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Independent View

While the regulators continue to deluge the financial services industry

with new rules and compliance procedures, the Government remains virtually

silent on doing anything about the abuses that continue to go on in the

residential property market.

We have all suffered. Mystery bids that appear from nowhere just as you

are about to exchange contracts, forcing you to increase your offer. Agents

who recommend a purchaser at £200,000 who sells the property three

months later for £300,000.

It is a scandal that it is still possible for absolutely anyone – from an

out and out fraudster to an incompetent – to set up shop as an estate agent

and advise individuals on the most important sales and purchases of their


At the moment, the only regulation of the residential property market is

through professional organisations such as the Royal Institution of

Chartered Surveyors and the National Association of Estate Agents.

It is totally voluntary, largely unpoliced and with limited access to

redress except through the courts. This is wholly unsatisfactory when you

consider that, for the average person, their home is their most valuable


When considering the amount of regulatory effort that has gone into

protecting the consumer from unscrupulous financial advisers, selling

products which on average are seldom worth more than £50,000, even

after a lifetime&#39s savings, why is nothing done to regulate the salespeople

who sell properties?

It is totally unsatisfactory that only 35 per cent of high- street estate

agents belong to the Ombudsman for Estate Agents scheme and the vast

majority of individuals working in these offices on a day to day basis are

totally unqualified. Selling property is one occupation where you do not

need even one GCSE.

The newly appointed Estate Agents&#39 Ombudsman, Stephen Carr Smith, is doing

his best and has got voluntary membership of the scheme up from 22 per cent

of high-street estate agents to 35 per cent in the past year.

But the scheme itself is flawed. Under the old regime, when it represented

commercial estate agents, maximum compensation was £100,000, low for

commercial property but probably enough to cover all but the very worst

cases of loss for residential property buyers. But, in an attempt to get

more estate agents to join, compensation was dropped to £50,000 in

January 1998 and to £25,000 in February this year.

This is insufficient. Where misrepresentation or fraud has occurred,

losses could easily run into hundreds of thousands of pounds. If estate

agents are all honest, competent individuals, there will never be a call

for compensation at this level, so they do not have to worry about the


The residential property market provides the opportunity for the

Government to try out a simple form of regulation which would be infinitely

preferable to our cumbersome and expensive Financial Services and Markets

legislation, which is still working its way through Parliament.

It is arguable that the various industry ombudsmen, soon to operate under

the umbrella of the Financial Ombudsman Scheme, have done infinitely more

to protect consumers and more importantly to provide a free system of

redress and compensation than all the rest of the regulators put together.

If the Government made membership of the Ombudsman for Estate Agents

mandatory for all residential estate agents, we could then see whether

licensing, training and competence standards and all the other compliance

requirements were essential to protect consumers.

Presumably the fraudulent or incompetent estate agents would find

themselves fined to the point where they either cleaned up their act or

went out of business.

Moreover, the requirement for compulsory professional indemnity insurance

would mean, in practice, incompetent estate agents would not be able to

remain in business because they would be unable to get cover so much

cheaper and more effective than the billions regulation is currently

costing the financial services industry.


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