Outright ban on referral fees could be ‘catastrophic’ for estate agency sector, warning

A ban on referral fees could have a “catastrophic” impact on the estate agency sector – and in particular trigger a “monumental” decline in corporate agencies.

The Call for Evidence into the process of buying and selling houses raises the possibility of an outright ban on referral fees earned from conveyancing and financial services.

Russell Quirk, of eMoov, said yesterday that if there were a ban, it could result in “absolute carnage”.

He said the likes of Countrywide, LSL, Connells and Foxtons depend on significant income from their affiliated conveyancing and/or financial services arms: if the ban meant that these firms’ estate agents could no longer refer introductions to these other parts of their respective group, the implications would be enormous.

At least two of the big corporates, said Quirk, earn more from their financial and conveyancing services combined than they do from estate agency income.

He said: “Referral fees are a perfectly legitimate aspect of the property selling process and are already regulated by the Estate Agents Act and via the Property Ombudsman.

“The buyer or seller has the option to use whoever they please to provide financial and legal facilities during a sale.

“While this could be made clearer to the consumer, the recommendation itself is certainly not solving a problem that needs to be prioritised.”

He went on: “While my unusually benevolent stance in standing up for the traditional players may come as a surprise to many, you have to look at the bigger picture and the absolute carnage that would come of these industry giants failing rather than flourishing.”

He said that thousands of staff would lose their jobs, adding: “Countrywide has already seen a 90% drop in profits year on year, with the majority of their income deriving from mortgage and financial services and conveyancing. This further reduction in income will surely sink the ship.”

Quirk warned that the Government has a habit of making knee-jerk reforms, and cited the forthcoming ban on tenancy fees.

He said: “The Government has a track record of pulling the rug from beneath the industry’s feet.”

While some corporate firms such as Countrywide were specifically set up as distribution networks, they would not be the only losers.

There is no data as to how much independents earn from referral fees, but if tenancy fees represent somewhere between 18% and 22% of lettings income, referral fees could represent the same kind of proportion of sales income. EYE yesterday spoke to one independent that says it earns 23% of its overall income from referral fees.

The Mirror, in its coverage today, cites the example of conveyancing firm, Attwells, which paid Cubitt & West a £612 referral fee. The law firm added this sum to the purchaser’s bill, says the Mirror, meaning the cost of the conveyance was hundreds more than the purchaser had expected, the Mirror claims.

Currently, the law requires estate agents to declare whether they earn commission from referrals. It does not require them to disclose the amount. The Call for Evidence has also raised this as a possible option, rather than an outright ban. However, the Government does not seem to regard the mandatory requirement for letting agents to publish their fees as a success – hence its argument for the ban.

Separately, the Call for Evidence has underlined that the Government will not be bringing back Home Information Reports.

Yesterday, however, the Conveyancing Association said it has been working on a Digital Home Report in pilots with member firms.

It said this involved providing “a comprehensive collection of information upfront to the potential purchaser” and would also contain a legally binding reservation agreement.

Eddie Goldsmith, chairman of the Conveyancing Association, said the results of the Digital Home Report pilot – and other pilots it has been working on – will form part of its response in the Call for Evidence.

He said: “We believe the Call for Evidence process will result in a revolution in conveyancing, and the Conveyancing Association will be at the forefront in helping deliver it.”



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  1. J1

    A lot of firms, especially medium sized firms and upwards have come to rely on referral fees to top up their agency fees

    Without them and tenants fees it will be goodnight for many

    Solicitors hate them and often put the cases to the bottom of their pile of work, thus leading to protracted transactions and a bad deal for the client in more ways than just cost

    Allow the solicitors to earn a decent fee, employ more staff and the conveyancing period will shorten considerably – saving the client money and time

    Its time many agents were more transparent and declared what they get from these deals much sooner in the process



  2. scruffy

    I for one would support a ban on referral fees, but the Call for Evidence addresses much else and hopefully may trigger government investment in local government to deliver a 21st century service in providing an online Search service.

    Whilst Russell Quirke may warn of redundancies in the corporate agency sector who, in the last 30 years have grown their businesses on the back of such ancillary services at the expense of “traditional” models, I feel this is a long overdue reckoning that will do much to level the playing field to the benefit of the consumer.

    Those keen to join the industry may then be able to pursue their dreams of matching people to property and learning genuine skills in doing so, rather than be de-motivated by the constant pressure of meeting referral targets.

    Corporates appear to see home buyers and vendors as vulnerable targets for a range of bolt-on services, model themselves as a one-stop shop, appearing to leave the sales element as       an irritant rather than a core service.

    Independents can and do struggle with such competition in the high street, despite their best endeavours, and the consumer has been the loser.

  3. localagent735

    Having worked for a large corporation and now a smaller high street firm i strongly disagree that this still happens as much as people say it does. The large corporation encourage you to get clients in front of the mortgage advisor but no pressure at all for them to sign up.

