Ombudsman Services
response to proposed
changes to the Estate
Agents Act (EEA) 1979
Ombudsman Services consultation
response to proposed amendments to the
Estate Agents Act (EEA) 1979 – August
2012
Ombudsman Services
consultation response to
proposed amendments to the
Estate Agents Act (EAA) 1979
1 Purpose of the consultation
1.1 The Department of Business, Innovation and Skills (BIS) is looking to make
amendments to the Estate Agents Act (EAA) 1979 responding to a recommendation in
the OFT’s 2010 Home Buying and Selling Market Study to amend the scope of the
EAA and therefore who will be subject to the legislation. The current definition of
“estate agency work” in the EAA is broad and can capture a wide range of business
models in the current home buying and selling market (an extract from the Act is
appended to this letter). The OFT’s market study noted that the definition of “estate
agency work” was framed before the internet existed and recommended that the
Government review whether it may now be inappropriate and overly burdensome in the
case of some business models and may be hindering innovation.
1.2 The proposal is that businesses, such as online sites that act simply as “passive
intermediaries” offering a limited, low-risk service to buyers and sellers, whether or not
they charge a fee should be outside the scope of the EAA. Passive intermediary
businesses in this context are those that, for example, allow for exchange of
information about properties for sale between sellers and prospective buyers, provide a
means for the seller and prospective buyer to communicate with one another or provide
information such as the sale price of recent sales. It is not the intention to remove any
important consumer protection afforded by the current legislation. Therefore if such
businesses offer personalised advice to buyers or sellers or handle money belonging to
clients, they should remain within the scope of the EAA.
1.3 The intention of the proposal is to open up the market to new business models and,
if it goes ahead, Section 1 of the EAA would be amended, probably via a clause in the
Ombudsman Services response to the Department
of Business, Innovation and Skills (BIS) proposed
amendments to the Estate Agents Acts (EEA) 1979
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Enterprise and Regulatory Reform Bill currently undergoing its passage through
Parliament.
2 Ombudsman Services response
2.1 The Ombudsman Service Ltd is a company limited by guarantee (not-for-profit) that
provides ombudsman services for the energy including the Green Deal,
telecommunications and property sectors, by appointment or approval from the
relevant regulators. We provide dispute resolution and redress to domestic consumers
and micro businesses.
2.2 Established in 2002, Ombudsman Services now has over 8,500 participating
companies and last year sent out over 20,300 complaint forms. The company employs
over 170 people and has a turnover in the region of £6.4 million.
2.3 Ombudsman Services is appointed by Ofcom and Ofgem to be the redress scheme
for the communications and energy sectors. In the energy sector we have recently
taken on the responsibility for complaints about feed-in tariffs, in addition to our existing
role providing the alternative dispute resolution scheme for both energy suppliers and
networks. The redress service we provide in property developed from appointment by
the Royal Institution of Chartered Surveyors, followed by approval from the UK Office
of Fair Trading to provide alternative dispute resolution services for estate agents.
2.4 The most recent sectors the service provides alternative dispute resolution for are
copyright licensing and the Green Deal and with our sustainable funding model,
independence and considerable experience we have the capacity to undertake further
work.
2.5 To help ‘level the playing field’ between consumers and companies, we have a
contact centre which provides information and helps those who have difficulty in
making a complaint. We achieve proportionality by providing alternative dispute
resolution through different processes, from informal resolution to in-depth formal
investigation. Our decisions are enforceable through the courts.
Ombudsman Services response to the Department
of Business, Innovation and Skills (BIS) proposed
amendments to the Estate Agents Acts (EEA) 1979
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2.6 Our service is free to consumers and paid for by the participating companies under
our jurisdiction by a combination of subscription and case fee. While we consult with
the sector participants on our annual budget and business plan, the participating
companies do not and should not exercise financial control over the company. Our
governance ensures that we are entirely independent from the companies that fall
under our jurisdiction.
2.7 Ombudsman Services welcomes the opportunity to comment on the Department of
Business, Innovation and Skills consultation on amendments it proposes to the Estate
Agents Act (EAA) 1979.
3 Consultation questions
3.1 Below is our response to the consultation which is most directly related to our
experience of operating ombudsman schemes.
Question 1. Is being within the scope of the existing Act i. a burden on existing
businesses in the home buying and selling market or ii. a barrier to new business
models?
This is not a matter that Ombudsman Services has any experience.
Question 2. Does the way “estate agency work” is defined in S1 of the EAA cause
uncertainty about the scope of the Act and thereby create a significant barrier to
businesses wishing to set up new business models, such as online estate agencies or
matching sites?
This is not a matter that Ombudsman Services has any experience.
Question 3. Are there any significant barriers to entry to the home buying and selling
market caused by other legislation?
There are no significant barriers to entry that Ombudsman Services is aware of.
