An estate agent’s novel way of coping with the property slowdown cost him rather more than he expected. David Pawan considers the impact that the newly in force CPUT regulations would have had on the penalty received by the estate agent.
Who: Trading Standards
When: 12 May 2008
Where: United Kingdom
Law stated as at: 23 May 2008
What happened:
The deception
An Ipwich estate agent put up "sold" signs on carefully chosen empty properties which had never been for sale, and had nothing to do with him.
The estate agent, Mark Halls, pretended that his firm had sold properties to increase customer confidence and stimulate business by giving the impression that his firm was the one to watch. The deception gave an unexpected strength to some of the entries in the "what customers say" section of the website of his firm, Seatons. One comment stated, "We couldn't believe the variety of properties you had available", and another described the number of viewings as "astonishing".
The agent, who had dealt with houses in the Ipswich area for 28 years, chose a selection of properties for his scam in streets where the market had particularly slowed. Amid the usual crop of optimistic "for sale" boards, his "sold" signs for Seatons Estate Agency, of which Mr Halls was the managing director, stood out.
Complaint
A neighbour of one of the houses advertised knew that the property was not for sale. She therefore contacted Suffolk county council's trading standards department, which investigated and found that the scam had run for more than a year, and that misleading "sold" signs had been placed on another four properties.
Breaches of the Trade Descriptions Act 1968
Mr Halls, managing director of Seaton's Estate Agency, admitted five breaches of the Trade Descriptions Act. A spokeswoman for the trading standards department announced that Mr Halls had been guilty of "flyboarding" at these properties between October 2006 and May 2007, and was fined £7,500 by magistrates for the deception.
Mr Halls claimed that these misleading signs were put up in the hope that it would stimulate business.
Why this matters:
Relevant legislation
The work of estate agents is primarily governed by the Estate Agents Act 1979 (the "1979 Act"), the Property Misdescriptions Act 1991, and Part 5 of the Housing Act 2004. This legislation is enforced by the OFT and trading standards officers in Great Britain.
Additionally the Consumers, Estate Agents and Redress Act 2007 (the "Act") contains provisions relevant to the regulation of estate agents. In summary, the Act seeks to strengthen the regulation of estate agents by:
a) Requiring estate agents to belong to a redress scheme for the purposes of all complaints relating to estate agency work carried out in relation to residential property;
b) Requiring estate agents to make and keep records, including records of offer letters, for a period of six years;
c) Giving the OFT and trading standards officers additional powers to require access to premises and to demand on-site production of records when they have reasonable grounds to suspect that an agent has not complied with the 1979 Act; and
d) Expanding the circumstances in which the OFT can consider the fitness of an estate agent to practise, and consequently to take regulatory action against estate agents under the 1979 Act.
The impact of the Consumer Protection from Unfair Trading Regulations
On 26 May 2008 the Consumer Protection from Unfair Trading Regulations 2008 ("CPRs") came into force andreplaced the Trade Descriptions Act 1968. The CPRs would still apply to the phantom "sold" signs put up by Mr Halls.
The CPRs prohibit unfair commercial practices (including advertising and marketing) by a trader in connection with the promotion, sale or supply of a product (defined to include the provision of a service) to consumers. For the purposes of the CPRs, the definition of "trader" would capture Mr Halls in his capacity as an estate agent as it includes any person who, in relation to a commercial practice, is acting for purposes relating to his business, as well as anyone acting on behalf of the trader.
A commercial practice is said to be unfair if, among other things, it contravenes the requirements of professional diligence. Professional diligence is defined under the CPRs as the standard of care and skill which a trader may reasonably be expected to exercise towards consumers in accordance with honest market practice or the general principle of good faith in the trader's field of activity. Mr Halls' activities would undoubtedly contravene the requirements of professional diligence on this basis.
A commercial practice is also said to be unfair if it is a misleading action. Under the CPR there is a misleading action if the nature or main characteristics (including the results to be expected or the benefits) of the product or service are false and therefore untruthful, or if the commercial practice deceives or is likely to deceive the average consumer in relation to any of these matters. Again, clearly Mr Halls' practices would constitute a misleading action under the CPRs.
Therefore, had the CPRs been in force, Mr Halls is likely to have been guilty of the offence of knowingly or recklessly engaging in a commercial practice which contravenes the requirements of professional diligence, as well as the offence of engaging in a commercial practice which is a misleading action.
The penalty for commission of an offence under the CPRs could be a fine and/or imprisonment for up to 2 years, and both the corporate entity and any officer can be liable for prosecution. For these purposes an officer could include a director or manager. Therefore it seems that under the new CPRs, Mr Halls could well have faced a much more severe penalty than the £7,500 fine he received.
