There are significant gaps in transparency of professional fees in the UK property industry and consistent and comprehensive regulation of the real estate sector is needed, it is claimed.
A Royal Institution of Chartered Surveyors working group has found numerous examples of unwelcome practice and inconsistencies in the level of transparency provided for professional fees charged. This leaves consumers unaware of what they are paying for when purchasing services, it says.
RICS is calling on the government to review and improve regulation in the sector after its research found that consumers want a breakdown of professional fee including any commission earned, clearer and more accurate information, and the relevant information they need to enable them to make an informed choice.
‘Whilst we have been working on this consultation we have witnessed a change in the banking world. The focus is now on sensible lending, transparency and proper management of risk. This consultation has highlighted both good and bad practice in how the property market operates. However the current market solutions are piecemeal at best,’ said Max Crofts, RICS President and Chairman of the Transparency Working Group.
‘We have a great opportunity to take the initiative and work with others to build upon the good practice that already exists. We need to put a stop to the unwelcome practices and enhance regulation and its coverage across the sector in order to improve standards and raise consumer protection. The industry will do what it can, but to obtain consistency in transparency of fees and commissions across the entire industry action and legislation is needed from government,’ he added.
The key recommendations are that landlords, letting agents and managing agents should be subject to appropriate regulation in order to achieve consumer protection, efficient markets and consistency across the sector.
Regulation of the industry should involve an independent body, for example, the Property Standards Board (PSB), and that body should approve and hold the agreed code(s) of practice that the industry follows. The Government should legislate to provide the PSB with the authority and backing to ensure that all landlords, letting agents and managing agents comply with appropriate regulatory requirements, RICS says, and the government needs to undertake a review of existing legislation in the residential sector.
RICS believes it can work with the relevant authorities to ensure that there is greater transparency and clarity in the description of mortgage and valuation fees for mortgage applicants.
And it adds that the industry needs to put greater emphasis on making sure clients, especially consumer clients, are made aware of the relevant remuneration, commission and any other payments paid on the purchase of insurance. Regulators should also impose requirements to improve transparency in relation to insurance.
