Estate Agents Must Operate Transparently To Consumers Regarding Referral Fees
Heather Wheeler, Minister for Housing and Homelessness, outlined the government’s position on referral fees and new housing reforms at the Council for Licensed Conveyancers annual conference.
Whilst delivering a talk at the CLC conference, Mrs Wheeler told delegates that she is “concerned with the lack of transparency” around referral fees.
Following the National Trading Standards Estate Agency Team (NTSEAT) survey which aimed to assess the use of the fees, that was launched in the summer of last year, the government have continued to explore how it can improve the buying and selling process for consumers, following last year’s Call for Evidence of the same title.
Mrs Wheeler emphasised that estate agents will need to be upfront with their clients regarding referral fees. All buyers will need to be aware of the panel of conveyancers used by the estate agent and the cost that will be applied to them if they use a recommended conveyancer.
Additionally, published guidance will be available in February for estate agents on this issue.
Whilst many predicted that the government may aim to ban referral fees entirely, the government are hoping that creating a more transparent system will offer buyers more choice and empower them to choose their own conveyancing provider. It is hoped that the additional information will change behaviour rather than employing a ban entirely; however, the changes will be reviewed in due course.
The news will be welcomed by SRA regulated firms who will be able to compete evenly when the changes are enforced. Under the changes that were made to the SRA handbook on December 8th of last year, SRA firms must ensure that clients are informed of all fee sharing and referral arrangements. The governmental changes will ensure that all buyers, regardless of regulator will be aware of referral fees in the future.
Chapter 9: Fee Sharing and Referrals, version 21, states: “O(9.4) clients are informed of any financial or other interest which an introducer has in referring the client to you.
“O(9.5) Clients are informed of any fee sharing arrangement that is relevant to their matter.”
The state of completions taking place each year and those falling through was also discussed by Heather Wheeler.
Under new housing reforms, the minister for Housing and Homelessness discussed the reformation of housing policy that is taking place and will become law in 2019. RICS data concerning the 19-week average it takes to complete a housing sale and the £270 million annual wastage caused by fall throughs were important figures in driving ministerial reforms.
Wheeler stated that “greater accountability” is needed for buyers and sellers pulling out of housing sales. The government remain enthused by enforcing reservation agreements to help secure more sales and provide greater confidence in the sale process.
The government will also look to standardise the agreements to avoid either buyers or sellers potentially amending the agreements and slowing down the process further. The minster was insistent that this should become “standard practice” moving forward.
Will these reforms help to increase buyer confidence in the moving process? Will the referral fee changes look to empower consumers and create an even playing field for conveyancers?