A short recall
With the goal of ensuring referral fees be made more transparent and open to consumers, the National Trading Standards Estate and Letting Agency Team or NTSELAT, in collaboration with the NAEA Propertymark, The Property Ombudsman (TPO) and other industry bodies, published the February 2019 guidelines on referral fees received by estate agents across the UK. NTSELAT was to observe estate agents’ compliance with the guidelines and report their observations to the Ministers.

But what is a referral fee?
Referral fees can be anything from a commission, a payment, a fee, a reward or a gift or some other benefit from a separate service provider for recommending their services to the buyer or the seller.

A complete ban of said fees were considered by the Ministry of Housing, Communities and Local Government unless the property sector could guarantee transparency.

See contents of guidelines

The NTSELAT report which is up for completion and submission anytime soon, may take some time for the government to decide upon their course of action, according to James Munro, head of the NTSELAT and the author of the report.

The report will contain a summary of the National Trading Standards Estate and Letting Agency Team’s evaluation regarding the transparency of the referral fee for the past 12 months since the introduction of its guidelines on February 2019. It will also include proposals for the government to act on ranging from amending the Trading Standards regulations to a complete ban which would require legislation that could take years as the Parliament’s hands are full with Brexit and economic issues.

Another option is for NTSELAT to go after individual agents who are openly disregarding transparency on referral fees, then subject those individuals to an investigation. However, if the number increases across the agencies, the National Trading Standards Estate and Letting Agency Team will issue a warning, and threaten to pass a specific legislation if the problem persists.

According to Munro, although some agents have been highly cooperative in informing the consumers about the fees in question, singling out Foxtons and Hunters, other smaller property agencies did not.

In the 2019 guidelines published by NTSELAT, agents were informed that ”failure to disclose referral arrangements may render an estate agent liable for criminal prosecution under the CPRs and/or action by NTSELAT for warning or prohibition”. The guideline gave agents an outline on how they should inform their clients of the referral fees they receive for recommending other services like conveyancing, legal services, etc.

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