Parliament deliberating a ban on sale by informal tender
The practice requires a seller to pay a small fee of no more than £300 while the prospective buyer is saddled with an agent’s fee, typically charged at 2%, meaning the fee is often larger than stamp duty.
Previously a proposed motion to outlaw the practice, led by Labour’s shadow minister for consumer affairs Stella Creasy, was dismissed after opposition from the government.
However today’s renewed motion to ban the practice came after Creasy resubmitted the “unfair contract” provision earlier last month and evidence suggests the government is non-opposed to the amendment.
Creasy says the practice is highly exploitative and that agents are cashing in on a “nice fat fee from both the buyer and the seller”.
She added that she would welcome a U-turn from government on the issue.
Currently major estate agents including Arun Estates, Haarts and YourMove are selling properties through informal tender arrangements. But they have come under fire from MPs and industry leaders including the National Association of Estate Agents and property ombudsman Chris Hamer.
While the practice is currently legitimate, the main point of criticism launched against estate agents is the lack of transparency when levying the fee.
The NAEA said: “In whatever instance a fee is levied our Code of Conduct is clear that all agents must be upfront and transparent about the fee being charged.
“Agents must highlight at the earliest opportunity any additional or unforeseen fees that may affect transactional decisions.”
And Chris Hamer, the property ombudsman, added: “Full disclosure of how the concept works and transparency need to be applied.
“This is an emerging commercial practice which needs to be fully transparent to all parties.”
Hamer also said that he was planning on a compromise with the relevant stakeholders to ensure that the current issues of transparency were resolved.
But if today’s amendment is passed it will mean a ban on the practice altogether.