Halifax defies house price `scam' uproar

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The Independent Online
THE HALIFAX Building Society has dug its heels in over a controversial scheme that rewards the society's estate agents for persuading owners to slash the prices of the homes they are selling.

The bonus scheme provoked a torrent of outrage yesterday from politicians, rival estate agents and professional bodies, and there were suggestions that it might be against the law - but the company said it would not be scrapped.

Labour's consumer-affairs spokesman, Nigel Griffiths, said the scheme was an "opportunity to cheat the public" and that he would be asking the Office of Fair Trading to investigate.

The head of one rival estate agency, who declined to be named, said: "The whole thing is appalling. It goes completely against the client relationship. Estate agents owe a duty of care to their clients."

There was growing concern that the secret arrangement - which came to light when a newspaper obtained a confidential staff circular - might be in breach of the Estate Agencies Act. This obliges agents to disclose all fees and commission they receive in the course of a transaction. Chris Elias, property partner with City lawyers Oswald Hickson Collier, said: "It does seem to me that the Halifax are running the risk of allowing their agencies possibly to breach the Estate Agencies Act."

But the Halifax has no immediate plans to abolish the scheme, which was launched in its northern region last month and goes on till the end of October. Mark Hemingway, a Halifax spokesman, said the scheme was targeted at vendors who had their homes on the market at unrealistic prices. "We're not in this business to rip people off," he insisted.

Mr Hemingway claimed there are safeguards to prevent the system being abused. There is no compulsion for clients to reduce their prices, he said. And the arrangement is only in the northern region - an area stretching from South Yorkshire to Tyneside.

Under the scheme, Halifax Property Services is offering staff prizes of up to pounds 200 if they persuade clients to cut their prices by set targets. The aim is to "increase price reductions in all branches", according to the leaked memo, which added: "Remember, this month's price reductions are next month's sales."

Labour's Mr Griffiths said: "The secrecy of this scheme builds it up as being a scam, and it is the first case in history of sales staff being told that the less they sell something for, the bigger the bonus." He described the leaked memo as "similar to a flyer for a timeshare scheme".

He added: "This is driving prices down, rather than getting the best price for sellers. Unfortunately, it comes on the back of the knowledge that 1.5 million people are trapped in negative equity."

Estate-agency employees are highly dependent on commissions and bonuses, earning as much as 60 per cent of their gross income in this way.

Many estate agencies believe vendors are being unrealistic in their asking prices, and some try hard to persuade them to bring their prices down. But the Halifax arrangement goes much further in rewarding agents for acting in a way that reduces the proceeds for their clients.

The Halifax scheme has also been condemned by the Incorporated Society of Valuers and Auctioneers. The National Association of Estate Agents was unavailable for comment.