Government mulls estate agents’ disclosure of referral fees

Munro: Pandemic has made it tricky

The government is to sit down with National Trading Standards (NTS) to consider whether stricter rules are needed to force estate agents to disclose that they have received referral fees from conveyancers, it has emerged.

James Munro, head of its estate and letting agency team, also said the pandemic has made it harder for action to be taken against estate agents.

NTS issued guidance on referral fee disclosure in March 2019 at the request of the government, and then it published a report in October 2020 recommending mandatory disclosure, rather than a ban on referral fees altogether, and other steps to make consumers aware of the issue.

Speaking on a Bold Legal Group podcast with founder Rob Hailstone, Mr Munro said the guidance made it clear that, when estate agents were in a referral situation with third-party suppliers, they must tell clients when a referral fee was paid and how much it was.

He said it was “unfortunate” that the timing of the 2020 report “coincided with the pandemic and the resources of local authorities were stretched, to put it mildly”.

Mr Munro went on: “It has been tricky over the last couple of years, but we do have the support of trading standards officers up and down the country to help us.”

He said the government had considered the report, “wants the situation monitored” and had agreed to sit down with the NTS to consider “whether the situation has changed in the last couple of years in terms of transparency and to make some recommendations on the way forward”.

Mr Hailstone said “a good proportion” of the 700 member law firms of the Bold Legal Group did not pay referral fees to estate agents, while some paid them willingly and “a number of them reluctantly”.

He said there were “numerous examples” in the Facebook group When Conveyancing goes Rogue of people complaining that they did not know their conveyancer was paying the estate agent a referral fee.

“It’s a bit murky out there and there is no transparency at the moment.”

Mr Munro said transparency was “not something we can monitor just by looking at websites”.

He went on: “We do rely heavily on redress schemes and Citizens Advice to tell us about referral fees that have been hidden.”

Mr Munro said NTS was discussing with Citizens Advice how it could find out more from people with complaints about their estate agent. Consumers must be “made aware of their options” and should be able to shop around for conveyancers.

“It’s really about consumer awareness and publicity. The professional bodies have a role to play, as do all of us. It’s incumbent on the industry as a whole to come together.”

He added that at a time when there was a drive to increase professionalism in the property industry, “the last thing it needs is negative publicity” about referral fees.

    Readers Comments

  • Peter O'Donnell says:

    It is a great shame that the same does not apply to IFAs who get backhanders from dodgy investment companies. Especially when it comes to very large misadvised pension transfers.

  • Jane Cole says:

    I would whole heartedly support a ban on referral fees. I am one of a dwindling number of conveyancers who do not pay fees. The estate agents appear to actively encourage clients from using a conveyancer who does not pay referral fees. Most clients are unaware despite the rules that the fee should be disclosed.

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