New precedent for dealing with lying estate agents

A new court ruling could have huge implications for property transactions conducted via estate agents.

An estate agency in Wales has been fined thousands of pounds for failing to disclose information which would have put a potential purchaser off buying a property.

Beresford Adams Estate Agents failed to inform the potential buyer about the existence of a mineshaft underneath the property, despite being aware of the fact that other potential buyers had previously withdrawn from purchasing the property due its presence.

As well as a £3,500 fine, the firm was ordered to pay £5,000 in court costs and £515 to compensate the potential buyer, bringing the total penalty to more than £9,000.

What does this mean for you?

The case, which was brought to court by Wrexham Trading Standards under the Consumer Protection from Unfair Trading Regulations Act 2008, could have wide-reaching implications for property buyers and estate agents in this country.

It sets a precedent and means that if an estate agent is aware of significant information which could influence your decision about whether or not to purchase the property, and the agent fails to disclose this information to you, then you could potentially take legal action against the firm.

Your rights and what has changed

As regular lovemoney.com readers will know, despite the huge amounts of money involved in a property purchase, the sector isn’t heavily regulated and any cowboy can set himself up and call himself an estate agent.

You can complain about an estate agents’ behaviour to the Property Ombudsman, but only if the estate agent has signed up to the TPO Code of Practice for Residential Sales. Since 2008, all estate agents have been required to sign up to some form of redress scheme, however, and in 2010 the Office of Fair Trading decided that further regulation was unnecessary.

Yet these Estate Agency redress schemes are designed merely to protect the client of the estate agent – i.e. the seller of the property. There is little to protect any potential buyer, as the estate agent is expected to work in the interests of the seller alone.

When it comes to marketing, the TPO Code of Practice, for example, states only that: “The estate agent must describe the property as accurately as possible and not misrepresent the details.”

In the case of the mineshaft property, then, the potential purchaser might have found it difficult to seek redress under the TPO scheme. The estate agent didn’t misrepresent the details of the property – but it did make a misleading omission, and that is where the 2008 Consumer Protection from Unfair Trading Regulations Act comes in.

Why this case was successful

One of the key reasons this Act was brought into force was to protect consumers from misleading omissions by traders. This Act made it illegal for any trader - including an estate agent - to deliberately withhold important information that you need in order to make an informed decision about your purchase.

As a test case for other property buyers seeking justice under the Act, this particular example of a misleading omission was very clear cut.

There can be no doubt that the information about the mine shaft was significant and would have a major impact on any potential buyer’s decision about whether or not to go ahead with the purchase. This is because the presence of a mine shaft underneath a property typically means it would be more likely to suffer from problems like subsidence, transmission of gas into the property, water emissions and even carbon monoxide poisoning due to the spontaneous combustion of coal!

As a result, mortgage lenders are very reluctant to lend on the property and it is difficult to sell.

The other key aspect about this case was the fact that previous potential buyers had withdrawn from purchasing the property when they discovered the mineshaft.

This made it much easier to prove that the estate agents must have been aware of the presence of the mineshaft for some time. Yet the firm allowed a new potential buyer to go ahead and incur the costs of searches and a survey, without revealing this information.

How you can use this case

If you ever find yourself in a similar situation - where the survey reveals a significant problem that would obviously affect your decision to purchase a property - try to find out whether the estate agent knew about it before you incurred any costs.

They may not admit it, but if there is good reason to suspect the agent deliberately omitted to tell you all the facts (for example, if previous offers from other buyers were repeatedly withdrawn after the survey stage), then you should seek compensation. Contact your local Trading Standards officer and ask them to look into it.

My view

I very much doubt Beresford Adams is the only estate agent to behave in this way. In fact, I imagine that in some estate agents around the UK, this sharp practice goes on, perhaps indefinitely, until a buyer neglects to get a survey done and unknowingly agrees to buy a nightmare property.

If nothing else, this case should act as a warning to buyers to be on their guard. Whether it will actually force estate agents to stop deliberately misleading us remains to be seen. It is, after all, usually going to be difficult to prove an estate agent knew about a problem beforehand.

What do you think? Has anything like this ever happened to you? Do you think this case will make any difference? Let us know using the comments box below.

More on buying and selling property:

Genie: Own a home without a mortgage or deposit

Dealing with estate agents

What's your property worth?

How to beat Stamp Duty

What to do when a home survey goes wrong