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Mark Hayward: Duties of disclosure

RLA
Written by RLA

Rules over how residential property is marketed affect landlords. It is important to be accurate and not leave anything out: you could be jointly liable with the agent. The duties of disclosure must be taken seriously: The CPR will be closely policed by Trading Standards – Mark Hayward, managing director of National Association of Estate Agents (NAEA)

“Rules over how residential property is marketed affect landlords. It is important to be accurate and not leave anything out, you could be jointly liable with the agent. The duties of disclosure must be taken seriously, the CPR will be closely policed by Trading Standards,” so says Mark Hayward, managing director of National Association of Estate Agents (NAEA)…

On October 1, something happened which will undoubtedly have passed most landlords by. It was the repeal of a law – the Property Misdescriptions Act.

This Act had prevented estate agents from misrepresenting a property when they marketed it for sale. For example, if an agent said that a house had double-glazed uPVC windows when in fact only half of the windows did, or that the garden stood in one-third of an acre when the plot extended to only one quarter, then the agent had breached the law.

The Property Misdescriptions Act was very specific. First, it applied only to sales agents, and not to letting agents. Second, although it tacitly assumed agents would not tell porkies about properties, the emphasis was on getting actual descriptions correct: it was left to the purchasers to find out something that the agent would not have told them, for example proximity to a power line. It was very much about caveat emptor – buyer beware.

All change

Everything changed on October 1, when the Property Misdescriptions Act was repealed. Instead, the Consumer Protection from Unfair Trading Regulations 2008 (CPR) took centre stage.

As the title suggest, these are not new. However, because they had co-existed with the Property Misdescriptions Act, few agents – or their vendors or landlords – took much notice of them.

Now, however, because CPR provide the main legal environment for the marketing of all residential property, they have become ultra important for landlords. Let us start with a health warning – Trading Standards will be conscientious about policing this legal environment, and the criminal penalties include prison as well as fines.

The main change is that instead of buyer or tenant beware, the onus is on sellers and landlords to make their customers aware.

Landlords’ liability

Unlike the old Property Misdescriptions Act, CPR apply equally to letting agents as to sales agents, and so rental properties must be accurately and fully described when marketed.

Responsibility to do this does not just fall to the agent: the vendor, in the case of a house sale, or landlord in the case of a let, is jointly liable.

It is important to note that whereas agents are fond of describing only a property’s good points, with CPR the description must be “warts and all”.

Under CPR, property details must not only describe the obvious – for example, measurements of rooms and number of bathrooms – but other aspects that could inform a prospective tenants or buyer.

With CPR, what is left out of property marketing information could be as important as what is put in: if something is omitted that could affect a ‘transaction’, then a breach of CPR could have occurred.

So, if the description of your rental property omits to say that it suffers noise because it is on a main road or near a busy pub or school, then you could be in breach: that means not just the agent who has written up the property details, but you as well.

Need training? The RLA can help you

Be sure that you are aware of your rights and responsibilities, RLA training courses highlight the basics and specifics of being a compliant, professional, and reputable landlord.

Our bespoke property advertisement training course is brand new and up to code to give you the most accurate information possible. Click here for more details

What and when?

The real difficulties arise as to exactly what should be disclosed, and when.

So, for example, should you disclose that someone at the property has recently died in unexplained circumstances? Should you disclose that a previous viewer decided not to take the property because they had discovered that the neighbours were an unsavoury bunch?

Should you even disclose that the property’s last tenants decided not to pay their rent and had to be evicted?

If so, should you disclose this before any would-be tenants come to view? Or before they sign along the dotted line?

The various property experts are still debating such issues and unfortunately there is no case law to go on – yet.

The one case that got to court was when an estate agent allegedly omitted to say that an earlier sale had fallen through because the property (in Wales) was close to a mineshaft. The agent, an offshoot of Countrywide, won on appeal because local Trading Standards, which brought the prosecution, had not interviewed the branch manager.

The case ended up testing nothing, and did not go into the other ramifications.

However, a case is certain to happen sooner or later, and because we live in increasingly litigious times, agents, sellers and landlords are all warned to take this legal environment seriously.

The good news, of course, is that if you are a tenant who discovers that the property is haunted but that earlier reportings of ghosts were not disclosed by the landlord, then you could do rather well out of this legal landscape. This may be an extreme example but undoubtedly, there will be any number of ‘accident chasing’ lawyers on the scene!

In other words, a lawyers’ field day looks to be in the offing.

What do the experts think?

Everyone is agreed that, for example, proximity to a motorway and subsequent exposure to noise needs disclosing. Less obvious examples prove more divisive.

Lettings expert David d’Orton-Gibson says it is highly subjective and would boil down to personal judgement. For example, some tenants might like the idea of a playing field behind the property; others might regard it as security threat. Would and should this be disclosed?