    1. NewsBoy

      I do wonder why this story started. Who has raised the issue – that would be the failing online only idiot, trying to make referral fees something to debate.  Sorry guys but let’s just get back to work – earning nice referral fees when appropriate.

  4. Estate_Agent_Memes

    Purple Bricks will be gutted to hear this as they get around £500 if their LPE refers someone, for a sale and purchase. I spoke to one of their panel solicitors who said basically they HAD to increase their fee to be able to pay commission to PB. This is where the problems come from.

  5. AgencyInsider

    The existence of a referral fee creates a conflict of interest. End of.

    1. localagent735

      the referral fees are always so minimal agents aren’t worried about that. the referrals we pass where i work are more just to get a good solicitor who will communicate with the agents rather than a cheap solicitor

  6. Fairfax87

    In a climate of reducing estate agency fees, the conveyancing income stream is important… but there are other major drivers too .. it’s about working with firms who are happy to work with our branches to overcome the many challenges we all face to get cases to exchange.
     Banning referral fees is not the answer.. estate agents will then either take ownership of conveyancing firms and take their referral fees as profit instead, or resort to receiving backhanders in brown paper envelopes or other payments in kind. Many estate agency top achiever events were paid for this way, back in the day when the ban was in place before.
    J1 says “allow Conveyancers to earn a decent fee” – who has driven legal fees and standards into the ground ?  Those same whinging Solicitors who quote ridiculously low prices direct to customers to win the work, under the misguided belief that its about the cost in the customer’s eyes.  The referral model proves that it is not all about the price.

    The Conveyancing Association has come up with some really sensible changes for improving the process – lets hope that the Government take more notice of these in their review.

  7. scruffy

    I only wish that that was right in all cases localagent735. If there is pressure to put a client (I assume buyers here, who are not strictly clients yet) in front a mortgage advisor on each occasion, it is not a huge leap of imagination to suggest there may be a conflict of interest rearing its head when one buyer says he wants a mortgage (a potential client), when another says he doesn’t. “Just think about all those fees” your line manager will be saying.

    Do such conflicts lead to the best outcome for the client (the vendor) on each occasion, or is it just the agent ?  May I boldly suggest that I don’t think so, and it is exactly this sort of double dealing that undermines our reputation.  A solicitor cannot act for both sides and in my old fashioned view, professional estate agents should have one master, their client.

    1. localagent735

      clearly there will be some agents who do have bad practices in place. but in reality as long as an agent sees the buyers mortgage in principle and proof of deposit they are happy. if they see the advisor and beat the deal then the buyer will be happy.

      If the buyer doesn’t have a mortgage in principle then clearly we are not looking after our clients interest and will advise the buyer to see our advisor or another advisor and get a mortgage in principle before the house is taken off the market.

      no pressure put on them we are looking out for our clients interest.

  8. Thomas Flowers

    So a certain loss-making online-only company make significant fees from conveyancing referrals via a MUST use deferred payment option or pay £360.

    Does this suggest that their net referral fee may be £360 after paying LPE’s a referral commission?

    Their profit from conveyancing referrals must, therefore, be huge?

    Are these substantial referral fees included in their main accounts or a separate company or companies?

    As these profits would not be possible without their estate agency referral service I would hope that they are included in the main accounts?

    If not, If I were a shareholder, I would be somewhat miffed?






  9. MrSerious

    First let me say that I disagree in principle with any Government interference in the free market. Mrs Thatcher (Conservative) banned all professional scale fees in the late-1970s as they were seen as restricting competition.  The new Fee Ban is just bringing back a new scale fee, but at Zero rate.  Hypocrites.

    However, from the Managing Agent aspect of the Consultation, I have extensive evidence as a leasehold flat owner of, quite frankly, rife and disgusting dishonesty concerning hidden fees, aka Secret Profits.  Undisclosed commissions; hidden back-room fees; secret back-handers from contractors – up to 60% of contract cost!; conniving deals with RMC directors; manipulation of boards.   And this is by companies who are so-called Regulated by the RICS.  If they are not honest, who can you trust?

    An Agent owes a single duty to its Client alone.  It must disclose everything at all times and receive explicit approval.  It may not make any secret profits.  Any that it does receive must be given to the Client.  This is called Fiduciary Duty.  If you do make secret profits, you are in breach of trust and not an agent, just a Contractor.

    Much as I hate the concept of interference in the free market, it does appear (again) that the endemic crooked actions of (quite) a few will cause grief for the honest majority of true Agents.

    1. BrandNew

      Have you reported them to the RICS?

      Most firms are audited every 4 to 5 years by RICS external auditors and if they are aware of these practices then they would be picked up.

      They look at company terms and conditions, client contracts, and whether such things as commissions are disclosed. As well as carrying out a full financial audit.

      If as you say firms you have dealt with have not complied with the codes of conduct then they risk being struck off.

  10. Trevor Mealham

    More than the corporates. A ban, or restraints on referrals would likely hit budget models most. Their cheap fees are typically propped up by ‘extra’ revenues.

