Referral fee ban back on the agenda

The estate agency press have this morning reported on a review by the National Trading Standards Estate and Letting Agency Team which recommends the mandatory disclosure of referral fees to consumers.

The review was requested by the Ministry for Housing, Communities and Local Government (MHCLG) instructed to look into the practice of referral fees and their impact on buyers and sellers in the UK property market.

In a recent survey of TPO (The Property Ombudsman) members, almost 60% of members had referred customers to external companies. More than 80% of those members admitted receiving a fee for the referral.

James Munro, Senior Manager, National Trading Standards Estate & Letting Agency Team, said:

“We recognise that referral fees have a place in business if used ethically and transparently and with no pressure to use the referred service. It is important that customers are fully aware of the basis and value of a referral or recommendation so they are able to take an informed transactional decision. Mandatory disclosure of referral fees would ensure there is full transparency around this practice, helping to build consumer confidence in the estate agency industry and demonstrating the duty of care agents should have to both parties in a property sale.”

The recommendations include:

  • Proposals for government to make transparency of referral fees mandatory and require a warning to be given to customers that they should consider shopping around
  • A public awareness programme to warn consumers about hidden referral fees
  • Further industry guidance, and work with the professional bodies and redress schemes to encourage compliance in the property sector.

The recommendations also suggest that agents who continue to flout the legal requirements concerning referral fees could be banned from the industry.

Mark Hayward, Chief Executive of NAEA Propertymark comments:

“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. ”

Minister for Housing Rt Hon Christopher Pincher MP said:

“This government is committed to making it easier, cheaper and clearer for people to own their own home, including by making the buying and selling process more transparent.

“It is unacceptable that unscrupulous practices are still taking place where consumers are not being made aware of referral fees when buying or selling a property.”

“I welcome the National Trading Standards’ work to raise consumer awareness of referral fees and will carefully consider the recommendations of their report. I have asked National Trading Standards to continue to monitor the situation to help inform if further steps need to be taken.”

The full report can be found here: https://www.nationaltradingstandards.uk/uploads/Referral%20Fee%20Report%20Feb%202020.pdf

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