Times are hard for a number of estate agents, and with a sharp fall in commission, a number of agents are focusing more on increasing their secondary revenue streams, particularly referral fees.
We all know that referral arrangements exist and are, at least for now, a fact of life. The question whether agents and linked conveyances are as open about these arrangements as they should, is less clear.
The pressure on agents to maximise secondary income has led to an increasing number of complaints about the unprofessional and unlawful tactic of ‘bad mouthing’ the vendor’s choice of conveyancer in an effort to ‘sell’ the service of their own pet conveyancer.
We have found ourselves the victim of this practice. Three local agents have made unjust remarks about our service in an effort to deter prospective clients from engaging us. We have written to each and have not had the courtesy of a response.
This conduct is abhorrent and is on the rise. The objective is clear. The agent is keen not to lose the commission that will be gained if the agent can steer the client to the agent’s pet conveyancer. No regard is had to the wishes of the client or indeed the client’s rights.
A truly independent conveyancer will undertake due diligence on the legal title without influence from the agent, and may, for instance, advise the client not to proceed with the purchase if there is a major issue with the title. The conveyancer may also assist the client to purchase the property at the current market price and not at the value advised by the agent. In short the conveyancer will act independently to everyone apart form the client.
The risk for the client who is pushed in the direction of the preferred conveyancer is that the service provided may be strongly influenced by the value to the conveyancer of the high volume of work it receives from that agent. There will be pressure on the linked conveyancer not to upset the agent who is feeding it with regular work. The conveyancer would be less likely to advise on issues that could delay or jeopardise the transaction.
So what is the narrative these agents use to ensure a prospective client goes with their recommendation?
Firstly, its best to use “our conveyancer is local" - There is no great advantage in a conveyancing solicitor being local because nearly all conveyancing tasks are completed using email and telephone. Just because the conveyancer is local does not mean the conveyancer is any good!
“We use them all the time" - by the very nature of the arrangement, which will not be disclosed, this is true. However the agent will have no direct control over the pace of the transaction, nor the actions of the other conveyancers in the chain.
"Our conveyancer is quick" - There is no conveyancer who can guarantee a quick service due to the fact that the transaction will only proceed as fast as the slowest party in the chain. Conveyancers have little control over the delivery time of searches and mortgage offers, for instance.
‘If you go with your choice of conveyancer you will have problems’ - if a client hears this he or she should run a mile. Though the agent may profess to know about very conveyancer under the sun, the reality is that the agent will have little genuine information on the conveyancer and will not be basing the opinion on any facts. The very fact the agent has mentioned this should ring alarm bells straight away. The best advice is to walk out of the agency and look to find an honest agent, or to go the choice of conveyancer direct who we are sure will point you in the right direction.
It is both morally and legally wrong to provide false information in the delivery of a service.
The National Trading Standards' Estate Agency Team issued guidance on property sales in September 2015 which clearly sets out the duties which estate agents, must provide to consumers, what rights consumers and clients have and what redress they have.
The guidelines are far-reaching and legally enforceable and breaches can be prosecuted in the criminal courts, resulting in possible jail terms and unlimited fines.
In particular, unfairness in practice, as defined in the guidance, is defined as results arising from the following:
- Giving false or misleading information to consumers regardless of how delivered, whether verbally, in writing or via telephone. This would cover providing a client with misleading information about the clients preferred conveyancer.
- Exerting undue pressure on consumers including pressuring a potential buyer to use associated services for example to use a particular firm of conveyancers
- Not acting with the standard of care and skill that is in accordance with honest market practice and in good faith.
Furthermore it is illegal under the Estate Agents Act 1979 for an Agent to force a client to use the Agent’s preferred conveyancer.
Blame for this practice does not stop with the agent and a client faced with pressure should also report the Agent’s pet conveyancer.
Both the Solicitor's Regulation Authority (SRA) and the Council for Licensed Conveyancers (CLC) make it very clear that its members are meant to ensure that their client has chosen them to act without pressure being exerted on them to do so.
If a client considers he or she has been caught up in one of these referral arrangements and have been deprived of a free choice of conveyancer our advice is to complain to the Agent and also to the Regulator of the pet conveyancer.
We will be happy to provide you with advice on you options.
And finally…. Do keep in mind that it will probably cost the client more - ( between £100 and £200) by engaging the pet conveyancer because most of these arrangements work on the basis of the referring agent’s referral fee being added to the fee paid for the conveyancing transaction.