Consumer Protection Regulations – embrace, panic, avoid?
In this short article, I give some background and information about one of the seemingly myriad of new or updated regulations and suggest that agents wake up to their responsibilities and obligations before they find themselves in potential hot water.
Consumer Protection Regulations (CPRs), or to give their full title – the Consumer Protection against Unfair Practices Regulations and the Business Protection from Misleading Marketing Regulations – have largely gone under the radar of sales and letting agents since their introduction five years ago in 2008.
Most residential sales agents were reasonably aware of and compliant with the Property Misdescription Act (PMA) which for the last 20 years was the primary legislation protecting consumers from false or misleading information provided by estate agents.
So, why should the property industry be concerned now? The regulations have been in place since 2008 and have not caused issues for many.
Well, the PMA was repealed in October 2013 leaving CPRs as the legislation that governs a business’s relationship with consumers and are much wider-reaching than the PMA and affect both sales and lettings. They also have the potential to be much more difficult for unprepared agents to comply with.
This news seems to have slipped under the radar for many, probably due to the Government launching the second phase of Help 2 Buy at the same time.
My view is that there will be an increasing number of cases brought under CPRs and its profile will rise significantly. Already there have been cases where the Ombudsman has made awards to consumers based on his views on this legislation and where agents have not met their obligations.
I have been running short CPR courses in recent weeks and have been amazed at the lack of awareness in the industry of the requirements of the regulations and of the lack of systems and procedures that agents have in place to help deal with their obligations. Worryingly, I have also had many conversations with business owners who were, in some cases, unaware that the PMA was no more and had certainly taken no action to ensure that their businesses were compliant under CPRs.
So what is it all about?
Quite simply, the thrust of the regulations is about removing unfairness (of which five clear forms of unfairness are defined under the regulations) and the key element makes it a requirement that the “average consumer” (again defined in the regulations) is provided with the information they require in order to make a “transactional decision”. A “transactional decision” could be many and various but would include deciding to view a property or make an offer etc.
Crucially the regulations make “misleading omissions” an offence as well as “misleading actions”, and so not revealing something is as important as revealing something incorrectly.
The regulations therefore effectively remove the old “caveat emptor” (let the buyer beware) maxim, as now a buyer (or indeed any “average consumer”) should be able to rely on the information he or she has been given or not given by the “professional” in the process – the agent.
Many of the situations where an agent could fall foul of the regulations would have been picked up during the legal purchase process, but by this time a buyer will have incurred expense and spent time and resources ascertaining a position that the regulations intend to have been clear at the outset. Remember too that the regulations govern all business, not just sale and purchase, and in the case of lettings, a tenant wouldn’t normally be represented by a legal practitioner who would be making these enquiries.
Clearly, there are situations that develop during property transactions that may require action. For example, an adverse survey sees a buyer withdraw and the seller and agent are now faced with what information to provide when the property is remarketed.
There are potentially hundreds of situations that could lead to a client and agent being exposed to a risk of not complying with the regulations and, until case law develops, it may be an educated “judgement call” that is required. Clearly, the better prepared and equipped agent is much less likely to find themselves at the centre of creating legal precedent and will be able to demonstrate “due diligence” in approach.
It is ironic that, if we still had Home Information Packs, these would go a long way to ensuring that appropriate information was available (at least in a sales environment) in a timely fashion.
It is however vital that agents put in place systems and processes for recording information and that staff are trained to use that information properly and in a timely, effective and auditable fashion.
Embracing the regulations will make your business more professional, ensure good business practice and is likely to reduce issues that arise during transactions.
Panicking over the regulations is unnecessary as you can seek help and guidance and, through good systems and training, ensure that your business is both operating compliantly and diligently for the benefit of all.
Avoiding the regulations or “turning a blind eye” is simply not an option unless you are prepared to face heavy fines, a potential jail term and the terrible adverse PR that would result.
Naturally, I should be pleased to discuss how your business can best comply with these regulations.