National Trading Standards: Hidden referral fees should be disclosed

Individuals must be informed about third party referral fees when buying or selling property, according to the National Trading Standards.

The proposed changes follow a review into the practice of referral fees and their impact on buyers and sellers in the UK property market, which was carried out by National Trading Standards at the request of the Ministry for Housing, Communities and Local Government (MHCLG).

Estate agents who continue to conceal hidden referral fees under the proposed changes could be banned from the industry.

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Within the review, the National Trading Standards noted that the practice of referring customers to a preferred service provider in exchange for a fee is regularly concealed.

As part of the proposed changes, the National Trading Standards recommends that customers should be advised to shop around to find a third party provider which offers the best value and service.

Further recommendations include proposals for the government to make transparency of referral fees mandatory and require a warning to be given to customers that they should consider shopping around.

In addition, a public awareness programme to warn consumers about hidden referral fees, as well as further industry guidance, and work with the professional bodies and redress schemes to encourage compliance in the property sector.

James Munro, senior manager of National Trading Standards, said: “We recognise that referral fees have a place in business if used ethically and transparently and with no pressure to use the referred service.

“It is important that customers are fully aware of the basis and value of a referral or recommendation so they are able to take an informed transactional decision.

“Mandatory disclosure of referral fees would ensure there is full transparency around this practice, helping to build consumer confidence in the estate agency industry and demonstrating the duty of care agents should have to both parties in a property sale.”

Minister for Housing Christopher Pincher added: “This government is committed to making it easier, cheaper and clearer for people to own their own home, including by making the buying and selling process more transparent.

“It is unacceptable that unscrupulous practices are still taking place where consumers are not being made aware of referral fees when buying or selling a property.

“I welcome the National Trading Standards’ work to raise consumer awareness of referral fees and will carefully consider the recommendations of their report. I have asked National Trading Standards to continue to monitor the situation to help inform if further steps need to be taken.”

Mark Hayward, chief executive of NAEA Propertymark, said: “New legislation which will require agents to display referral fees is a step forward, providing clarity to agents that they must not fall foul of the law, but importantly ensuring greater transparency for consumers to avoid any confusion about what agents are charging for.

“This is something we have been working closely with government and the National Trading Standards on, and given that agents were facing a complete ban of referral fees, we would strongly advise that anyone who is not currently displaying their fees should start now, regardless of when the new laws will come into force. ”