with you all the way.

        THEN… you just had to play the prat card and bu99er up your credibility in this industry once again…

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      2. Robert May

        “The price should be transparent and clear” in September 2012 you boasted you could get £2000 out of someone who thought they were paying £400.  How does that fit with transparent and clear?

        There was a long thread,  as I recall, where your numbers didn’t add up to  being a viable business, at which point you  claimed  off a base of £400 or £800 you could get £2000 out of some vendors.

        I have to say your numbers in 2012 were all over the shop and I still haven’t worked out how you  could possibly  average save vendors  £4000 when the average commission at the time was  £2500.

         

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  3. Mark Reynolds

    Don’t get me wrong, I am with you on the transparency thing, my point is what is wrong with “Plus VAT at 20%” being displayed?

    Either way it’s academic as it has to be done

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    1. PeeBee

      Mr Reynolds

      What is ‘wrong’ is (in my opinion) twofold – firstly people forget (often ‘conveniently’, I concede…) and as Mr Day correctly points out the “average” (according to Mr Hayter’s advertorial last week) fee will attract VAT of some £582.60 – this is one heck of an amount to suddenly have chucked at you; secondly, we deal in the main with the general public – they cannot claim back VAT and they don’t pay 50p+VAT for Heinz Beans so why should they be tempted by a fee that THEY SIMPLY DO NOT PAY?

      Take it from me – quoting INCLUSIVE Fees isn’t a hard thing to do.  Working out the actual split on the Invoice might cause some ‘challenged’ individuals a headache… but that being the case they perhaps shouldn’t be the ones counting the beans in the first place…

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      1. Mark Reynolds

        Mr Bee 🙂

        We do, I was simply making an observation – In fact when people contact us and ask what our fees are we naturally tell them “all inclusive and no hidden extras, what you see is what you pay” or words to that effect…A model we have successfully used since we started out on our own and we have had no problems with it.

        Our approach has always been to let them know from the outset so there are no hidden extras or shocks – Our engagement form has the total to pay on there and we even go the extra mile and give them some variables depending on what they sell for.

        We can’ do much more than that I’m afraid but my point is I sometimes think as agents we are seen as the bad guys, when in fact the likes of you, Adam and others on here are doing what we can to make the process as smooth as possible or all.

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  4. wayneleecarson

    The dumbing down and interference of the industry must stop! The authorities are targeting an industry that has nothing to be blamed about for the actual problems with housing in the UK and that is there simply is not near enough properties. The rules of consumerism are forgotten here. If a customer doesn’t like what they see they can go elsewhere…simple. If it isn’t broke then why are they fixing it or is it the usual fixing it until it is broken!

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  5. Herb

    Has anyone reported tepilo purplebricks emoov etc to the ASA? http://asa.org.uk/Industry-advertisers/Industry-Make-a-complaint.aspx

    They have to show the headline price inc vat

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  6. bigG

    Are other service industries being forced to state their fees in a similar fashion?

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  7. Harree

    Agents not displaying fees is as much of a con as excluding vat. If I visit a website where fees aren’t displayed, any website, I smell an overpriced rat.

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    1. PeeBee

      Harree – it’s so uplifting to surmise from this post that you’re proper upfront, transparent and supersqueakyclean in giving your potential customers this information on your website.

      Little question, if I may.  How does your Fee package compare to your local competitors – lower, middle or higher end of the scale?

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      1. Harree

        Irrespective of where an agent is on fees they should display it. Historically not displaying fees had a lot to do with local cartels and we all know it. Now, with more competitive fee structures common-place most agents don’t want to flaunt their higher fees in case it affects valuation enquiries – most aren’t even upfront with fee costs if asked during a telephone or office enquiry. To answer your question we are middle end in our area.

