[Via email to:
Adam Gray
Consumer and Competition Policy
Department of Business, Innovation and Skills
1 Victoria Street
London
SW1H 0ET
5 October 2012
Dear Mr Gray,
RICS RESPONSE TO BIS Consultation ON THE SUPPLY OF GOODS, SERVICES AND DIGITAL CONTENT ‘ENHANCING CONSUMER CONFIDENCE BY CLARIFYING CONSUMER LAW’
RICS is the leading organisation of its kind in the world for professionals in property, construction, land and related environmental issues. As an independent and chartered organisation, RICS regulates and maintains the professional standards of over 100,000 qualified members (FRICS, MRICS and AssocRICS) and over 50,000 trainee and student members. It regulates and promotes the work of these property professionals throughout 146 countries and is governed by a Royal Charter approved by Parliament which requires it to act in the public interest.
RICS Regulation monitors, inspects and advises Members and Regulated Firms to uphold our professional, ethical and business standards, as well as against specific schemes. RICS Regulation takes a risk-based approach to monitoring and regulation of its schemes. In line with better regulation principles, our regulatory activities are transparent, proportionate, accountable, consistent and targeted. Our specific answers to the questions you have raised, and outlined below, should be taken in this context.
This RICS response includes general comments about the issues raised by this consultation, as well as specific comments on a number of the questions included in the consultation paperwork, in particular in the area of the provision of services.
General Comments
RICS notes the Government’s rationale forthese proposed changes to consumer rights as outlined in the opening paragraphs of the Executive Summary. RICS also notes the comprehensive and wide ranging approach adopted both in terms of the assessment of the current regulatory framework associated with the provision of goods, services and digital content, and the proposed changes to realise the stated policy objectives. The consultation is extremely good at setting out the ‘supply chain’ in relation to consumer law. It articulates well the inconsistencies and complexities. This is in sharp contrastwith the piecemeal approach currently being taken by Government regarding changes to the regulatory framework associated with the UK residential property market, most recently the announcement on 13 September of changes to the Estate Agents Act 1979 to take ‘passive intermediaries’ out of scope of that legislation. Such an approach has the considerable potential for unintended consequences, most notably increased complexity and confusion, and associated costs, for both businesses and consumers alike. That is extremely unfortunate in a market which at its most fundamental is concerned with the provision of shelter – an essential human need.
RICS considers there are problems with the current legislative framework in the UK residential property market of a similar nature to those articulated in this consultation regarding the existing legislation associated with consumer rights. The Government should take a consistent approach and consider the problems in UK residential in a similarly comprehensive and holistic manner.
Whilst residential sales agents are currently required under the terms of the Consumer, Estate Agents and Redress Act 2007 to provide consumers with access to a free redress scheme, lettings agents are not subject to the same statutory requirements. Lettings agents who are members of the RICS arerequired to have such a redress framework in place as part of compliance with RICS rules of conduct for firms. However, this is part of the RICS self-regulatory framework, not a statutory requirement.
RICS published a new Residential Policy document on 31 May 2012 that indicates, amongst other things, that RICS is working to encourage the UK Government to remove the artificial distinction between sales and lettings. The RICS is recommending reform of the Estate Agents Act 1979 to ensure lettings/managing agents need to have Client Money Protection, Professional Indemnity Insurance and clear redress mechanisms. Lettings agents would also then come within the scope of the money laundering regulations too. RICS also considers that Section 22 of the 1979 Act, requiring minimum professional standards for Agents to start trading, should also now be enacted to create a statutory level playing field for all estate, lettings and managing agents operating in this field.
Many businesses operate in both sales and lettings, and the regulatory arrangements should reflect that fact. Such an approach would both ensure minimum levels of consumer protection, and provide businesses operating in sales and lettings a clear, simple and consistent approach that is lacking in the current unnecessarily complex regulatory arrangements. In summary, there is potential here to enhance consumer protection and minimise burdens on business. RICS made this point in response to the Housing and Construction theme consultation on the Red Tape Challenge, recognising that we have a role to play, in particular the development of industry-wide standards that are recognised by property professionals, business and consumer alike, including common minimum standards of entry and practice.
RICS stands ready to work with Government, both at Westminster and in the devolved administrations, and other industry/consumer representatives to reduce regulatory complexity and deliver the one touch regulatory framework outlined above that the UK residential property market so desperately needs to aid business growth, improve informed consumer decision making, and strengthen consumer protection.
Returning to the Government’s proposed framework for enhanced consumer rights, RICS considers it will be vital for the Government when finalising the proposed framework to minimise the potential for unintended consequences, in particular by reviewing the framework to ensure it does not overlap with other existing legislative frameworks. Such duplicationwould increase burdens on business and not deliver clarity for consumers.