  11. Peter Ambrose (The Partnership)

    Clearly, there is nothing fundamentally wrong with paying introduction fees.

    However.  (And it’s a BIG however).

    They MUST be proportionate, reasonable and must not influence the person who is making the recommendation or they fall foul of the Bribery Act.

    Frankly, this story in The Mirror (and confirmed by an ex-employee of Attwells) is nothing short of scandalous.

    In what world can anyone suggest that a referral fee of over £600 on a conveyancing case is justified?  The problem is further compounded by the agent in question using a panel manager, who takes more money out of the system.

    The issue of WHERE the referral fee goes needs more investigation, especially when the law firms doing the work are paid less than those referring the work.

    This cannot be right in any sane world.

    1. MrSerious

      …as an Agent, only if it is fully disclosed to the Client in advance and receives explicit approval, and complies with the Law of Agency and the non-contractual fiduciary relationship.

  12. itmakessense94

    I am sure most buyers and sellers are clueless as to the real problem. The lawyer is giving some of their fee to the agent and will charge this back to the client with ad-on’s later in the transaction. The agent is just driven by greed and by targets given to him from above or large greedy corporates who have panel lawyers in their pockets or even own the conveyancing company.
    The people to blame are actually the lawyers themselves and the SRA for not banning bribes, if you look up the bribery act it ticks all the boxes.
    If they didn’t pay what can only be viewed as a bribe to the Agent they (the agent) would not have any leverage. The average conveyance charges around 7-900 for a purchase or sale compared to 6-10 times that charged by the agent!
    Estate agents are just house dealers, same as car dealers, shove a sign on for sale, stick an ad in the local rag, shove a picture on right move and that’s it apart from ironing an extra large collar and brushing some goose fat or in modern times perhaps coconut oil through their hair and chucking in a couple of lies. Generally no university or college, no degrees (maybe a degree in poor dress sense) usually lacking in education generally. You don’t need any qualifications to be an agent and there is no governing body that will take action against them no matter what they tell you. Try complaining about an agent and see what happens? Nothing!
    There are agents in Brighton (rife), especially the larger ones that do force you to use their chosen solicitor and will not let you purchase unless you do. This is plain corruption and means that they are not marketing correctly for the seller who is paying them which is a disgrace, hardly putting their client first as they like to suggest. These agents will actually bad mouth the best conveyancers because the best conveyancers ask more questions and make more enquiries on behalf of their client. These real conveyancers still do the job properly but agents see this as an unnecessary delay in obtaining their huge fee on completion.
    Conveyancing over the last 10 years has not even kept up with inflation. Email, social media and unprofessional estate agents, coupled with unrealistic client expectations has made conveyancing a thankless task. In our current climate there is simply a lack of respect and courtesy for professional people.
    Qualified legal executives and solicitors who practice conveyancing have worked for their qualifications and are the ones who ensure that the huge responsibility that is the purchase of your home is all in order. Does anyone really think the agent gives a monkey (with or without headset)? Often the reason delays sometimes occur, is because the agent has mis-represented the property and the solicitor (who is acting in the client’s best interest by the way and is the only one to do so out of all parties concerned) has happened to ask a question of the other side that is a panel “lawyer” or monkey with headset! Then has to wait a month for the answer as the monkey has to ask the one qualified person out of the 20 working on the panel and it all grinds to a halt.
    So the answer to the problem is to choose a local conveyancer who is recommended by a friend and never an agent. Ask them if they pay commission to the agents. Call some for a quote and listen to what they say; you will get a feel for a good one. Refuse to use the agents preferred solicitor as they may be based 200 miles away from your property with no local knowledge at all and if the agent recommends them it will be in most cases because they get a bung! There are some good honest agents out there but you are lucky if you find one because the %age is low. You can usually tell because if they recommend a lawyer and they don’t get a bung then they are recommending for the right reason. It is not just the agents, if you ask your lawyer if they pay the agent for work they are bound by SRA rules to disclose the truth to you, so don’t be afraid to ask, in fact it is a must. If a lawyer is paying the agent then one has to ask why? Usually because they have not performed well enough in the past and are not recommended through their own merit. If the consumers take care to use the good honest law firms (you can find these by asking the right questions) then the power will shift from the greedy unscrupulous agent and back to the consumer. One thing I can assure you of is that the agent will not use their recommended lawyer when buying a house for themselves!
    Surely it is a breach of the agent’s duty to his client (the seller) if they are referring solicitors that they would not recommend if they did not receive a fee? In this instance they are recommending a firm even though they believe that they will not deal with the matter proficiently?”
    What’s laughable is the agents blame the lawyers that they don’t recommend for any delays when it is the other way round and God forbid if the good conveyancer should make any enquiries to ensure the property will not be a problem to sell in the future.
    Use cheap online conveyancing services at your peril and if you do so then you may as well get a will kit from WH Smiths whilst you are at it!
    Once you find a good conveyancer stick with them, they are actually a rare commodity these days.


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