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        1. Robert May

          I have been  in Agency for  best part 30 years and can not remember a single  case of  cartel fee fixing so  no we don’t all know it.  The 40, 50 and 60 year veterans might know otherwise but I suspect what you want to portray as fee fixing was  a more professional and informed regard and understanding of fees.
          Fee flexibility is about controlling one’s register and local competition, the very opposite of a cartel.  I always knew what I had to average to make a profit, the occasional 3% multi allowed me to do the occasional 1% on special stuff that would sell quickly.  2.25% sole got reserved for the  properties and the vendors I didn’t like  or the unrealistic  expectations.
          When the register got thin up would go commissions but so did the margin ahead of market.  Valuing and achieving well beyond vendor expectation is after all why intelligent vendors use good agents.

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        2. PeeBee

          So, Harree, from that may I just ask why you are seemingly happee (sorree – couldn’t resist…) to be a middle runner?

          Wouldn’t you like to be one of those Agents who “flaunt a higher fee”?

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          1. Harree

            No, I’m happy where I’m at. Next question?

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            1. PeeBee

              WHY are you happy where you are?

              Wouldn’t you like higher fees?

              (oops sorry – two questions…)

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              1. PeeBee

                Folks – allow me to speak the northern dialect to our hesitant friend – the last question seems to be causing some concern…

                Haway, Harree – get ya bliddy finger oot… they’re not geet hard questions or owt and yer lukkin like a wassock, man!

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            2. Herb

              Low fees low service Harreeeeeeee

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  8. Robert May

    Have I missed something or is it groundhog day? How come this subject is being covered again?
    Percentages  is subject many people struggle with  so why not rule that Agents  should  provide a ball park figure, inclusive of VAT  based to the asking price and probable sale price?
    In terms of transparency it then pulls the rug from under those who advertise much cheapness listing fees  but who then rely on additional services to bolster their overall  fee inclusive of VAT to well over double the  loss leader advertised price.  When an average fee is more than twice the ‘grabya’ price I consider that a thoroughly dishonest and shameful practice, far worse than not catering for those who flunked KS2 maths.
    I seem to remember someone used to boast that their advertised rate was  £500 plus VAT  (£600) but their actual average was £1100 plus VAT (£1320) by the time they had tucked up vendors into additional services.  So much for transparency!

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    1. smile please

      Unfortunately sales and transparency does not go hand in hand (this can be any industry)

      Its all fudging of figures and hiding the price.

      Although i agree more transparency is needed the public are partially to blame, where we live in a throw away society alot of them are only interested in ‘cheap’ even if it does not fit their requirements.

      Education is needed overall, so much so that these ‘life skills’ should be taught in schools.

       

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  9. M Barnard

    Afternoon all – these are not new guidelines, they have been around for a long time. The guidelines are not individually aimed at Estate Agency advertising. The ruling, which is part of the CAP code, apply to all advertising including businesses own websites and social media.

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  10. Herb

    How about fees starting from £X (inc vat)

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  11. Mark Reynolds

    I had a new tyre fitted to my car last week, when they quoted the price I asked is that including VAT, no it wasn’t they said so that was extra £20 on top!

    But at least I asked, can someone tell me where the number is to report the tyre industry to the ASA? thanks! 🙂

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    1. PeeBee

       

      “…can someone tell me where the number is to report the tyre industry to the ASA?”

      Erm… strictly speaking you can’t – as it isn’t an advert you are complaining about but a quotation!

      But don’t worry – plenty of Legislation out there to get your teeth into – CPRs… Trading Standards…

      Go on, m’lad – knock yerself oot! ;o)

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  12. PeterGreatorex

    Using a low fee as a selling point and including in it advertising is the beginning of the end for the high street. Good agents figure out how differentiate themselves from the competition so fee doesn’t become an issue and certainly DO NOT use price as a key selling point!

    Sadly most agents follow the pack and struggle to even separate themselves from the online agents like PurpleBricks – exactly why Onthemarket banned them from their website. It’s therefore only a matter of time before they steel a much larger slice of the market.

    Good agents who can work out a different angle will also thrive and will be able to charge 2% plus Vat.  Oops – I’m sorry 2.5% inclusive!!

     

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  13. Robert May

    2.5%? Are you sure about that?

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