The consumer protection challenge
Why solicitor estate agents need to take very seriously the Consumer Protection from Unfair Trading Regulations 2008
The Consumer Protection from Unfair Trading Regulations 2008 (“CPR”) apply to all consumer-facing sales organisations, yet less than 50% of the industry involved in house sales are actually aware that they apply equally to them, and could result in an unlimited fine and, in the worst case, a prison sentence.
To be pigeonholed along with those attempting to sell extended warranties, secondhand cars and the like does not sit comfortably with property professionals, yet that is exactly where they lie. This legislation covers not only sales but also lettings in equal manner, together with auctioneers, developers and builders.
Has it slipped under the radar? Yes. With the repeal of the Property Misdescriptions Act 1991 on 1 October 2013, this is now the primary legislation that Trading Standards will use to pursue miscreants. They need case law now and you, as a practitioner, do not want the dubious privilege of becoming that case law.
What is material?
Central to the interpretation of this legislation is the phrase “transactional decision”, defined as whether or on what terms to purchase, make payment for, retain or dispose of a product (including immovable property). Staff who interact with the consumer at whatever level need to inform the consumer at the earliest opportunity of any material factor relating to the property that would affect their “transactional decision”. This is not at the commitment stage of the transaction, but in all likelihood will be when they decide to view the property, as the draft lettings guidance refers to “anything that would put them off”.
This is where it starts to become difficult and counterintuitive. Sales people are used to extolling the benefits of property: the special features, the excellent condition, the aspect, proximity to services and a host of other positives – yet now everything needs to be brought to an interested party’s attention, and at the earliest stage.
Misleading omissions of “material information”, where they are likely to cause the average consumer to take a different transactional decision, are specifically targeted – as is lack of professional diligence, where it materially distorts or is likely to materially distort the economic behaviour of the “average consumer”. The OFT defined this person as “someone who is reasonably well informed, reasonably observant and circumspect”, and who in addition will be “an individual acting for purposes outside their business”. This would include a prospective buyer or tenant, and particularly a potential viewer of a property.
Particular care needs to be taken with vulnerable or targeted groups, as regard is then had to the average member of the group.
Draw to your attention...
Some of the CPR breaches quoted in the guidance are leading a potential client to believe that you have buyers or tenants lined up for their sort of property when this not true, and misdescribing the main points of the property (no different from the Property Misdescriptions Act, but in this instance any aspect of the property, particularly of a negative nature such as proximity to a rail line or busy roads, needs to be highlighted).
Notwithstanding the regulations prescribing the content of the home report, there remains a necessity for the agent to highlight additional information if these facts would affect, to a material degree, any form of transactional decision. Failure to disclose key information, should it be deemed to be a misleading omission, will be considered a breach of the CPR. Examples such as flight paths and low flying planes, adjoining footpaths, neighbours’ behaviour, indeed anything that they need “to take an informed transactional decision” would need to be drawn to their attention.
Everyone in your organisation who interacts with the public needs to be aware of the extent of this legislation and how to act to comply with it. Employers need to demonstrate due diligence and have systems and procedures in place. Contemporaneous notes need to be made whenever information is conveyed verbally, and records kept that can be deemed satisfactory should a breach be reported.
As for carrying out reasonable checks on the accuracy and truthfulness of information that you use in marketing, no longer is it acceptable to say you don’t know: you now have to identify what you don’t know and seek out answers. Should anything in effect put you on notice that some aspect of the property, its condition, history, or immediate area is awry, you need to ascertain the facts and convey those to any and all interested parties.
A misleading omission is information you have left out, hidden, not made clear or again not given in good time, which is “the information which the average consumer needs according to the context to take an informed transactional decision”.
Training staff to use scripts or specific techniques that are intended to mislead consumers is again a clear breach and is to be avoided. Aggressive practices are also covered under this legislation, such as applying undue pressure on a consumer to use your company’s associated services, for example to take out a mortgage through your in-house mortgage adviser.
No getting out
Having spoken at meetings throughout Scotland, Wales, Northern Ireland and England, it is apparent that this subject is compelling, and is a seismic shift from how business has been done in the past and how it must change for the future.
This is just a brief taste as to the essence of this legislation. It should serve to alert businesses, employers and employees to just a few of the pitfalls. Penalties can be severe, potentially very damaging, and can only be avoided by a thorough understanding of the essence of how to comply.
This message is not necessarily palatable, but it is an absolute requirement for businesses to be seen to be complying. While the consumer is not yet hugely aware of their rights under the legislation, they will be, so prepare and be forewarned. It is a tabloid centre page article waiting to happen.
Mark Hayward, managing director, National Association of Estate Agents
How to stay in the clear
The following will in the first instance help avoid a breach:
- Treat your consumers, business customers and competitors fairly; familiarise yourself with the guidance; if necessary, make changes to your practices; and ensure that all your staff understand the complexity of the regulations and comply with them.
- Take care gathering and presenting the information you will use to advertise your services and to market properties for sale or rent.
- Have systems and safeguards in place to ensure that your marketing information is accurate, balanced and does not leave out relevant material facts.
- When an employer or employee sees, hears or learns something to put them on notice of a possible problem or issue, take appropriate steps to establish the facts: ask questions, carry out checks, consult official sources.
- Promptly correct or update marketing material whenever new facts become available.
- Avoid pressurising consumers to act unnecessarily quickly, or to take other services you may offer.
- Carry out training of all staff who are consumer facing, keep records of such training and, above all, demonstrate due diligence.