According to the National Association of Estate Agents (NAEA), difficult and sensitive issues about a property that relate to previous occupants should be flagged up, not just before a transaction but before viewings.

These would include murders, suicides or whether a previous tenant had been a paedophile. Previous housing minister Mark Prisk also took the view that personal information must be disclosed, and so it is probably safe to assume that Kris Hopkins, his successor, believes the same.

Importantly, the NAEA’s broad view is that disclosures must be made of any information about previous occupiers which might affect a consumer’s decisions as to whether to view, rent or buy.

Mark Hayward, managing director of the NAEA, says that disclosures required under the CPR extend to far more than saying whether the property is close to a railway line or a public footpath used as a short cut to a pub.

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

“The duty of disclosure must be taken seriously: the CPR will be closely policed by Trading Standards and there are significant penalties.”

He says that while it might not always be appropriate to flag up certain 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.

Property ombudsman Christopher Hamer agrees. He says some sensitive points might not be flagged up in advertising for reasons of sensitivity, but should nevertheless be disclosed “at the earliest practical opportunity”.

David d’Orton-Gibson says: “The key test for disclosure is you should disclose any information that might cause a consumer to make a different purchasing decision.

“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!”

Safety’s sake

For landlords who use agents to find their tenants, the thought of being joined in action by a litigious tenant – or even someone who feels they were misled into viewing a property – is an unpleasant one.

It underlines the absolute necessity of using an agent who has the correct insurances – a professional indemnity product that will cover them against legal action under CPR.

The CPR regime also underlines the need for the agent to visit the property and ask questions about it, and for landlords to ensure that they see and sign off all the marketing material, and are satisfied that adverts and property details are accurate in what they do say and not potentially misleading in what they leave out.

And if you don’t use an agent?

If you find all your own tenants and do not use an agent, the CPR could still make you culpable.

The OFT is currently consulting on its Guidance for Lettings Professionals – a document which advises on compliance with relevant consumer protection law, including CPR.

The guidance also focuses on three other pieces of legislation: The Business Protection from Misleading Marketing Regulations 2008 (BPRs); The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs); and the Supply of Goods and Services Act 1982 (SGSA).

The guidance is currently in draft, but says: “We consider a ‘lettings professional’ to be anyone who, as part of their business, supplies services related to the letting of privately owned residential property. This guidance is therefore relevant to letting agents and to landlords, whether or not they use the services of a lettings agent.”

However, it also confuses the issue by saying that the guidance applies to ‘professional’ landlords.

Later on still, it says (and repeats): “The OFT considers it sensible for all landlords to comply with the requirements of consumer protection in their dealings with tenants of residential property.”

Clearly, some more clarity would be helpful.

It is a long document at 110 pages, and very repetitive. It can be downloaded from the OFT website.

Landlords are also consumers!

The OFT draft guidance also makes clear that it is not just tenants who are consumers, but landlords too when they are customers of agents’ services.

One area where landlords might feel aggrieved is if they use an agent who is a member of a particular body.

Under CPR, any agent who belongs to, for example, the Association of Residential Letting Agents, must obey ARLA’s own code. If not, they are in breach of CPR.

The guidance also stipulates that landlords should know in advance what a letting agent’s fees to them will be, and also tell the landlord what the agent will be charging tenants.

Advertising properties with fees

As of November 1, all letting agents must comply with an Advertising Standards Authority requirement to show fees charged to tenants: in other words, it is not enough to show rent only, but also show charges for services such as check-ins and referencing.

As a landlord, if you do not use an agent but find your own tenants, be aware that this does apply to you if you charge move-in fees.

Mark Hayward, is the managing director of National Association of Estate Agents (NAEA). For more information please visit www.naea.co.uk.

Need training? The RLA can help you

Be sure that you are aware of your rights and responsibilities, RLA training courses highlight the basics and specifics of being a compliant, professional, and reputable landlord.

Our bespoke property advertisement training course is brand new and up to code to give you the most accurate information possible. Click here for more details.

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RLA

RLA

The Residential Landlords Association (RLA) represents the interests of landlords in the private rented sector (PRS) across England and Wales. With over 23,000 subscribing members, and an additional 16,000 registered guests who engage regularly with the association, we are the leading voice of private landlords. Combined, they manage almost half a million properties.

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  • As I understand it one of the main drivers behind this change is that the misrepresentation legislation was drafted in a pre internet age .

    Letting property portals such as gumtree and private landlord directory landlords can list property effectively acting as their own agent because as said in the article the legislation has always been different to selling property.

    If however you want to be a DIY seller then the legislation had to be applied by the numerous online estate agents making selling your house online much mor difficult .
    Online sales have been on the margins for years precisely because of this problem however have begun to increase markedly as people realise they can save thousands of pounds .

    As with everything one set f legislation often conflicts with another and as said above needs testing but I think you will see a massive shift over the next ten years toward online sales as we already are with online lettings .

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