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Property marketing: don’t fall foul of the law

25 January 2019 • Mike Nuttall

Housing providers’ sales teams will no doubt be familiar with the key legal elements of the conveyancing process, but it’s also crucial to understand your obligations under the much wider legislative and regulatory framework you must work within, as sanctions for non-compliance can be serious, potentially leading to criminal prosecution.

The wider law affecting estate/lettings agency activity largely relates to trading standards and consumer protection, particularly in relation how you market and advertise properties, and also key new data protection and money laundering legislation that have been introduced since 2017.

Are you misleading potential buyers?

The old Property Misdiscriptions Act was repealed in 2013 and sales and lettings activity is now covered by the Consumer Protection from Unfair Trading Regulations (CPRs) and Business Protection from Misleading Marketing Regulations (BPRs). These regulations offer consumers more protection against misleading sales and advertising, and are also wider in scope, covering letting agents and property managers as well as estate agents.

In essence, these regulations prohibit misleading activity that may make a potential buyer make a transactional decision that they would not have taken otherwise. This not only covers giving outright false information, but also giving an overall presentation that could potentially deceive a buyer, even if the information is factually correct.

The CPRs cover not only what is said verbally, but also printed words, photos, plans, models and websites. Clearly, as the vendor you will want to advertise a property by presenting it in the best light, but you must ensure you stay within the confines of the regulations and don’t overstep the line into misleading activity.

What to watch out for

We strongly advise that your teams are fully familiar with their obligations under regulations, that staff are well-trained on compliance, and that you have good systems in place to gather, verify and sign-off property and sales information, but some of the key things to watch out for include:

  • Ensure your particulars are accurate and justifiable – you now need to back up descriptions such as ‘immaculate condition’, ‘stunning’ or ‘in a quiet area’ with evidence
  • Be clear about the location. Don’t stretch popular or desirable areas too far, and take care how you describe proximity to local services, transport routes etc
  • Be 100% clear about rights to/ownership of parking spaces, and describe this accurately.
    Make sure you avoid misleading photographs, or alter them to avoid problematic features. Don’t crop out the power station and then describe the ‘unspoilt views’!
  • Failing to give necessary information is also against the rules – don’t leave out or hide important information about the property if it could be viewed as negative.
  • Be mindful of your sales technique; for example, don’t exaggerate your sales record with similar properties in the area, be honest about how your property is priced relative to local market conditions/value, and avoid being aggressive or exerting undue pressure.
  • Have a system of re-checking and verifying particulars to ensure they remain accurate, particularly if a property takes a long time to sell. If, for example, a train operator withdraws a service you have referred to, you should modify your advertisements to reflect this.

Serious sanctions

Being caught out by these regulations can lead to criminal prosecution by Trading Standards, resulting in substantial fines or compensation payments, and in serious cases even imprisonment – not to mention the reputational damage too.

There is scope to defend any action if you can demonstrate that reasonable precautions were taken and that you exercised due diligence in the process of putting together your sales and marketing material. Therefore, keeping an audit trail of checks on information and dealings with customers is important.

Data Protection legislation

As handlers of significant amounts of customers’/potential customers’ data you need to be clear about your responsibilities and obligations in relation to data protection in terms of how you gather, use and store personal information to ensure compliance and avoid a data breach.

We won’t go into the finer details of GDPR here, and we expect the vast majority of RPs will have got their ‘house in order’ in preparation for its introduction in May 2018. However, we strongly advise keeping your practices and processes under regular review to ensure continued compliance.

Anti-Money Laundering legislation

Organisations providing estate agency services are subject to the new Money Laundering Regulations that were introduced in 2017. Given the large amounts of money changing hands the conveyancing sector is an area of law heavily targeted by fraudsters, and HMRC is proactively policing the sector.

The new regulations contain important changes and specific obligations for those providing estate agency services, and failure to adhere could result in criminal proceedings. Again, we won’t go into the full detail of the legislation, but RPs involved in selling properties need to satisfy themselves that they are compliant and meeting their obligations, including:

  • Assessing and managing money laundering risks to the business
  • Carrying out sufficient customer due diligence, particularly around proving source of funds
  • Ensure you have a system of identifying and reporting money laundering risks and suspicions
  • Store, maintain and back up records in accordance with the regulations
  • Ensure staff are trained, and therefore alert to money laundering risks

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