Code of Ethics:
To view the NAEA Rules of Conduct, click here
There are no compulsory minimum competency or other standards for Estate Agents in the UK and anyone can set up an office.
By choosing an NAEA member, however, you can be sure you are dealing with an experienced and professional agent. Membership of the Association is through formal qualification ensuring that NAEA member agents have the knowledge and experience to guide you through your property transaction as smoothly and painlessly as possible. Operating under strict rules of conduct, members must meet certain standards relating to professional and ethical practice. Under the rules, agents are required to protect and promote their client’s interests, while at all times acting in a fair and proper manner. If you are unfortunate enough to suffer at the hands of malpractice by an NAEA estate agent, the Association can take disciplinary action on your behalf. Look for the NAEA logo.
There has been considerable interest from foreign investors in acquiring residential and commercial property within the UK in recent years. Although this may have been temporarily affected by recent economic international events, the relative ease with which foreigners may acquire interest in property and, in the medium term the likely return on investment and capital growth is likely to continue to drive a market which over the years has proved strong.
Foreign nationals purchasing property in the UK should be aware that they would be liable for stamp duty on the purchase with current stamp duty thresholds based on the following:
£125,000 – £250,000 – 1%
£250,000 – £500,000 – 3%
£500,000 and above – 4%
Land Registration System
The current system of land registration was introduced in 1862. The Land Registry is responsible to the Lord Chancellor’s Department for the keeping of records of property ownership in England and Wales. In Scotland the Register of Sassines carries out the same function as the Land Registry.
Within both systems, records of title and dealings are kept and maintained including any charges against a particular title. Compulsory registration was introduced in 1990 for all conveyances of freehold title and leases over 21 years.
A local Land Charges Register is maintained by local authorities through which searches are currently obtained on behalf of the prospective buyer, which reveal any local infrastructure changes or public projects which may materially affect the interests of a prospective owner. Over the next 3-4 years most local authorities are expected to provide this information in electronic format which will overcome some of the delays that are currently associated with the obtaining of this information
Home Information Packs
Subject to a small number of exceptions, before any residential property, in England or Wales, is placed on the market, a Home Information Pack (HIP) has to be available. This pack can be produced by a seller, agent or one of a number of pack providers. It must contain a number of documents such as, index, a property information questionnaire, a sales statement,, extract of Land Registry Title, standard searches, copy of the lease (If applicable), An Energy Performance Certificate is also compulsory which has to be produced by an approved Energy Assessor. More information is available at:-http://www.direct.gov.uk/en/HomeAndCommunity/BuyingAndSellingYourHome/Homeinformationpacks/DG_171685 In Scotland only three documents are required in what is known as a Home Report. A single survey contains information about the condition and value of a home. A Property Questionnaire gives a summary of information and, as in England and Wales, an Energy Performance Certificate. More information is available at http://www.scotland.gov.uk/Topics/Built-Environment/Housing/BuyingSelling/Home-ReportOther industry professionals
Conveyancers, either licensed conveyancers or solicitors act for both the seller and purchaser in collating legal documentation and preparing draft contracts for signing. They are also responsible for transfer and formal registration of change of ownership on completion.
Chartered Surveyors provide reports on structure and condition of property along with valuations where commissioned by individual purchasers. Also act as valuers for mortgage lenders prior to the formal offer of mortgage being made.
Mortgage lenders. There are well over 100+ lenders either in the form of Banks or Building Societies, the latter operating on a mutual basis for the benefit of borrowers and investors.
An estate agent’s service in regards to the sale and letting of property would typically include the following activities:
- Appraisal and marketing advice.
- Guidance with the preparation of a Home Information Pack or Home Report (in Scotland)
- Preparation of sales details/brochure.
- Preparing and booking local or national advertising (agents normally charge extra for national advertising).
- Marketing of the property through the Internet, mail shots to registered applicants followed up by ring-rounds to selected applicants whose requirements most closely match the relevant property.
