The housing minister has stressed the importance of estate agents disclosing their referral fee arrangements upfront.
Heather Wheeler said buyers needed to make informed decisions.
She was speaking following findings that most buyers who follow an estate agent’s recommendation of a conveyancer do not know if the firm has been paid for that ‘back hander’.
A YouGov survey of almost 500 consumers in England and Wales who have bought a property in the last ten years, reported that recommendation by an estate agent was the most popular primary factor behind their choice of a conveyance.
Some 26% followed the agent’s recommendation, compared with 21% who went on price, 20% on previous use of that lawyer, 18% on recommendation from family/friends, and 15% on the firm’s general reputation.
However, 59% of those who took a recommendation did not know whether or not the estate agent was paid a referral fee for this.
Some 29% were aware a fee had been paid, while 12% knew a referral fee had not been paid.
The survey was done for regulator the Council for Licensed Conveyancers ahead of rule changes.
When they confirm their instructions from their client for the first time, CLC-regulated lawyers already have to set out when they have paid a referral fee.
From this December, firms will be expected to provide this information earlier in the process, when consumers are shopping around for a lawyer.
The move anticipates likely similar disclosure by agents.
The Ministry of Housing, Communities and Local Government is planning to make it mandatory that estate agents reveal their referral fees.
Sheila Kumar, chief executive of the CLC, said: “We are not saying that it is wrong for conveyancers to pay referral fees, but transparency is key and that is why CLC lawyers have always had to inform clients about them.
“However, it is important that the client is aware of the payment of referral fees before deciding who to appoint.
“So, we welcome the Government’s proposals that estate agents should be required to be transparent about referral fees they will receive if their client follows their recommendation.
“It is in the interests of both the public and those we regulate that consumers have easy access to useful and easily comparable information to guide them in their choice of lawyer.
“That is what all of the front-line regulators of legal services are introducing new rules with the aim of empowering consumers to make better informed choices.”
Housing minister Wheeler said: “The findings from this valuable survey demonstrate why it is so important that estate agents are transparent about referral fees.
“That’s why we are working with the industry to ensure estate agent referral fees are clear, so consumers can make an informed decision before they decide to purchase.”
See also Peter Ambrose’s very topical column – EYE’s down!