You, your agency, and most lettings and estate agents are misleading consumers in criminal breach of the Consumer Protection from Unfair Trading Regulations so you risk being fined or imprisoned. You probably regard the risk as small because all your colleagues and competitors have been doing the same thing for years and regulatory enforcement by the OFT, trading standards departments and other regulators has been very feeble. However, you and your agency face other large risks: accumulated civil liabilities, and prosecution for failing to provide for significant liabilities and for failing to disclose them to your auditors or to your professional negligence or legal costs insurers.
Your illegal activities are accumulating civil liabilities which, like PPI-misselling claims, remain live for up to fifteen years. If claims are initiated by many consumers your company could be forced into insolvency and it would be unable to pay you. Worse, your consumer clients could claim against you personally for torts of deceit if it is obvious that you know that your practices are misleading,
If you do not quote ALL your fees to consumers, including consumer landlords, inclusive of VAT (and I am not aware of any agency that does) you are in breach of the Consumer Protection From Unfair Trading Regulations (CPUTR) and of the OFT’s guidance with both of which any competent agency should certainly be familiar. Quoting fees or percentage commissions exclusive of VAT understates them by 17% (when the rate of VAT is 20%) and, if you do so, you have no reliable defence against a civil claim for a refund. (The Property Ombudsman’s Code informs you of your obligation to comply with the CPUTRs but negligently prescribes a non-compliant treatment of VAT for percentages. The Ombudsman has certainly known about this error for at least a month, it has very probably known about it since the OFT published Guidance for Property Sales in 2012, and, since the CPUTRs, and the Consumer Protection Act before, are very clear, it has probably known about it for years.)
If you do not transparently disclose your fees to consumers, including landlords, many of whom are treated as consumers by the law, you are also misleading consumers in breach of the CPUTRs. I am not aware of any agent that is fully compliant and most agents have not made only token efforts to comply with the Advertising Standards Authority’s adjudication against You Move despite warnings and deadlines to do so. Agencies’ typical price disclosure practices are extensively criticised by the OFT guidance which describe them as drip-pricing. You face the prospect of civil claims for the return of all improperly disclosed fees and commissions.
If you include renewal fees in your landlord agreements or advertising (and the vast majority of agents do), you are, according to the OFT’s guidance, engaged in an illegal aggressive business practice. You face the prospect of civil claims for the return of all improperly disclosed renewal fees and commissions unless specifically agreed by the client.
The scale of the risk amounts to a about a quarter of your reported revenue over fifteen years plus interest and legal costs, obviously large enough to have a fatal impact on any long-established agency. It is another criminal offence, against the Companies Act, not to make and to disclose such risks in financial reports. In case you or your company plans to rely on professional negligence or legal costs insurance you commit insurance fraud if you do not disclosing the risks to your insurer whilst continuing to mislead consumers. However you are unlikely to be insured against the consequences of criminal activity.
Unless you think you can rely on inactive regulators, inactive consumers, and inactive new entrants, you must stop misleading consumers, you must inform the management of your agency of the risks they face, and they must comply with the CPUTRs. Unfortunately they must also disclose any already accumulated risks to their accountants, their auditors and their insurers.
The same basic information was first published on 29th October 2013 as Will civil claims bankrupt Foxtons, Countrywide and LSL?. Since then not a single detail has been challenged by agencies, the Property Ombudsman, regulators or anyone else. If you think there is anything wrong with it, leave a comment.
Your illegal activities are accumulating civil liabilities which, like PPI-misselling claims, remain live for up to fifteen years. If claims are initiated by many consumers your company could be forced into insolvency and it would be unable to pay you. Worse, your consumer clients could claim against you personally for torts of deceit if it is obvious that you know that your practices are misleading,
If you do not quote ALL your fees to consumers, including consumer landlords, inclusive of VAT (and I am not aware of any agency that does) you are in breach of the Consumer Protection From Unfair Trading Regulations (CPUTR) and of the OFT’s guidance with both of which any competent agency should certainly be familiar. Quoting fees or percentage commissions exclusive of VAT understates them by 17% (when the rate of VAT is 20%) and, if you do so, you have no reliable defence against a civil claim for a refund. (The Property Ombudsman’s Code informs you of your obligation to comply with the CPUTRs but negligently prescribes a non-compliant treatment of VAT for percentages. The Ombudsman has certainly known about this error for at least a month, it has very probably known about it since the OFT published Guidance for Property Sales in 2012, and, since the CPUTRs, and the Consumer Protection Act before, are very clear, it has probably known about it for years.)
If you do not transparently disclose your fees to consumers, including landlords, many of whom are treated as consumers by the law, you are also misleading consumers in breach of the CPUTRs. I am not aware of any agent that is fully compliant and most agents have not made only token efforts to comply with the Advertising Standards Authority’s adjudication against You Move despite warnings and deadlines to do so. Agencies’ typical price disclosure practices are extensively criticised by the OFT guidance which describe them as drip-pricing. You face the prospect of civil claims for the return of all improperly disclosed fees and commissions.
If you include renewal fees in your landlord agreements or advertising (and the vast majority of agents do), you are, according to the OFT’s guidance, engaged in an illegal aggressive business practice. You face the prospect of civil claims for the return of all improperly disclosed renewal fees and commissions unless specifically agreed by the client.
The scale of the risk amounts to a about a quarter of your reported revenue over fifteen years plus interest and legal costs, obviously large enough to have a fatal impact on any long-established agency. It is another criminal offence, against the Companies Act, not to make and to disclose such risks in financial reports. In case you or your company plans to rely on professional negligence or legal costs insurance you commit insurance fraud if you do not disclosing the risks to your insurer whilst continuing to mislead consumers. However you are unlikely to be insured against the consequences of criminal activity.
Unless you think you can rely on inactive regulators, inactive consumers, and inactive new entrants, you must stop misleading consumers, you must inform the management of your agency of the risks they face, and they must comply with the CPUTRs. Unfortunately they must also disclose any already accumulated risks to their accountants, their auditors and their insurers.
The same basic information was first published on 29th October 2013 as Will civil claims bankrupt Foxtons, Countrywide and LSL?. Since then not a single detail has been challenged by agencies, the Property Ombudsman, regulators or anyone else. If you think there is anything wrong with it, leave a comment.
No comments:
Post a Comment