- Arranging viewings and accompanying where required.
- Providing viewing and marketing feedback to the seller.
- Negotiating sale, subject to contract.
- Confirming sale terms to conveyancers acting for both seller and buyer.
- Pro-active problem solving.
- Sale progressing.
- Rental appraisal and marketing advice.
- Advice on repairs and other action necessary before a letting is arranged.
- Arrange for safety checks on gas and electrical services where requested by landlord.
- Advice on the requirement to register any deposit taken.
- Other general advice in relation to informing mortgage lender and advice on insurance products.
- Conduct respective tenant viewings.
- Seek references as agreed with the landlord.
- Either prepare or arrange for a schedule of the condition of the property and its contents to be prepared for agreement between landlord and tenant.
- Provide or arrange for the drawing up of an appropriate tenancy agreement.
- Arrange for the transfer of service bills to the new tenant.
During the tenancy and where the agent is instructed to manage the property other services frequently provided would include the collection of rent, accounting to the landlord, retaining in a client account the tenant’s dilapidations deposit, arranging for regular visits to the property as agreed with the client and to supervise routine maintenance work where this may be required.
It should be noted that, whilst deposits legally have to be protected, rents collected on behalf of the landlord, are not statutorily controlled. Although it is a requirement of professional bodies such as the NAEA, ARLA, NALS and RICS for the proper holding of client’s money within their Rules of Conduct, this is a matter which should be clarified with the agent.
It is also not a statutory requirement for agents to maintain any form of Client Money Protection insurance to protect client monies from dishonesty or fraud on the part of the Agency.
Uncertainty over expected levels of service and current Professional Indemnity and Client Money Protection insurance cover were some of the foremost reasons why NAEA. ARLA. RICS and NALS insist on Client Money Protection. Always check that your agent belongs to one of these professional bodies.
Many firms of estate agents provide a range of additional services which may include the following:
- Professional services including formal valuation and structural survey work
- Financial services.
- Insurance products.
- Auction sales.
- Provision of Home Information Pack or Home Report in Scotland.
Where estate agents provide additional services to prospective buyers, there is a statutory requirement that these must be disclosed, in writing, to their seller client. It is required that not only should these be disclosed at the point of instruction but also at the point where a prospective buyer agrees to accept the offer of products or services from the estate agent e.g. the taking up of a mortgage offer provided by the Financial Services Department of the Agency.
With the growth of interest in residential property as an investment and the increased availability of ‘Buy to Let’ mortgages, many estate agents also provide services to landlords in both the securing of tenants and property management.
Property Marketing Systems
Method of Sale:
The most usual form of transaction is sale by private treaty, which refers to the agreement between willing seller and able buyer who agree a price subject to a formal written contract.
Increasingly in certain market conditions and in respect of certain types and style of property this method of sale is on the increase. Auctions are usually public and the property well promoted and advertised beforehand with the property being sold under the hammer to the highest bidder where the contract is immediately created.Informal Tender:
This method of sale is often used where there is equality of offer on the part of a number of potential buyers and with the agreement of the seller an agent invites each party to make a final offer, in writing, subject to contract and to be submitted by a certain time and date. Agents are advised that it is wise to ensure that offers are opened in the presence of either the seller or their legal representative to ensure fair play.Formal Tender:
Similar to the above except that the acceptance of an offer becomes binding on the buyer and seller.Property Advertising:
There exists within the United Kingdom a wide range of national, regional and local advertising publications ranging from newspapers to glossy weekly or monthly magazines in which properties for sale are featured. In addition, and where appropriate, agents may advise quality advertising in regional or national magazines or newspapers where the cost is normally passed on to a seller client. Many agency firms produce their own in-house property publications and in some areas agents have come together to produce specific magazines where costs are shared and distribution is directly through the agencies involved.Multi Listing:
