OFT inquiry accused of 'bottling out' over rogue estate agents

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The Independent Online

A two-year government investigation into rogue estate agents was dismissed as a sham yesterday, after it stopped short of demanding proper legislation of the profession.

Consumer groups and trade bodies said the report by the Office of Fair Trading (OFT), which called for more self-regulation in the industry, did not go far enough.

The Royal Institution of Chartered Surveyors (Rics) accused the OFT of "bottling out". Others said the report did not adequately tackle agent abuses, such as not passing on offers to buyers and giving misleading descriptions of properties.

Estate agents earned an estimated £2.5bn from the sale of residential property in 2002, with agents handling more than nine out of 10 deals of the 1.45 million sales that took place. The ombudsman for estate agents received 6,462 complaints from the public that year; a near sixfold increase over the figure in 1991.

Emma Harrison, a spokeswoman for the Consumers' Association, said the fines levied by the ombudsman - an average of £500 - were too small. "Voluntary codes are not going to work," she said. "With an average fee of, say, £3,000, a £500 fine is not a deterrent."

The National Association of Estate Agents was disappointed with the report. A spokesman said: "We have long campaigned for the licensing of estate agents, which this report falls short of recommending. Our own code of practice provides the public with redress from rogue agents. However, although we can expel and heavily fine members, we cannot stop them from continuing to practice."

The report acknowledged that a quarter of people who had recently sold a house were not satisfied with the service they received from agents. But it did not demand a statutory system of regulation, or that agents should have professional qualifications, and did not seek to place limits on the fees charged, despite finding that "price competition is limited" in the industry. Estate agents do not need a licence or professional qualifications and are not obligated to join the industry system of self-regulation.

The OFT called for "better and more widespread" self-regulation but did not recommend that agents be forced to join such a scheme. A spokesman for the OFT said it was issuing a "wake-up call" to the sector to reform.

John Vickers, the chairman of the OFT, said: "Necessary changes include sharper price competition, more effective regulation and higher industry standards." Mr Vickers added: "Is self-regulation going to work? One doesn't know. The strategy is to give it a go."

The OFT said that existing legislation needed to be tightened to give it "teeth". This included providing power under the Estates Agents Act of 1979 to ban agents for malpractice. The OFT may consider making regulation by a professional standards body mandatory when it re-examines the market in two years'.

Jeremy Leaf, the chairman of the residential faculty at the Rics, said: "A minimum level of competency and compulsory licensing must be introduced for residential estate agents in order to ensure consumer protection and bar the cowboys."

The OFT said changes in the law were needed to force agents to produce a proper "paper trail" for transactions, to help stop abuses and make complaints easier. It called for clearer contracts, with the amount of commission written in pounds, rather than as a percentage figure. A common abuse cited in the OFT report was offers not being passed on to sellers, which agents are obliged to do. This may be because the agent has a vested interest in seeing an alternative transaction at a lower level; with the buyer perhaps being a friend or relative.

TRICKS OF THE TRADE

Manipulating the property's location: The oldest trick is making the property appear to be in a smarter suburb than it is.

Failure to inform seller of all offers: Estate agents collude with property developers, vetting higher offers so a seller agrees to exchange contracts at a knock-down price.

Unearned commission: Sole-agency clause: even if the seller is introduced to the eventual buyer by other means, the agent may claim the full fee.

Fly-boarding: Putting up For Sale boards outside properties not on the market to give false impression of business.

Broken promises: When a property is re-marketed after an offer has been agreed - normally happens when a buyer is struggling to sell own property.

James Sturcke

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