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Case Study: Clients will dictate what constitutes material information

21st October 2016

In a dispute brought to The Property Ombudsman the failure to provide accurate information about an explicit requirement outlined by the buyer resulted in the agent reimbursing the buyer.

In the case a buyer had explicitly discussed with the agent their desire to purchase a freehold property. Despite seeking assurances from the agent that the property in question was freehold, it was subsequently established to be a leasehold by the buyer’s solicitor.

The buyer pulled out of the transaction, seeking reimbursement for costs incurred to date, including the survey, search fees and storage.

In their defence, the agent claimed that it was not generally industry practice to obtain such information. Indeed in previous rulings The Property Ombudsman has indicated that investigations that require skills outside the remit of an estate agent would not constitute a failing.

In this case the area was well known for long leaseholds and the staff member dealing with the buyer had 25 years’ experience locally. The Property Ombudsman took the view that the buyer’s specific requirement for a freehold property constituted material information; taking into consideration the specific circumstances of the case it was felt that the agent should have either been aware, or made efforts to make themselves aware of the tenure given the importance the buyer placed on it.

The fact that the buyers withdrew from the transaction immediately after finding out satisfied The Property Ombudsman that had the agent provided more accurate information up front, a different transactional decision would have been made. The buyer was reimbursed £1,100 for the survey and searches, but storage costs were not included.

According to NFoPPs Assured Advice material information in relation to leasehold would include:

  • Number of years remaining on the lease
  • Annual Ground Rent charge and when it’s payable
  • Annual service charge and when it’s payable
  • Annual “Sinking Fund Reserve” and when payable (if applicable)
  • Details of any other event-related fees and charges under the lease that are triggered by certain circumstances or events.

By establishing better quality information up front, you can comply with your obligations under the CPRs, improve the quality of your viewings and reduce the number of fall throughs.

 

comp logoCompliance in a Box is the industry recognised compliance solution for Estate and Lettings Agents developed with industry stakeholders including the NAEA and adopted by Relocation Agent Network, Auction House UK, The Guild of Property Professionals and Fine & Country. The suite helps agents deal with the implications of the Consumer Protection and Money Laundering regulations, providing access to expert training, regular industry updates and our Compliance Hotline in addition to Compliance Packs. For more information contact Samantha Peacock (speacock@etsos.co.uk) on 01524 220013.

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