Open Letter to The Property Ombudsman – Agents Operating Illegally

Open Letter to The Property Ombudsman – Agents Operating Illegally

9:47 AM, 7th September 2012, About 9 years ago 23

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Dear Property Ombudsman

I am very concerned about the number of readers letters that I receive from both landlords and vendors of properties who feel they have been ripped off by unscrupulous and unlicensed agents calling themselves “Property Sourcers“.

There is very little I can do about this other than offer sympathy as Property118 is neither an arbitrator nor a regulator.

How landlords are ripped off

These “Property Sourcers” (which sometimes also refer to themselves as “buyers agents, property mentors, property clubs etc.) regularly use the phrase “Instant Equity” or “below market value” in advertisements for investment properties for sale. I am not convinced that many of these deals are even a bargain, let alone how it can be possible to justify advertising properties using such terminology. Surely a property is only worth as much as somebody is prepared to pay and if a vendor could get a better deal they would do so?

If people or businesses claim to act as an agent for a buyer or a seller of a property, my understanding of the Estate Agency Act 1979 is that they are “Estate Agents” regardless of what other fancy title they want to dress up their activities as and should therefore comply with The Estate Agency Act 1979 in terms of registering with an Ombudsman service and satisfying the criteria of membership. I quote a section from the OFT website (in blue text below) which, to my way of thinking, is quite clear on this:-

Who is an estate agent?

By law, you are an estate agent if:

  • you deal with people who want to buy or sell freehold or leasehold property, throughout the UK: this includes commercial and agricultural property
  • you do this as part of a business
  • you act on instructions from a client.
The complaints I most often receive from landlords are:-
  • Wasted valuation and legal fees when mortgage valuations do not match the agents claims on value
  • Agents are not registered with an Ombudsman
  • Agents take reservation fees from purchasers and refuse to refund them if the buyer pulls out of a transaction, even if the results of “due diligence” (such as a mortgage valuations not matching the claims made by the agent) are the reason for not proceeding

My questions to the Ombudsman are:-

  • Does the Ombudsman agree that people or businesses working for a vendor of a property or a purchaser of a property should be registered with an Ombudsman scheme according to the Estate Agency Act 1979?
  • How can people check whether a person or business acting as an Estate Agent is registered?
  • What can be done when a person or business is found to be breaking the law of the Estate Agency Act 1979 in terms of none registration?
  • If readers of Property118 report business offering services such as those described above which are not registered, or which appear to be in breach of the rules, will the Property Ombudsman Service undertake to take action and refer complaints to the relevant bodies for them to be investigated and dealt with?
I look forward to reading your response in the comments section below.

Yours faithfully

Mark Alexander
Founder of property118.com


Comments

by Mark Alexander

13:08 PM, 9th September 2012, About 9 years ago

Hi Annette, my understanding it that a criteria of becoming a member of an Ombudsman scheme is that an agent must have PI insurance.

by Mary Latham

16:15 PM, 9th September 2012, About 9 years ago

Mark why not go straight to Trading Standards - they will investigate a complaint regardless of whether the subject is a member of this scheme or that. I think that you have raised a very important issue and one which is catching would be landlords out all the time.
Ironically you cannot fault a person who wants to become a landlord/property investor and he pays for "training and services" because he know what he does not know. I hate it that these people are trying to do the right thing and are being hoodwinked.

by Anthony Endsor

21:37 PM, 9th September 2012, About 9 years ago

Hello.I was ripped off by a 'property sourcing' company over the course of 18 months between March 2009 and September 2010. The company sourced a property through another company. They took fees for reserving the property, the other company also took a 'third party fee'. I was given the runaround throughout, with the companies constantly making excuses as to why it was taking so long to go through before finally it all collapsed.
I believe this was all done illegally and have complained to both companies but received no response. Would the ombudsman be able to help in such an instance if I gave full details of companies, circumstances, etc? I think both companies are still operating. Thanks.

by Mark Alexander

1:55 AM, 10th September 2012, About 9 years ago

Hi Anthony

Have you checked to see whether the company you engaged and the one they were working with too are registered with one of the Ombudsman schemes. If they are you should take your complaint the the appropriate Ombudsman. If not, then you should report them to Trading Standards for operating illegally and also copy in The Property Ombudsman.

If you do involve Trading Standards please make them aware of this thread.

Good luck and please keep us informed.

by Mark Alexander

5:57 AM, 10th September 2012, About 9 years ago

Thank you for spreading the word Vanessa, I have also commented on Property Tribes.

I've shared this thread in numerous LinkedIn and Facebook Groups to spread the word.

I've been banned from some and my post has been deleted from others!

