Isle of Man Office of Fair Trading Proposed Estate Agents and Landlords Bill 2012 Initial Consultation Paper February 2012
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Isle of Man Office of Fair Trading
Proposed Estate Agents and Landlords Bill
2012
Initial Consultation Paper
February 20122
Contents
1. Introduction and Purpose
2. Background
3. Proposals
A. Persons Treated as Carrying on Business as Estate Agents
B. Persons Prohibited from Carrying on Business as Estate Agents
C. Compensation for Dishonesty
D. Property Misdescription
E. Other Issues
4. Consultation Process
Appendix 1 List of Direct Consultees
Appendix 2 Code of Practice on Consultation
Appendix 3 Existing Primary and Secondary Legislation
31. Introduction and Purpose
The Office of Fair Trading (OFT) and the Department of Social Care (DSC) are currently
progressing the Estate Agents and Landlords Bill 2012 (Bill). The purpose of this initial
consultation paper is to outline a number of significant issues and broad proposals
pertaining to the registration and regulation of estate agents and to gather information,
views and evidence from the public and other interested parties as part of the consultation
process.
The purpose of the Bill, which is included within the Council of Minister’s legislative
programme for 2012/13, is to make fresh provision for the registration and regulation of
estate agents and to provide for the registration and regulation of private landlords.
The registration and regulation of estate agents is currently provided for in the Estate
Agents Act 1975 (1975 Act) and the secondary legislation made under the 1975 Act. A list of
the existing primary and secondary legislation can be found at Appendix 3. There is
currently no legislation providing for the registration and regulation of private landlords.
This paper only focuses on significant issues pertaining to and broad proposals for the
registration and regulation of estate agents. Please see the DSC’s separate consultation
paper (www.gov.im/dsc), which focuses on proposals for the registration and regulation of
private landlords.
The questions in bold within the ‘Proposals’ section are intended to prompt debate and are
by no means exhaustive. Respondents may wish to quote the reference numbers of the
questions, i.e. A1, A2, etc., in their responses but there is no requirement for responses to
be so specific. The OFT will welcome both specific and wide-ranging responses. There is
also no requirement for responses to be limited to the content of this paper as long as they
address the main subject matter, i.e. the registration and regulation of estate agents.
The OFT will consult further and in more detail once the Bill has been drafted.
42. Background
Responsibility for the registration and regulation of estate agents was transferred from the
Department of Local Government and the Environment to the OFT on 1st April 2010
following the re-organisation of Government and a number of significant issues pertaining to
the registration and regulation of estate agents were inherited by the OFT as a
consequence.
The Bill should address the aforementioned issues by providing a legislative framework that
is modern, effective and proportionate.
Enforcing the requirements of the 1975 Act to the letter of the law would force some
established businesses to alter their structures and practices.
Whilst the existence of a level playing field for businesses and a level of stringency that
allows new and established businesses to compete in the market are obviously of
importance, it should not be forgotten that the Bill is primarily a consumer protection
measure for the purpose of ensuring that estate agency business is only conducted by
competent and accountable persons.
References to ‘person’ in the following section include any body of persons, corporate or
unincorporated.
53. Proposals
A. Persons Treated as Carrying on Business as Estate Agents
Under section 15 of the 1975 Act, a person shall be treated as carrying on business as
an estate agent if, but only if, he or a partnership of which he is a member-
(a) receives payment for acts done by way of practice as an estate agent by him
or by a partner of his, or by an employee of his or of all or any of his
partners; or
(b) holds himself or itself out as prepared, in return for payment, to undertake
the doing by any such person of acts by way of practice as an estate agent.
Practice as an estate agent shall be taken to be, and only to be, the doing, in connection
with the sale or proposed sale of land of any of the following acts, namely-
(a) bringing together, or taking steps to bring together, the vendor and a
prospective purchaser;
(b) negotiating as to the terms of the sale with the vendor or a prospective
purchaser;
(c) acting as an auctioneer.