Within the United Kingdom a national multi-listing scheme does not exist although there are networking groups such as TEAM Associates who now commit to a multi-listing type of approach. There are also a number of other franchised groupings including groups such as REMAX, Century 21, Countrywide Assured, Legal & General and Winkworths. In addition, many small independent firms have joined affinity groups which foster national referral business with fee sharing opportunities such as HomeLink which is run through the NAEA, and National Homes Network.Web Based Services:
The majority of agents in the United Kingdom have now developed their own websites and in many cases have also registered with a number of national property portals. NAEA/ARLA operate their own portal known as PropertyLive. http://www.propertylive.co.uk
Although many property portals currently provide free access, it is anticipated that more will move towards a registration fee approach and there is likely to be further rationalization amongst the portals to a lower number but offering a larger selection of properties currently on the market.Referral System
Within the United Kingdom there does not exist a National Referral mechanism and arrangements are often created informally between agents who may wish to pass information concerning a potential purchaser where they are moving from one area to another. In these circumstances any agreement concerning a share in fees is left to negotiation although in certain cases, particularly where the market is extremely buoyant, the receiving agent is unlikely to offer a very high percentage of commission. The situation may differ where in some circumstances an agent is able to refer a potential seller in which case the instruction may be offered on the basis of a commission split of between 1/3 and 1/2 of the selling agent’s normal commission arrangements.
Two significant referral networks exist, which are largely supported by small independent firms and these are HomeLink and National Homes Network. HomeLink is operated under the umbrella of the National Association of Estate Agents and membership is only open to firms with a principal, partner or director member of the Association. HomeLink members pass referrals in an agreed format and successful introductions are rewarded in line with a recommended percentage level according to whether it is an applicant or vendor referral or a rental or management referral. National Homes Network is also open to independent agents and they operate in a similar manner with referral fees agreed by the main Board.
Relationship of Buyer/Seller to Practitioner
This section will explain three key areas: the agent’s duty, agency relationship, and services.
Agent’s Duty to Principal:
Estate agents within the United Kingdom owe a fiduciary duty to their client based on trust and an overriding principle to act in good faith and the best interests of the principal. Confidentiality between client and agent is paramount and there is an implied duty that the agent will exercise all due care and diligence in carrying out the client’s instructions. The role of Buyer’s Agent has not developed to one that is commonplace within the UK market although this has grown over the years.Agency Relationship:
There are four types of agency contracts that can exist with sellers and these are: sole agency; sole selling rights; multiple agency; and sub agency. In respect of sole agency and sole selling rights, legislation dictates that these terms must be clearly explained within an agent’s terms of business by the use of statutory clauses. As has already been indicated, multi-listing is not common practice within the United Kingdom, which has led to two other types of agency arising, namely, multiple agency where more than one agent may be instructed by a seller or sub-agency where a sole or sole selling agent may, with the seller’s authority, invite selected agents to act in a sub-agency capacity. In those circumstances the relationship with regard to the payment of fees lies between the sub-agent and the head-agent. In the United Kingdom, estate agents do not generally become involved in the movement of funds connected with the purchase, this being normally part of the responsibility of the conveyancer acting for the seller and buyer. It is no longer common for agents to take a pre-contract holding deposit when a sale is agreed subject to contract and it is usual for the 10% deposit to be paid to the seller’s conveyancer on exchange of contracts. The transfer of funds on completion is handled between the buyer’s conveyancer and the conveyancer acting for the seller with the mortgage funds being synchronized through the buyer’s conveyancer.Remuneration
Average fees within the United Kingdom vary regionally but on the whole range between 1.5-2 percent for sole agency and 2.5-3 percent for multiple agency. All fees are subject to Value Added Tax (VAT) currently at 17.5 percent. Agency terms usually dictate that fees become due on exchange of contract but are payable on completion of the transaction. On average, in the United Kingdom, the period between offer and exchange of contracts is 8 weeks with a further 2-4 weeks normally allowed for completion. However, where there are a number of inter-related sales and purchases known as “chains” transaction times can take considerably longer.