Following the launch last week by National Trading Standards of a new initiative to improve the provision of material information in property sales and lettings, here are more details as to why change is important.
The debate about how much information should be provided in property particulars and listings has been going on for years. ‘Caveat emptor’ isn’t heard so much today but is still quoted by some agents who feel that it is the responsibility of the purchaser to avail themselves of all the information they need when buying or renting a property. On its own caveat emptor is often used as a means of disclaiming all liability on behalf of the seller. The phrase from which it originates however is ‘Caveat emptor, quia ignorare non debuit quod jus alienum emit’ which adds the point that the purchaser should not be ignorant about the nature of the thing they are buying.
Agents are not surveyors, nor are they lawyers or conveyancers, but they are responsible for ensuring that the properties they market for sale or rent on behalf of their clients are accurately described so as to give potential buyers or tenants the information they need to make an informed decision about whether to make further enquiries about the property or indeed go on to view and then buy or rent. Having material information available upfront can bring many benefits for all concerned – from reducing time wasted on unnecessary enquiries and viewings, to fewer transaction fall-throughs, and shorter overall transaction times.
Those with long memories will remember the introduction of the Property Misdescriptions Act 1991 which governed the activities of estate agents (and developers) when describing property. The Act made it a criminal offence to make false or misleading statements about properties. The legislation didn’t however require the specific information to be given, merely that if information was given it had to be accurate. Some say this contributed to the lack of information we see today because agents and developers were failing to disclose details for fear of falling foul of the law, and this culture has continued to this day.
The year 2008 saw the introduction of the Consumer Protection from Unfair Trading Regulations – the ‘CPRs’ (or ‘CPUTRs’ if you’re a first aider and don’t want to get confused), and in 2013 the PMA was repealed on the basis that the CPRs provided broadly similar protection. The CPRs apply to all businesses, not just property agents, and impose a general statutory duty to behave honestly and in good faith with consumers. The CPRs introduce the concept of ‘material information’ – information that a consumer needs in order to make an informed transactional decision. Case law has established that this information needs to be provided at the earliest opportunity.
What exactly is ‘material information’, and why does it cause such difficulty in the property industry? And why is it so important for estate and letting agents to get this right? It’s a tough job marketing property: you’re dealing with a unique product that often comes with a whole lot of history and can have a multitude of different things affecting it. Sorting out the information that people need, as opposed to what they just want, is complicated and will be different for each property. Let’s not forget you’ve also got to market the property in its best light whilst ensuring that potential buyers or tenants have all the information they need, before they make enquiries.
Working out what people need to know can be tricky – some information is obviously needed and is binary in its nature. Take the tenure of a property for example – for a potential buyer this will invariably be something they need to know – and in the main it will either be freehold or leasehold. So, the tenure of a property is material – but what if it’s leasehold? Leasehold brings a raft of other issues – the years left on the lease, the amount of ground rent and service charges (plus the review periods and planned increases) – some of this information will be more important (for example if there’s less than 85 years on a lease), other information less so (e.g. if there is a peppercorn ground rent).
The CPRs create some unwelcome challenges for agents, especially when it comes to sensitive issues. If a vendor has been recently convicted of serious violent or sexual offences, should agents disclose this? If a property has got unsafe cladding – how should agents go about marketing such properties? We are working with government, industry groups, professional bodies and the redress schemes to help agents interpret legislation in a constructive way. We can then work with local enforcement authorities and primary authorities to ensure that advice and enforcement is consistent around the country.
We would like to see agents encouraging sellers to engage a lawyer or conveyancer at the outset to make sure that all the necessary information is collected, and that issues such as problems with title, restrictive covenants and other matters are addressed at an early stage. More and more agents are checking the title plan and title deeds for properties – these are available online at minimal cost and can provide valuable information about rights of way and other information which should be disclosed on the property particulars. How many agents have been told by a seller about the boundaries of the garden only for it turn out that the bit of garden at the end doesn’t actually belong to the property?
The introduction of property information questionnaires for use by agents is a great step forward. Getting properties ‘market ready’ is welcome news. The aim of getting market ready is to smooth the journey for agents and their customers – reducing the time taken, with fewer abandoned transactions. Why wait for people to find things out further down the line? If sales agents could convince vendors to instruct lawyers or conveyancers at the outset, so much more could be done at an earlier stage, which would ultimately save time and money for all concerned.
Getting it wrong doesn’t just delay transaction times – complaints can result in the redress schemes getting involved. Look at the Property Ombudsman case studies and news reports to see examples of what happens when things go wrong. In addition if someone has entered into a contract and the omission of information is a significant factor they may have grounds to claim compensation. In serious cases local Trading Standards can take prosecutions, and our team can take action under the Estate Agents Act to prohibit individuals or business from carrying out estate agency work in the future.
The National Trading Standards Estate and Letting Agency Team is developing guidance for agents to clarify what should be considered as material information. To inform this guidance, the team is encouraging estate and letting agents to share their thoughts about what constitutes material information in this new survey. The deadline for responses is Monday 17 May.