Lawyers could have field day over agents' duties to disclose property information

Lawyers could have field day over agents' duties to disclose property information

A lawyers’ field day looks to be on the horizon after experts disagreed on what needs to be disclosed in property marketing under a legal regime which now dispenses with the Property Misdescriptions Act.

According to the NAEA, difficult and sensitive issues about a property that relate to previous owners should be flagged up, not just before a transaction but before any viewings.

These would include murders or suicides.

Industry leaders say that the Consumer Protection from Unfair Trading Regulations 2008 – not new, but which have now entirely replaced the PMA – could prove far more challenging than many agents think.

Housing minister Mark Prisk also takes the view that personal information must be disclosed.  

This includes any information about previous occupiers which might affect a consumer’s decisions as to whether to view, rent or buy.

However, a leading property lawyer – David Smith, of Anthony Gold – said he disagreed with this interpretation.

Another property expert, David d’Orton Gibson, said the difficulty with disclosure was that so much is highly subjective and would boil down to an agent’s personal judgement.

Mark Hayward, managing director of the NAEA, insisted that agents must make disclosures before viewings which could include any recent suicide or unexplained death at the property, whether a paedophile has lived there or if there are likely to be two property chains involved as a result of the vendors divorcing.

Hayward said that disclosures required under the CPRs extend to far more than saying whether the property is close to a railway line or wind farm.

He also warned agents that the CPRs carry criminal penalties, including unlimited fines and jail sentences.

A further hazard for agents, said Hayward, is that whereas the PMA – which became defunct last week – made agents responsible for property descriptions, the CPRs make sellers and agents jointly responsible.

In addition, the CPRs also apply to rental properties, giving letting agents and landlords joint legal responsibility for the accuracy of property descriptions, including the duty to disclose.

Hayward said: “Under PMA, agents had to be honest about their descriptions, but caveat emptor applied. The big difference is that caveat emptor has now been replaced by making the agent responsible for making prospective buyers aware of anything that might make them not even want to view the property.

“For example, not everyone would want to view a property where someone had taken their own life.

“Agents would have to disclose whether there was a school nearby, even if the address was in School Lane, and would be expected to find out if a public footpath by the side of the property was used by noisy customers of a nearby pub.

“The duty of disclosure must be taken seriously: the CPRs will be closely policed by Trading Standards and there are significant penalties for agents who get it wrong.”

He said that while it might not always be appropriate to flag up problems in a property advert, prospective viewers should always be alerted to these – for example, by a note telling them to contact the agent before viewing the property, even if just externally.

Property ombudsman Christopher Hamer said he agreed with Hayward’s interpretation.

He said that some sensitive points might not be flagged up in advertising for reasons of sensitivity, but should nevertheless be disclosed “at the earlier practical opportunity”.

Hamer said: “For example, if someone spots a property on a portal and phones the agent to say they will be travelling a long distance to view it, then the agent at that point should disclose proximity to a graveyard, murder, etc. And record that they have done that.”

Hamer produced guidelines for estate agents earlier this year and is in the process of preparing advice for letting agents. However, his guidelines for estate agents differ slightly from Hayward’s interpretation as to when to disclose an event such as a suicide – Hamer’s advice says this could be done at a viewing.

David Smith, who specialises in property law at Anthony Gold, said he disagreed that information about previous occupiers needs to be disclosed to prospective buyers and tenants.

He said that this was “certainly not” how he would interpret the regulations and that previous occupiers were irrelevant. Guidance from the OFT said nothing about this, he said.

However, Smith cautioned: “I do agree that proximity to motorways is relevant and it would also be incorrect to make a generic statement such as it being a quiet area without proper investigation.

“I would also agree that some of this needs to be done on primary advertising as the offence is committed if a transactional decision is made.”

David d’Orton-Gibson, of Training for Professionals, said: “The key test for disclosure is you should disclose any information that might cause a consumer to make a different purchasing decision. It is Mark Prisk’s interpretation that this means telling of a previous paedophile, etc.

“This is really difficult as actually it is very much a judgement. For example, if you are told the house is haunted, do you declare this? Do you, or the potential viewer, even believe in ghosts!

“What will influence purchasers will be very different. One may like the park at the rear, another may not like it and consider it a security hazard.”

D’Orton-Gibson also said that under the regulations, agents who are members of a body such as ARLA must obey the organisation’s own rules.

He said: “The logic is, if someone uses you because you are an ARLA member, they should be getting that benefit and you comment a criminal offence in not providing that benefit.”

Under the new regime, agents may also have to give reasons for any previous abortive sale such as a bad survey or a down-valuation. However, the only case so far to have made the courts under CPR was thrown out on appeal, and so there has been no proper test on these points – yet.

Here’s how we reported it.