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Scottish Government and referral fees

Friday 05 April 2019

The rules on referral fees affect estate agents working in all parts of the UK. The issue was raised in the Scottish Parliament on 19 March 2019 by Graham Simpson MSP who asked the Scottish Government whether it plans to consult on the use of referral fees for solicitors or estate agents during the conveyancing process.

Scottish Government Minister, Ash Denham, responded on 28 March saying: The Scottish Government has no plans to consult on the use of referral fees for solicitors or estate agents during the conveyancing process at this time.”

“The use of such referral fees for solicitors falls to the Law Society of Scotland as the regulator. The Society has Rules and Professional Standards for solicitors to comply with.

“The regulation of Estate Agents is reserved under section C7 of Schedule 5 of the Scotland Act 1998. Estate Agents are principally regulated by the Estate Agents Act 1979 and the Consumer Protection from Unfair Trading Regulations 2008.”

Looking ahead, the Minister explained that the Scottish Government is aware that the UK Government have consulted on such referral fees in their call for evidence on Improving the Home Buying and Selling Process.

Finally, Ash Denham outlined: “Any outcomes from the UK Government consultation would apply to Estate Agents across the UK including Scotland.”

What are Referral Fees?

A traditional referral fee exists where an agent recommends (refers) another business to a seller or prospective buyer, and that business rewards the agent for the referral by way of money, gifts or any other form of benefit. The other business might offer preliminary services, such as photography, or something as fundamental as conveyancing.

What Propertymark is doing

NAEA Propertymark responded to the call for evidence on Improving the Home Buying and Selling Process and is a member of the UK Government’s Regulation of Property Agents Working Group. Its mission is to come up with regulatory solutions that will raise standards across the property agent sector. More information can be found here.

The recommendations of the Group will be of relevance to the whole of the UK, because whilst lettings and managing agents’ powers are devolved, estate agency powers are reserved. Therefore, any introduction of mandatory rules for estate agency will affect those working in all areas of the UK, including Scotland.  More information can be found here.

Guidance

In March, the National Trading Standards Estate Agency Team (NTSEAT) published guidance on referral fees received by estate agents across the UK, with the aim of making previously hidden fees open and transparent to consumers.

Propertymark Webinar

On 21 March, Chief Executive of NAEA Propertymark Mark Hayward recorded a webinar and went through the key points of the recent NTSEAT guidance to explain what agents need to do make your referral fees clear to your customers. Watch the recording here.