The National Trading Standards has announced the first step in introducing new material disclosure rules, on what agents and landlords should include in property listings. Sean Hooker, Head of Redress at the Property Redress Scheme, shares the story so far.
Last week it was announced that the first phase of a project for improving material information on property sales and lettings listed on the property portals will be put into place. So how did we come to this?
The role of the Property Listings Steering Group
Over a year ago at the beginning of February 2021, I was invited by the National Trading Standards Estate and Letting Agent Team (NTSELAT) to join what was being called, the Property Listings Steering Group. NTSELAT had extensively surveyed consumers that had expressed a clear desire for open and transparent information as early in the process as possible.
The group was set up as the government had expressed concern that the lack of information being provided to buyers of domestic properties was leading to a high percentage of sales falling through, delaying the process and ultimately costing consumers considerable sums of money.
The view was that property agents were at the front line of informing and communicating with the buyers and the main tool they used for presenting this information in the first instance was the property portals.
It was also acknowledged that the portals were, for most consumers, the first port of call when it came to finding properties. The legal position was that they were merely platforms and not directly responsible for the information they displayed. However, it was felt that the portals had an obligation to lead and guide what information was present and, whilst the onus was on the agent to ensure the information was accurate and correct, the portals had a major role in facilitating the presentation.
It was also recognised that lettings were equally subject to the same legal obligations of disclosure and long-term leasehold, especially in the light of the aftermath of Grenfell and the cladding scandal were essential to be included in the project.
How material disclosure rules have changed over time
The group recognised that the agent community was confused and uncertain of what information they should be collecting and what the consequences of not providing it actually meant in terms of their responsibilities and liabilities. Many of the older hands in the industry had been brought up with the concept of caveat emptor and were under the impression that, as long as they asked the seller or landlord to provide the information, they had the appropriate disclaimers and limitations in place and were therefore covered. For sales, the agent was acting for their seller and the buyer was responsible for their own due diligence.
The old school also remember the Property Misdescriptions Act 1991, which was repealed in 2013 as it was felt to have been superseded by a raft of consumer protection legislation. Since then, the Consumer Rights Act 2015, strengthened the legal position and introduced punitive penalties for effectively a beauty pageant of offences, such misrepresentation, misleading information, misdescription, and mis-selling. In addition, there has been the introduction of mandatory redress for estate agents in 2009 and letting agents in 2014, and the replacement of the Office of Fair Trading with a dedicated Trading Standards unit - originally National Trading Standards Estate Agent Team and later when lettings was added, its current NTSELAT moniker.
How the group's objectives have progressed
The steering group was tasked with providing clarity and guidance for agents, but also to work with the portals to deliver changes to their listings to ensure that the basic and essential information is provided and is both accurate and up to date. The message from the Ministry was that, at present, they were not going to make certain information mandatory. However, if agents continued to omit vital information, they would legislate to make it compulsory.
How hard was this going to be? Well, a year down the line, the group is now at the stage of announcing a phased introduction of the project. To even get this far, NTSELAT conducted a major consultation of the industry, accompanied by a case for change, in spring 2021. The group collated the data and started work on coming up with a definitive list of essential information.
As you can imagine, this was far from a straightforward task, and the first tranche of information that will be promoted is as basic as it gets. The portals themselves, whilst being cooperative and willing to achieve the objective, have continually tried to manage expectations as each new data field needs a lot of background reconfiguring of their databases and the task of verifying the information and the checks and balances needed are no easy feat.
It is also an ambition for some or most of this data to be provided automatically and from some open source data. The Government’s recent Levelling Up White Paper states that their ambition is that "The UK Government and the industry will work together to ensure the critical material information buyers need to know – like tenure type, lease length and any service charges – are available digitally wherever possible from trusted and authenticated sources and provided only once. If necessary, the UK Government will legislate."
Delivering the new material information rules
How this will be delivered remains to be seen. However, with advancements in digital technology that can securely access such data, we are probably closer than we think. The group is reaching out to conveyancers, The Law Society who have their own project looking at TA6 forms, mortgage lenders and the Land Registry.
The Buying and Selling Group, the brainchild of Kate Falkner, is another coalition of industry experts (including dare I say me!), who have got together to improve the homebuying experience and last year introduced the voluntary Buying and Selling Property Information (BASPI) form designed to be a “single source of truth”, for a property sale. They now have been working on a Property Pack with the intention of providing information based on the average consumer’s intended use and enjoyment of the property.
There is also the Propertymark NAEA Property Information Questionnaire which looks to achieve the same thing. Whether this all morphs into a new version of the Home Information Pack (HIP) remains to be seen and, whilst the original HIPs were seen as a bit of a disaster and were consigned to the legislative dustbin, many believe the time is right for another go.
How material disclosure fits with other lettings legislation and processes
Leasehold remains a challenge and with the advent of stricter rules on fire and building safety, this will be an increasing area of concern. The Government has already expressed its desire to mandate the timescale and cost a property manager or freeholder will need to work to when asked for leaseholder information. I am already on record saying that tenants need to also be informed of prospective remedial work to a property in terms of safety and also disruption to the tenancy during works.
For landlords looking to buy property for investment, all these changes to upfront information can only improve the experience. However, they should be aware that the obligation to disclose information to prospective tenants is equally vital.
Interestingly, the pressure is on via the green agenda, with changes to Energy Performance Certificates and the raising of the rating to a minimum of C due to come into force before the turn of the decade. Many landlords are blissfully unaware of this, and agents have the duty to inform them of their responsibilities and in this era of rocketing fuel prices make clear to tenants how much the property is cost to run. Despite EPCs being mandatory, many properties are advertised without a completed EPC, with the excuse it will be done before the completion of the transaction. It is likely that this could well be an area the government looks to legislate on first.
The modern agent is far more technologically savvy than in the past and it is not beyond the scope of imagination for the required information to be incorporated in the software systems used by agents and for these to integrate with the portals. There has also been a lot of work on using Unique Property Reference Numbers as the way of tying properties to transactions and, if the concept of a property condition report - effectively the equivalent of an MOT for rental properties - becomes a reality, we will be pretty much there. Platforms such as Gazeal and Sprift already claim they collect the majority of data needed for sales and there are serious roles for the likes of Goodlord in making data accessible for letting agents.
What this means for letting and estate agents
So, is there anything for agents to fear from this development? Essentially, no. Agents are already obliged to disclose material information, to the best of their ability and failure to do so is a breach of the CPRs. What however frustrates them, is they do not always know what to provide and how much detail is needed. Consumers also don't in most cases ask for huge amounts of information upfront, and this understandable, as moving home is as much emotional as transactional. Their initial priorities are, do they like the property and will they be happy there. It is only when it goes wrong and they complain that the situation becomes the problem they did not foresee.
This new process, using the portals, will act as an early warning system, managing the expectations of consumers and explaining the reasons for why the information is important and where they can obtain it, if it is missing. Agents are not expected to be experts on all aspects of the transaction but, to protect themselves and other parties, they should be as transparent as possible.
The next steps will involve the second and third phases of the project, working on the guidance for both agents and customers and eventually the mandating of the information in law. I urge all agents out there to embrace this initiative, make it work, and help the consumer and yourselves. Fewer complaints, faster transactions, happier customers. What's not to like?
