Recent changes in consumer law, in particular under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (“CCR”), impose new requirements on businesses that sell goods, services or digital content to consumers, which include those services offered by estate agents to their customers. These stipulate that certain information must be clearly stated in plain language in the terms and conditions that customers sign when engaging estate agency services (in addition to the requirements of the Estate Agents Act 1979), including:
- The right to cancel their contract during a ‘cooling-off period’ of 14 days – This requirement applies to certain contracts (“off premises” contracts and “distance” contracts which include contracts entered into in the presence of the customer at the customer’s home). The right to cancel the contract must be clearly stated in the contract and may follow the statutory model form. However, as is often the case, customers may want to proceed with marketing their property before the 14 day period expires. If this is the case, then the agency has the right to a proportion of costs incurred provided that the customer expressly consents in writing to starting marketing before the end of the cooling-off period. Failure to give notice of the right to cancel is a criminal offence.
- Details regarding agency fees – These must be expressly set out in the contract together with an explanation as to how the fees will be calculated and when they should be paid. In the case of letting agents, the fees must be shown inclusive of VAT (even if the fee is based on a percentage). Whilst there is no specific requirement that sales agents provide their charges inclusive of VAT in their agreements, it has become increasingly common to do so as a matter of good practice as it has been argued it could be implied as necessary by CCR. Additionally, if a company is advertising its services, a recent Advertising Standards Authority ruling has led to the Committee of Advertising Practice advising that charges be advertised inclusive of VAT.
- Details of complaints handling procedures – The CCR require that information about any complaint process is provided before the customer enters into the contract. Agents would be wise to ensure the complaints procedure appears as part of the contract, or is handed to the customer, before any contract is signed.
In addition, the Property Ombudsman Code of Practice for Residential Estate Agents provides that customers must be informed if it is intended that buyers’ services (for example financial, investment, insurance etc services) or the services of an associate or connected person, are offered. With London estate agents Foxtons recently coming under fire with a group action being launched against them for allegedly being paid commissions that were not referred to in invoices, transparency of third party commissions will become increasingly scrutinised.
It should also be noted that the Consumer Rights Act 2015, which has received Royal Assent, is expected to be brought into force in October 2015, following which further changes to the consumer protection law will also have an impact so watch this space!
For more information on this and how the Corporate and Commercial team can help you, contact either Mary Anne Fedeyko on +44 (0)1206 217049 or by email on firstname.lastname@example.org or Caroline Nicholls on +44 (0)1206 217031 or by email on email@example.com.