The Property Ombudsman and Trading Standards are teaming up to assess the use of referral fees among estate agents amid warnings that the Government is coming close to an outright ban on what it sees as ‘backhanders’.
Ombudsman Katrine Sporle yesterday revealed that TPO and Trading Standards are working on a survey that would ask how agents approach referral fees.
It comes after the Government said in April it would look at banning referral fees as part of plans to professionalise the agency sector.
The results will be fed back to a Department for Housing, Communities and Local Government working group on reforming the buying and selling process in the property market.
She told agents at yesterday’s TPO conference: “My understanding is the jury is out and the Government may want to ban referral fees unless you can show better transparency. There is also a move towards looking at reservation fees.
“We are concerned about transparency issues. Trading Standards will be putting a survey together to ask you about how you currently approach referral fees.
“These are open questions which are about finding evidence; we are not asking you to incriminate yourselves.
“The Government wants to see transparency and enforcement, and they are serious.”
She said TPO was also keen on speeding up the complaints process and was looking to set up a working group to discuss creating a single portal where all consumers could issue and manage complaints.
Sporle also revealed that the TPO is establishing a consumer forum to be led by TPO council member Mark McLaren and an industry version headed by agency veteran Michael Stoop, also a council member. Both forums will monitor issues and themes in the industry.
Comments (7)
As most real solicitors do probate work……..
Humph, once again people are upset with us making money!
I think that a small referral fee for making the customer aware of a business is fine. And lets not forget, if we refer a buyer/seller to a solicitor that we know to be slow, rude, useless and hard to contact is shooting ourselves in the foot both long and short term. I used to have two or three solicitors who we referred to, each gave us a slightly different fee, I think it was about £25-£30 for each ‘connected’ transaction (sale and related purchase for example) so I would refer the customer to all three, they would get in touch and make their decision on if they wanted to use one of them, or someone else. If they chose one of them, we got paid. I didn’t but the company did.
But in a corporate I had to push people to use the conveyancing company and we got paid £200+ for it, and the negotiator got a cut.
Most people would assume I preferred the corporate option. I didn’t. Yes, I received a small payment but the service was so awful I hated people taking it! At least with the 2-3 local ones, their ‘fee’ went in to the pot which determined if we hit target and I got paid any commission, and their service was good, so there was more chance of the sale completing in a reasonable time…
I must admit that I do feel inclined to agree with a “complete” ban on all referral fees for out side work such as conveyancing, utilities etc but believe it should be fair for agents to refer business for selling or letting between themselves.
The worst culprit seems to be the conveyancing side with agents taking up to 40% of the fee, clients expecting a £1,000 service and getting a £350 service.
I agree with RealAgent with [naturally!] a couple of caveats.
Introductory fees must be proportionate – if a service is being provided whereby the introduction fee is higher than the fee charged for the service being provided then something is morally wrong there and this should be stopped.
The other fundamental problem is where agents can fall foul of the Bribery Act, where the introductory fee acts as an inducement to recommend a service that they know is below standard. We have first hand experience of this, and this is where the Ombudsman should focus their efforts.
Introductory fees in themselves are not wrong but where they drive behaviour that is detrimental to the consumer, this should be addressed.
Thank you Peter for “sort of” agreeing but I often hear comments about the bribery act being related to quality. It is nothing to do with that. With respect I am sure your organization offers a high level of service, but the quality of your service is still “subjective”.
My point was a referral for payment is fine, a referal fee earned when a client is told they have no choice is not. But that is the ONLY distinction that should be made in my opinion.
As agents we are not in a position to award business to anyone, we can make a suggestion and an introduction, but that is it. As I have said provided that is the case then frankly the TPO should leave this well alone.
I’m sorry Katerine but have you seriously got nothing better to do? Referral payments are part of a capitalist culture; the garage that sold me my car no doubt made money from the finance, they made money from the alloy insurance and the minor damage insurance.
How are customers being ripped off? Because they could get it cheaper? Think again, many firms give a referral fee out of their earnings, a free market ensures they stay competitive. These firms have made a commercial decision to offer a referral fee back to an agent to increase volume. Why should you feel you need to be involved in that decision?
Saying “thank you” has been going on since time began all that’s happened is that the Chinese meal at the end of a month has evolved. But certainly if you are intent to drag us back to that please let me know where on my letters to clients you’d like me to add that for this referral, I received 2 spring rolls, Crispy Duck and Sizzling Lamb with spring onion.
TPO are part of the problem, if them trading standards, NAEA, ARLA, ASA etc regulated out industry and the other things that we do properly there would be no need for further measures. I dont care about referral fees either way, but some well known companies really do, so perhaps a referral fee ban would be beneficial to most of us.
One thing i would say however, if unless properly monitored any fee ban is meaningless as certain companies will just find a way round it, maybe they would be paid a yearly retainer perhaps.
Transparency is a very fashionable word used by those who offer none to criticise those who have always been so.