Referral fees are a ‘step forward’ for agents

New recommendations on referral fees transparency from the National Trading Standards has been welcomed by NAEA Propertymark and the Property Redress Scheme.

Those purchasing or selling property should be informed about third party referral fees, according to the National Trading Standards Estate and Letting Agency Team (NTSELAT).

NTSELAT has issued a report, commissioned by MHCLG, to government recommending mandatory disclosure to improve transparency and ensure consumers are confident in the services they receive, and that means being aware of any potential hidden fees, by insisting that those who break the rules face a ban from the industry.

Housing Minister Chris Pincher says that the recommendations made by NTSELAT will now be considered by the government.

NAEA Propertymark has described the new guidelines and controls over referral fees as a major ‘step forward’ for the estate agency sector.

Mark Hayward, chief executive of NAEA Propertymark, commented: “New legislation which will require agents to display referral fees is a step forward, providing clarity to agents that they mustn’t fall foul of the law but importantly ensuring greater transparency for consumers to avoid any confusion about what agents are charging for.

“This is something we’ve been working closely with government and the National Trading Standards on, and given that agents were facing a complete ban of referral fees, we would strongly advise that anyone who isn’t currently displaying their fees should start now, regardless of when the new laws will come into force.”

Sean Hooker, head of redress at the Property Redress Scheme, was on the working group with the MHCLG and NTSELAT along with TPO, Propertymark, RICS and the Guild that helped draw up guidance for agents as part of a voluntary trial of disclosure and transparency.

He commented: “Whilst the guidance was followed by many businesses, the NTSELAT report shows that more is needed to be done and whilst they have fallen short of recommending a full ban, the introduction of mandatory disclosure is required.

“This is the correct and proportionate response to protect the consumer and reduce the complaints against agents.”

But OpenBricks CEO Adam Pigott is not so keen on the idea of customers being told about third party referral fees when buying or selling a home.

Pigott does not see how the proposal put forward by the NTSELAT will help improve transparency of property sales.

He said: “The question is, should it [the proposed referral fees transparency rules] be necessary at all and should the authorities continue to squeeze estate agents until the pips squeak at the same time as nannying the consumer to a such an unnecessary and ridiculous extent?”

Before the government decides on whether to introduce addition legislation, Piggot has listed few things that he hopes it will consider, which you can read in the next story.

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  1. scruffy

    Long, long overdue.

    Referral fees are a scourge on our industry and until addressed in this way, will mean that to be regarded as professionals will remain a forlorn prospect for many.

    While some referred companies are chosen for the size of the fee paid, and others where the companies are subsidiaries of the agent, trust by consumers will remain unlikely. There are exceptions.

    Referral fee income has become vital for some with staff routinely targeted, diminishing their focus on selling a clients property.

    More worrying recently has been the race to the bottom from such agents by ignoring the guidance of MHC&LG and our professional bodies regarding property inspections. Relying on such traffic is vital to them, and appear to be risking our health in the process.


  2. James White

    Having been involved in this profession for many years I have come to the conclusion that referral fees are responsible for damaging the conveyancing process and have contributed to the decline in service being received by many clients and also agents.

    Any system that denies the service provider of funding is surely stifling their ability to innovate.

    Let me explain, we don’t take referral fees, we allow our panel to charge their normal rate, but we ask them to put our clients at the top of their pile of work, which they are happy to do so.

    They prioritise our clients over those from agents paying a referral fee, as they are getting a better fee for themselves.

    If an agent dips the pocket of a conveyancer or solicitor, they are removing the profit from the job and as far as I can tell the good will attached to receiving the job.  Some will argue its just commerce as I used to, but I have seen another way, a better way for our clients.

    Conveyancing fees have been suppressed by agents, therefore the profits and monies available to conveyancers have been stifled and so has innovation.  Even worse, they are forced to take on more and more work, thus reducing the service and time spent per client even further.  How can it be possible that a conveyancing matter now takes longer than it did when solicitors exchanged files in the pub thirty years ago???

    There is though a problem for agents looming.

    A revolution in conveyancing would undoubtedly impact on Estate Agents’ very future too.  Once the conveyancing process is shortened to, lets say a fortnight, then agents will be under threat…..the second part of the selling process, the transaction, will almost be taken out of their hands.

    A kaleidoscope of dilemmas.   Allow the conveyancers to keep their fees and innovate, and put agents out of business….

    Whatever happens, in my opinion referral fees are counter productive…….

    1. WiltsAgent

      Agree with pretty much all of this with the exception of the ‘looming problem’ of a shortened conveyancing process. This has been promised for the last 25 years during which it has become progressively more tortuous to get property transactions to completion. I am confident that I will go to my grave still reading that game changing tech is going to transform the system.

      1. James White

        It is interesting that tech has not speeded up the process isn’t it?   It actually may have done, but the fact remains that fees have remained too low (blame referral fees or competition or both for that), and as a result conveyancers take on too much work for not enough profit and thereby leaving nothing for innovation……

  3. scruffy

    Thanks to James for this valuable perspective. But overall this morning, the silence from our agency friends, particularly from every agent professing to be “independent”, is deafening.

  4. Richard Copus

    Misleading headline worth of The Sun!

    Referral fees are hugely damaging to professional integrity.  Rather than recommend the best person for the job, estate agency staff are being pressurised to recommend the firms that give them a hand-out.  We all know cases, for example where we (generically) are selling an old house but have to recommend the surveyor who is used to dealing with modern houses.  Also there where there is a complicated title but we have to use the conveyor belt conveyancer.  Not using our “best endeavours” for our client.  This is what comes from joining in the race to the bottom for fees.

  5. David Jabbari

    What people often forget is that work direct to conveyancers from agents often carries much better fees than those paid by panel managers to law firms.  So even with paying a referral fee the law firm is better off than they are if they support a panel arrangement.

  6. Woodentop

    The scandal was allowing ‘corporate agencies’ to get away with this for decades, everyone knew what they were up to. Independents received referral fees but nothing like on the scale, as they were unable to provide the volume that paid big bucks. Conveyancing and Mortgages were a classic example not necessarily in the client’s best interest and in lettings the collusion over utility companies was illegal practice in any event for tenants.


    Should referrals be allowed. Yes, but be transparent. The only reason to be so secretive ….. embarrassed or fearful the customer will see they are being ripped off.

  7. Mothers Ruin

    If you’re getting £100 and passing conveyancing over to someone who has an interest in ensuring everything goes smoothly for your clients and are open and honest about it I can’t see why you’d be worried about this. Sorry but if you’re getting £200 plus then you should be squirming. It’s always the greedy estate agents that spoil things for the rest of us. We charged £75 for tenant referencing others charged £300 look what happened there. We all suffered to some extent.

  8. scruffy

    This is the transparency shown by one competitor
    Financial Services
    We recommend sellers and/or potential buyers use the service of *********** Limited. However, no referral commission is paid to ************* for these referrals.
    NB They neglect to mention that

    a. the “mortgage” company is wholly owned the the same directors and

    b. that staff are heavily targeted on their referral performance.  Loadsamoney !!

    Should you decide to use the services of ***********Solicitors you should know that we would expect to receive a referral fee of £400 per legal completion for recommending them to you.
    Should you decide to use the services of ******Conveyancing you should know that we would expect to receive a referral fee of £400 per legal completion for recommending them to you.
    NB Covering their bases by stitching up 2 routes for their clients to consider.


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