It would seem the truth hurts too much for some group moderators to want their group members to hear it!
Thanks also to @TessaShepperson from Landlord Law for her efforts in respect of sharing and linking back to this thread.

If all Landlords who read this thread were to share it via social media and/or link back to it from other websites that would be an amazing way to spread the word.

Similarly, if anybody reading this has good Press and Media contacts please put them in touch with me - mark@property118.com

by Anthony Endsor

11:23 AM, 10th September 2012, About 9 years ago

Hi Mark. I have just checked the websites of both of these companies. I cannot see any evidence that either are registered with any Ombudsman scheme, so I think I'll have to report them to Trading Standards.

by

5:59 AM, 11th September 2012, About 9 years ago

Dear Mark

In answer to your question, Section 2 of the TPO Code of Practice for Residential Estate Agents requires that the figures provided by registered firms following the market appraisal are done so in good faith and must reflect the available information about the property and the current market conditions. In addition, that figure must be supportable by comparables of similar properties. In short, the Code requires that an agent does not deliberately misrepresent the marketing value of a property.

In addition, Paragraphs 5h, 5i, 5j and 5k require that the details of the property particulars are agreed with the client prior to the start of marketing; that advertising must comply with the Consumer Protection from Unfair Trading Regulations 2008 and the Property Misdescription Act 1991; and that adverts are legal, decent, honest and truthful in accordance with the British Codes of Advertising and Sales Promotion and Direct Marketing.

Taken together, these requirements mean that, if a registered agent chooses to us the term ‘instant equity’ and advertise a figure, they must be able to provide appropriate evidence to support such a figure, as well as their client’s agreement to market the property on that basis.

Any disputes relating to registered firms which are referred to my office would be measured against these requirements of the Code of Practice. If a firm was found to be in breach of these obligations then a suitable award may be made. However, each dispute is considered on the circumstances of the individual case, therefore, awards (if appropriate) may vary. If the dispute concerns a valuation provided by a surveyor then the matter should be referred to either the Royal Institute of Chartered Surveyors or Ombudsman Services (previously the Surveyors Ombudsman Scheme).

I must also point out that, regardless of the agent’s marketing, there remains a responsibility on the buyer to ensure that what they are purchasing suits their intended purpose. If the purchase is to be an investment, I would strongly recommend that the buyer obtains an independent survey to check for themselves that the investment is suitable for their needs before such times as they have committed themselves to the purchase. Furthermore, I have seen a number of recent cases where the buyer concerned has not visited the property before deciding to commit themselves to the purchase. By taking the time to visit the property and obtaining an independent report to verify whether the property is suitable for their investments needs, many disputes could be avoided.

Finally, I would reiterate that the agent’s role is to obtain the best possible deal for their client. Where an agent acts for a seller, the buyer must always bear this in mind and take the necessary precautions (by way of instructing independent third parties) to ensure that the property fulfils their specific requirements.

Regards

Christopher J Hamer
Property Ombudsman

by

1:12 AM, 14th September 2012, About 9 years ago

Excellent topic. My former business went into the business of 'sourcing' - ie getting motivated sellers to market properties. On researching, it was quite clear that we need to be members of the Property Ombudsman scheme. All properties were marketed at the discounted price agreed with the vendor. So in my opinion, all property sourcers are covered by the Estate Agents Act and need to be members.

The key issue of Ombudsman membership is the need for PI cover and to adhere to Codes of Practice for complaints etc.

Most sourcing companies therefore will completely shy away from joining for these reasons! They get lots of complaints, which will ultimately land on the desk of the Ombudsman.

Sadly, it is not mandatory for letting agents, by we, like many agents are also members of the Ombudsmand Scheme for Lettings. This is actually an Arla requirement.

by Vanessa Warwick

15:13 PM, 6th October 2012, About 9 years ago

Just to up-date this thread with the news that I interviewed both the Property Ombudsman and the Chief Ombudsman of Ombudsman Services at the NALS Annual Conference on this subject.

You can view the videos here:

http://www.propertytribes.com/what-property-ombudsmen-have-say-about-deal-sourcers-t-6493.html#pid81228

They both said that it was black and white that deal sourcers fall under the Estate Agent Act and need to be registered with an Ombudsman Scheme.

by Richard Greenland Richard

1:55 AM, 7th October 2012, About 9 years ago

Thanks Mark for this excellent initiative. Dishonest operators have been fleecing the unwary this way for far too long. I used to spend time outing them, but the reality is there seems to be a never-ending supply of gullible people desperate to thrust money into their clutches. I've got limited time and frankly I've run out of patience, so it's really good to know there is an official body to send dodgy-sourcer spam to and laws in place to deal with them. Probably Mr Hamer will need to hire an assistant!


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