The property market is greater than estate agency and the lettings business is
increasing. There is an anomaly in that estate agents are regulated while lettings
agents are not. Many firms offer both. Estate agents must belong to an approved
Ombudsman Services response to the Department
of Business, Innovation and Skills (BIS) proposed
amendments to the Estate Agents Acts (EEA) 1979
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redress scheme, there is no such requirement for lettings agencies. Ombudsman
Services is of the view that this causes confusion for both the industry and consumers
as well as reducing the protection available to tenants and prospective tenants.
Question 4. The proposal is that businesses, such as online sites, that act simply as
“passive intermediaries” offering a limited, low-risk service to buyers and sellers,
whether or not they charge a fee, should be outside the scope of the EAA. What do you
think the benefits and disadvantages of amending the scope of the EAA in this way
would be?
Inherent dangers exist in determining whether a site is truly passive and any site
offering a service which is beyond merely offering property details and has an
interaction between the buyer and seller should form part of the EEA and have a
redress requirement.
At the European Consumer Summit held in Brussels on 29 May 2012, the issue of both
passive intermediaries and sites that assist in procuring sales was on the agenda. It is
likely that this will be considered by the Health and Consumer Policy Directorate (DG
Sanco). There are two main concerns; transparency and the opportunity for redress
should something go wrong.
If businesses such as online sites should be outside the remit of the EEA, then they will
not be required to be part of an approved independent redress scheme. It is
Ombudsman Services view that in order to encourage consumer confidence and to
support consumers and they should still be required to be a member of a redress
scheme. Although there may indeed be less of an opportunity for things to go wrong,
no process is perfect and problems will inevitably occur. This being the case provision
should be made for a cheap, quick and easy way for problems to be resolved rather
than having to go through the courts which is both time consuming and costly.
It is our view that in order to have consumer confidence, the redress scheme
should operate in accordance with the Cabinet Offices guidelines and adopt the
Ombudsman Association’s criteria for ombudsman schemes and its principles of good
governance.
BIS should also keep in mind the legislation proposed by DG Sanco on ADR and ODR
(SEC(2011) 1408} and {SEC(2011) 1409}
Ombudsman Services response to the Department
of Business, Innovation and Skills (BIS) proposed
amendments to the Estate Agents Acts (EEA) 1979
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Question 5. If the EAA was amended as proposed what activities should result in a
business ceasing to be a ”passive intermediary” and coming within the scope of the
EAA?
If the EAA is amended, it is important to have a precise definition of ‘passive
intermediary’ so that it is clear when a business is moving beyond those boundaries.
Question 6. What do you estimate the likely effects of the proposed change to be on
the operational costs and profitability of individual firms or the industry as a whole?
This is not something we can answer. If BIS decides to take this further then it is
essential that an impact assessment is completed. Our experience suggests that
belonging to a redress scheme assists businesses and can encourage growth. Not only
does an independent redress scheme provide consumers with the confidence to do
business with the company, belonging to a scheme also provides the company and the
consumer a means of resolving complaints that is cheaper and quicker than the courts.
Question 7. Would the purpose of the proposed change be best served by amending
the definition of “estate agency work” ie the activities within the scope of the EAA
(S1.1) or by amending the set of activities which are exceptions to the EAA (S1.2, 1.3
and 1.4)?
Ombudsman Services is of the opinion that the ‘set of activities’ should be amended.
This will provide greater clarity and avoid unintentional removal of activities which
should fall within the scope of the act.
Question 8. What, if any, beneficial or detrimental affects might the proposed change
have on consumers?
This has been covered elsewhere
Question 9. Could there be unintended consequences of the proposed change and if
so, what?
Ombudsman Services response to the Department
of Business, Innovation and Skills (BIS) proposed
amendments to the Estate Agents Acts (EEA) 1979
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If ‘passive intermediary’ is not clearly defined, an unintended consequence might be a
kind of ‘back door’ liberalisation of the estate agent market and may attract new
entrants, that avoid regulation and do not have robust and tested complaints processes
in place. Such companies could do considerable damage to the reputation of the rest of
the sector and undermine consumer confidence.
Question 10. Would there be particular issues about implementing the proposal in
Scotland, Wales or Northern Ireland?
Ombudsman Services cannot comment on the likely reactions of the Scottish
Government and the devolved administrations. We would emphasise the need for
consumer protection through redress.
Question 11. Are there any other points you wish to make about this proposed
change?
No
Ombudsman Services is willing to work with BIS as it develops these proposals. If you
have any questions on these comments, please contact Policy Manager, Mark Glover:
[email protected]
Lewis Shand Smith
Chief Executive/Chief Ombudsman, Ombudsman Services.
Ombudsman Services response to the Department
of Business, Innovation and Skills (BIS) proposed
amendments to the Estate Agents Acts (EEA) 1979
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