Marketing properties for your tenants

Are you compliant?

For many RPs, involvement in the share re-sale process, in particular the marketing of the property and selecting potential new buyers is a given. However, RPs must be careful that their involvement in these activities does not expose RPs to greater risk and land them in hot water. Although they might not consider themselves as such, there is a danger that they will be deemed to be acting as Estate Agents and if so, RPs must ensure that they comply with the regulations governing these.

Are we acting as an ‘Estate Agent’?

The term ‘Estate Agent’ is not defined but the definition of their work is set out in Section 1 of the Estate Agents Act 1991 (“the EAA”). Broadly speaking, the EAA defines those who conduct estate agency work as those people or entities who, in the course of business, effect introductions between a property owner and third parties wishing to acquire their interest.

The definition of property in the EAA applies to interests in land and, whilst not yet tested, is logically likely to include Shared Ownership interests.

So, if in the course of your business, you are introducing tenants to possible buyers of their share, and particularly if you are charging a commission or fee for this, you will be an Estate Agent and must comply with the statutory regulations.

If we are an ‘Estate Agent’, what must we be doing?

If you are caught under this definition, then below is a short summary of the most important requirements you must meet. Failure to do so can see you facing both criminal and civil sanctions:-

1. You must belong to an approved redress scheme – Since 1 October 2008, under section 23A of the EAA (amended and added to by statutory instrument in 2008) you must belong to a Government appointed complaints scheme – The Property Ombudsman Service or Property Redress Scheme.
2. As your “client”, you must provide your tenants with prescribed information at the outset of a matter – such information relates to fees, charges, key dates and terms of business. You will also have to comply with general Consumer Protection and Contracts requirements as set out in the steadily evolving body of statute for such matters.
3. You must register with HMRC for money laundering oversight – as of 31 July 2009, the Money Laundering Regulations 2007 have made it a criminal offence for any body which conducts Estate Agency services as defined under the EAA not to specifically register themselves with HMRC as such. Registration requires whole new internal compliance regimes to be put in place regarding due diligence and internal record keeping, if not functioning already.
4. You must comply with the Consumer Protection Regulations 2008 and Business Protection Regulations 2008 – the former put in place regulatory barriers preventing you from engaging in unfair commercial practices with tenants (as consumers) whilst the latter prevents misleading advertising, which is particularly pertinent to the marketing of properties.
5. You must also be mindful that such actions can attract tortious liability for misrepresentation and shall see you owe a duty of care to tenants on a professional negligence basis to handle sales with reasonable skill and care.

If you believe that your business may fall foul of the broad definition under the EAA and if compliance practices are not already in place, please contact us and we will be happy to help.