The Office of Fair Trading has released a new Code of Conduct applicable to all estate agents in Gibraltar. We welcome this new code as it demands a greater level of professionalism and duty of care from the estate agency industry.
There are some significant enhancements to the current code which was published in 2015. The section on commissions has been significantly enhanced to prevent so called “second agents” trying to hijack a transaction and leaving the vendor potentially facing a liability to pay two agents a fee for selling their property once. We believe that the days of every estate agent being instructed “just because” are over. Vendors and landlords will be less at risk of a dual fee liability by choosing one preferred agent and allowing that preferred agent to deal with other agents. It is something we have encouraged for quite some time now.
A new advertising rule should change the way estate agents publish statements which quite simply cannot be corroborated. For example, if an agent states that they have the largest selection of properties, but this statement is not true, that agent has broken the code of conduct.
Virtually at the same time as this new code was issued, new Anti-Money Laundering guidelines for estate agents were published. The Code of Conduct now makes specific reference to estate agents’ obligations to undertaking anti-money laundering checks on all landlords, tenants, vendors and purchasers. From a resource point of view, these AML guidelines are a game-changer in our industry.
The process that an estate agency must undertake at the end of a tenancy has now been set out in writing. This is good news for tenants and landlords who have often been left at the mercy of their estate agent’s own processes which in some cases fall short of a process considered standard in, say, the UK.
The main new features of the new code are set out below.
Each estate agent must give their client (usually a vendor or landlord) a copy of the code before entering into a binding contract.
Terms of Business
Written terms of business including the basis of fees and commission, and how the contract may be terminated, must be signed by the client.
A request from a client to rent government co-ownership properties to third parties (in contravention of the title deeds) cannot be accepted by an estate agent.
If an estate agent takes on a property already marketed by another agent, the second agent must explain the potential of a dual fee liability to the vendor by the appointment of the second agent. The code encourages agents to communicate with each other to prevent a dual fee arising. And if there is a dispute, then if funds are held by an estate agent in respect of the fee, such sum should be held in escrow until the fee dispute has been resolved. If the fee dispute cannot be resolved amicably, the code encourages the use of mediation.
Interestingly, a new code of conduct has just been published in the UK which takes a slightly different approach to commission disputes. The Property Ombudsman (“TPO”) has taken on board feedback from UK agents who consider that sharing a fee allows the second agent to ‘take a punt’ and, instead of referring a sale back, continue with the sale in the hope of receiving at least part of the fee. TPO’s view is that in dual fee cases the agent who effectively introduced the buyer should be the agent who is entitled to the fee. An effective introduction must evidence that the agent carried out an act that initiated the buyer’s reaction to the property and that is nearly always a viewing. A viewing more than six months prior to dis-instruction without evidence of continuity of interest will not be deemed an effective introduction by the first agent to any subsequent sale post dis-instruction. To establish an effective introduction, there must be a viewing of the property. It will be interesting to see if this rule will find its way into Gibraltar in due course given its simplicity and objectivity.
Before accepting client money, the client must have the basis upon which the estate agent holds his / her money in writing, and it must always be subject to contract (unless agreed otherwise).
Where a tenanted property is sold to a new landlord whilst tenanted, the existing tenant must consent to his / her tenant deposit being transferred to a third party ie the new landlord.
An estate agent must be able to objectively substantiate the statements it makes in its advertising.
Access to properties
Tenants must be offered the opportunity to attend the final check-out at the end of their tenancy, ie when the state of the apartment is assessed by the estate agent in advance of the release of the tenant deposit.
The final check-out report by the agent must reference back to the opening inventory or schedule of condition.
End of tenancies
Estate agents must give the tenant written guidance as to the end of tenancy check-out process, specifically in respect of areas where deductions could be made from the tenant deposit.
Undisputed parts of the tenant deposit must be refunded within 10 working days of the end of tenancy date by the estate agent.
We want the industry in Gibraltar to lead the way in professionalism and customer service, so we can be seen from a local and an international perspective as a safe place in which to invest in and rent property. To help achieve this, we urge all estate agents to embrace these standards and encourage the regulator, the OFT, to stamp out bad practice, as without their enforcement of the code, there will not be improvements across the board.
Contributed by Mike Nicholls
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