There are exceptions:-
the OFT or a local authority in connection with the exercise of its
functions as such;
the proprietor of a shop or newspaper by way of the display of an
advertisement therein;
an advocate in the course of his practice as an advocate;
a member of a recognised body of accountants in connection with his
practice as an accountant;
a duly qualified architect in connection with his practice as an architect;
a coroner or lockman in the exercise of his functions as such;
any person in pursuance of an order of the High Court; and
a trustee in bankruptcy or a trustee under a deed of arrangement, or a
receiver or liquidator of a company, in the exercise of his functions as
such.
6'land' means land in the Island, but does not include-
(a) mines, quarries or minerals; or
(b) growing timber, timber-like trees or saleable underwood.
'sale of land' includes the grant of a tenancy at a rent and any other disposal for valuable
consideration of an estate, interest or right in or over land, whether subsisting before or
created by the disposal, and 'vendor' and 'purchaser' shall be construed accordingly.
Traditional estate agents and property letting agents are treated as persons carrying on
business as estate agents and as such should be complying with the requirements of the
1975 Act. There are, however, a number of businesses, many of which operate on the
internet, employing new marketing techniques that were not thought of when the 1975 Act
was drafted and it is by no means clear as to whether or not these businesses should also
be complying with the requirements of the existing provisions.
The OFT is also aware of the fact that property management agents are not currently
treated as persons carrying on business as estate agents and there may be a case for this
issue to be addressed as property management agents are perhaps more likely to handle
client monies than traditional estate agents and property letting agents.
Taking the above into account, the OFT proposes to ensure clarity by redefining what
constitutes carrying on business as an estate agent.
Questions:
A1. Should property managing agents be treated as persons carrying on
business as estate agents?
A2. Who else should be treated as persons carrying on business as estate
agents?
A3. Is the above list of exceptions still relevant?
A4. Are the definitions of ‘land’ and ‘sale of land’ still relevant and fit for the
purpose?
7B. Persons Prohibited from Carrying on Business as Estate Agents
Under section 11 of the 1975 Act:-
An individual shall not carry on business as an estate agent unless he is a registered
estate agent.
A body corporate shall not carry on business as an estate agent-
(a) in a case where the carrying on of that business is the main activity of
the body corporate, unless all the directors are registered estate agents;
(b) in a case where the carrying on of that business is not the main
activity of the body corporate, unless-
(i) each director responsible for the carrying on of that business is
a registered estate agent; and
(ii) that business is managed by a person (whether a director or
not) who is a registered estate agent.
A person shall not carry on business as an estate agent unless, in every office where
the business is carried on, it is carried on under the supervision of a registered estate
agent.
It is a criminal offence to carry on business in contravention of the above.
A significant number of established businesses are not complying with these requirements
and the OFT proposes:-
to ensure that at least half of the executive directors are fit and proper to carry on
estate agency business where the carrying on of that business is the main activity of
a body corporate; and
to ensure clarity with regard to office supervision as it is surely more proportionate
for responsibility for the business conducted at each office to lie with a registered
estate agent rather than for a registered estate agent to be physically located at
each office.
In addition, consideration will need to be given as to how business conducted on the
internet can be supervised.
8Questions:
B1. Is it reasonable to ensure that at least half of the executive directors are fit
and proper to carry on estate agency business where the carrying on of that
business is the main activity of a body corporate?
B2. Is it more proportionate for responsibility for the business conducted at each
office to lie with a registered estate agent rather than for a registered estate
agent to be physically located at each office?
B3. Should the OFT consider registering businesses rather than individuals?
C. Compensation for Dishonesty
The provisions of section 10 of the 1975 Act have effect with a view to enabling the OFT,
after consultation with the Treasury, to make, where it thinks fit, grants out of any sums,
received by the OFT pursuant to that section, for the purpose of relieving or mitigating loss
caused by the fraud or other dishonesty of any person engaged in carrying on business as
an estate agent in relation to money or other property received by him or any other person
in the course of the business.
Any bond or security issued or given in favour of the OFT for the purposes of section 10
shall be enforceable at the suit of the OFT notwithstanding any rule of law as to insurable
interests.
No person shall carry on business as an estate agent unless there is in force, in relation to
the business, a guarantee bond or other security issued or given in favour of the OFT by a
person approved by the Treasury whereby provision is made to the satisfaction of the
Attorney General for the payment to the OFT, up to the required limit, of the amount of any
loss caused by such fraud or dishonesty as is mentioned above.
It is a criminal offence to carry on business in contravention of the above.
9The current relevant limits are:-
where the business is carried on by a single individual, £50,000;
where the business is carried on by two or more individuals, £50,000 multiplied by
the number of those individuals who are registered estate agents;
where the business is carried on by a body corporate, £50,000 multiplied by the
number of the directors who are registered estate agents or £100,000, whichever is
the greater.
Where one or more offices at which the business is carried on is or are under the
supervision of a manager who is not a person carrying on the business or, as the case may
be, a director of the body corporate, the required limit shall be increased by £50,000 for
every such manager.
It is obvious to the OFT that the requisite security appears to be very difficult to obtain,
particularly for new businesses, and that many registered estate agents believe that they
should be covered by their professional indemnity insurance. The OFT is aware of only one
provider of the requisite security and the provider concerned has not exhibited any long
term commitment to providing the same.
As it is a distinct possibility that in the near future it may not be possible for businesses to
comply with section 10, the OFT proposes to ensure that consumers do not lose out as a
result. The OFT is aware of two client money protection schemes, one administered by the
Royal Institution of Chartered Surveyors and the other by UK’s National Association of Estate
Agents, which may provide the requisite security and will look at these along with any other
viable options.
Questions:
C1. Should the OFT ensure that businesses are members of appropriate client
money protection schemes rather than ensuring that they provide a guarantee
bond or other security issued or given in favour of the OFT?
C2. Would there be any need for businesses to provide security if the OFT
ensured that registered estate agents had professional indemnity insurance?
10C3. Are the current relevant limits adequate?
D. Property Misdescription
Part 1 of the Estate Agents Act 1999 (the 1999 Act) prohibits the making of false or
misleading statements about specified property matters in the course of estate agency
business and property development business, otherwise than in providing conveyancing
services, for example, it may be an offence for an estate agent to describe a property as
freehold when it is leasehold.
The 1999 Act has been passed by Tynwald but no appointed day order has been made to
bring it into force. The OFT has not been able to discover why this is the case.
The OFT proposes to make provision in the Bill for property misdescription by lifting the
existing provisions in the 1999 Act. The Bill would repeal the 1999 Act.
Questions:
D1. Is Part 1 of the 1999 Act still relevant and fit for the purpose?
E. Other Issues
There are other issues that may have to be addressed in the Bill, e.g. the constitution of and
need for the existing Estate Agents Tribunal, the requisite qualifications for registration and
the existing rules of conduct, and the OFT will consider any issues which may arise from this
initial consultation.
Questions:
E1. Is the constitution of the Estate Agents Tribunal specified in section 6 of the
1975 Act still fit for the purpose?
E2. Are the functions of the Estate Agents Tribunal specified in section 7
(Removal of certain names from the register), section 8 (Grounds for disciplinary
proceedings) and section 9 (Hearing and determination of disciplinary cases) of
the 1975 Act still relevant and fit for the purpose?
11E3. Are the grounds for disciplinary proceedings specified in section 8 of the
1975 Act still relevant and fit for the purpose?
E4. Is Schedule 1 (Hearing and Determination of Disciplinary Cases) to the 1975
Act still relevant and fit for the purpose?
E5. Could the functions of the Estate Agents Tribunal be transferred to some
other body, e.g. a trade association or a professional body?
E6. Should persons carrying on business as estate agents be members of an
appropriate redress scheme for resolving disputes with consumers?
E7. Are the functions of the registrar of estate agents specified in section 2 (The
estate agents register) and section 3 (Certificates of registration) of the 1975 Act
still relevant and fit for the purpose?
E8. Are the requisite qualifications specified in section 3 of the 1975 Act and
Rule 13 of the Estate Agents Rules still relevant and fit for the purpose?
E9. Are the Estate Agents Rules still relevant and fit for the purpose?
E10. Are the matters in respect of which rules may be made specified in
Schedule 2 to the 1975 Act still relevant and fit for the purpose?
124. Consultation Process
The OFT would welcome your views and any comments you wish to make on the proposed
Estate Agents and Landlords Bill 2012.
Comments should be submitted in writing by post, fax or email no later than
5.00pm on Friday 27 April 2012 to:
Research and Development Section
Isle of Man Office of Fair Trading
Government Building
Lord Street
Douglas
Isle of Man
IM1 1LE
Tel: (01624) 686576
Fax: (01624) 686504
Email: iomfairtrading@gov.im
Additional copies of this document can be obtained from the OFT by telephoning
01624 686576. Electronic copies of this document are also available at www.gov.im/oft
When submitting your views please indicate if you are responding on behalf of an
organisation. A list of Consultees can be found at Appendix 1 of this document. If there is
anyone not on the list who you think should be consulted please contact the Section named
above.
To ensure that the process is open and honest and in line with the Government’s Code of
Conduct on Consultation, as attached at Appendix 2, responses can only be accepted if you
provide your name with your response. Any abusive or offensive responses will be
disregarded.
Unless specifically requested otherwise, any responses received may be published either in
part or in their entirety. Please mark your response clearly if you wish your response and
name to be kept confidential. Confidential responses will be included in any statistical
summary and numbers of comments received.
13A summary of responses will be published within three months of the closing date for this
consultation and will be made available on the OFT website (www.gov.im/oft) or by
contacting the above named Section.
The purpose of consultation is not to be a referendum but an information, views and
evidence gathering exercise from which to make an informed decision on the proposed
Estate Agents and Landlords Bill 2012. In any consultation exercise the responses received
do not guarantee changes will be made to what has been proposed.
14Appendix 1
List of Direct Consultees
Tynwald Members
Attorney General
Local Authorities
Chief Officers of Government Departments, Boards and Offices
Isle of Man Chamber of Commerce
Isle of Man Law Society
Isle of Man Association of Estate Agents
The Royal Institution of Chartered Surveyors (RICS)
Isle of Man Chairman of RICS
National Association of Estate Agents
UK Property Ombudsman Service
UK Surveyor Ombudsman Service
Association of Residential Letting Agents (ARLA)
Registered Estate Agents
Local Property Letting Agents
Local Property Management Agents
15Appendix 2
Code of Practice on Consultation
This consultation follows the Code of Practice on Consultation the criteria for which are set
out below.
The Six Consultation Criteria
1. Consult widely throughout the process, allowing a minimum of six weeks for a
minimum of one written consultation at least once during the development of the
legislation or policy.
2. Be clear about what your proposals are, who may be affected, what questions are
being asked and the timescale for responses.
3. Ensure your consultation is clear, concise and widely accessible.
4. Give feedback regarding the responses received and how the consultation process
influenced the policy.
5. Monitor your Department’s effectiveness at consultation.
6. Ensure your consultation follows best practice, including carrying out an Impact
Assessment if appropriate.
The full Code of Practice is available at www.gov.im/cso
16Appendix 3
Existing Primary and Secondary Legislation
Primary Legislation
Estate Agents Act 1975
Estate Agents Act 1999 – the 1999 Act has been passed by Tynwald but no appointed day
order has been made to bring it into force
Secondary Legislation
Ref No Title
GC 135 75 Estate Agents Act 1975 (Appointed Day) Order 1975
GC 61 78 Estate Agents Act 1975 (Appointed Day) Order 1978
GC 75 78 Estate Agents Rules 1978
GC 158 78 Estate Agents (Amendment) Rules 1978
GC 254 82 Estate Agents (Amendment) Rules 1982
GC 17 88 Estate Agents (Amendment) Rules 1988
SD 889 03 Estate Agents (Amendment) Rules 2003
SD 2 11 Estate Agents (Amendment) Rules 2011
A document consolidating all of the above rules which are currently in force has been
created by the OFT. A copy of this document can be obtained from the OFT.
Copies of the above legislation may be obtained from the Tynwald Library
(Tel 01624 685520, Email library@tynwald.org.im)
1718
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