Specific Comments
Questions from Chapter 4: Introduction:
Q1. Do you agree that all businesses should be subject to the same framework of consumer protection for the sale and supply of goods, services and digital content, or
Do you consider that micro businesses should be exempt from any or all of the new proposals and remain subject to the current framework? (4.21-22)
X Yes, all businesses should be subject to the same framework
No, micro businesses should be exempt
Not sure
Comments:
A single framework, easily understood by all businesses and consumers has the potential to minimise burdens on business, encourage compliance, and enhance consumer protection. Such a framework also has the potential for targeted, proportionate and effective enforcement activity. Indeed, without such enforcement activity the stated policy objective in the consultation paper of empowered consumers to drive economic growth will not be achieved.
RICS notes that paragraph 4.20 of the consultation paper limits the scope of the Government’s proposals on consumer rights to transactions “where a business supplies goods, services, or digital content to a consumer under a contract”. Such a definition appears to exclude those consumers who engage with intermediaries in a transaction between two private individuals. For example, residential sales agents acting for a vendor to find prospective buyers for the vendor’s property, or a lettings agent acting for a landlord to find prospective tenants for the landlord’s property. In such circumstances the prospective buyer/tenant may be obtaining a service from the sales/letting agent without signing a contract with them. RICS recognises that such transactions are covered by the Consumer Protection from Unfair Trading Regulations 2008, and considers that for completeness a reference those regulations should be included in the Consumer Rights framework so that consumers are aware of their additional rights in circumstances where they do not enter into a contract with a trader.
Q2. Do you agree with the Government’s proposal to introduce a single definition of ‘consumer’ and a single definition of ‘trader’? (4.25-38)
X Yes No Not sure
Comments:
RICS recognises and accepts the rationale for the proposed single definition of ‘consumer’, and ‘trader’, mindful of the need to take account of existing EU law, and the Law Commission’s work in this area.
Do you have any concerns with any aspects of the proposed definitions?
Comments:
The proposed definitions can be summarised as follows:
Consumer - this would be limited to an individual acting for purposes which are wholly or mainly outside of his or her trade, business, craft or profession; but would not include an individual buying goods at an auction which individuals may attend in person (for the purposes of protections currently subject to this restriction).
Trader – this would be an individual (‘natural person’) or organisation (‘legal person’) whether publicly or privately owned, who is acting – including through any other person acting in their name or on their behalf – for purposes relating to their trade, business, craft or profession in relation to contracts for goods, digital content or services.
Questions from Chapter 6: The Supply of Services:
Q24.Are these helpful distinctions? What problems, if any, do you envisage in dividing up services in this way? (6.11)
X Yes No Not sure
Comments, including any problems you envisage:
To ensure common understanding by businesses, consumers and enforcers alike, it will be important to include examples for each of three proposed categories of services.
Q25.Do you agree that these are the implied terms which may currently be introduced into consumer contracts for the supply of services? (6.16-31)
X Yes No Not sure
Comments:
Q26.Do you think the proposals should apply in Scotland with the same effect as they would have in the rest of the UK? (Box 20)
X Yes No Not sure
Comments:
Consistent application across the UK is desirable as this will aid common understanding by businesses, consumers and enforcers alike. In seeking to achieve this policy objective, however, the UK Government will need to take account of the historic difference in the common law remedies in Scots law compared with EnglandWales. Whilst recognising the potential additional costs of compliance in EnglandWales, RICS considers the common law remedies in Scots law should be the starting point for consistent application across the UK.
Q27.Do you agree that the remedies for breach of implied terms in consumer contracts are difficult for consumers to predict? (6.32-36)
X Yes No Not sure
Comments:
Q28.The Government is not proposing a solution to this problem as it cannot identify a deficiency in the law or any obvious clarification that would help. Do you have any suggestions? (6.51-54)
Comments:
RICS notes this is a complex area where clarification would aid consumers, but cannot offer any immediate suggestions.
Q29.In your view, what problems are created for consumers by the current law? Can you estimate the impacts? What effects on the market do these problems cause? (6.55-68)
Comments:
Q30.How does your business respond to the complexity of consumer law? What, in particular, is the cost of compliance? (6.69-71)
Comments:
RICS produces a range of professional standards, technical guidance notes, and other written advice for its members, including on issues associated with consumer law.
For example, The RICS UK Residential Property Standards (generally referred to as the ‘Blue Book’) is intended for estate, lettings and managing agency practitioners, but it is also a useful source of reference for clients and customers. It has particular significance in outlining the duties and responsibilities that those practising in this field owe to their clients and customers who are likely making one of the most important financial decisions of their lives.The aim of the Blue Book is to ensure that clients and customers have a clear understanding of the scope and standards of services they can expect from estate, lettings and managing agents, and to help to improve standards in the sector by raising public and professional awareness. A further objective is to encourage agents to aspire to the highest operating standards through the training and ongoing development of their staff.
RICS Regulation seeks to provide RICS members and regulated firms with a single regulatory framework that meets all their requirements – legislation permitting.
Q31.Does your business consciously seek to go beyond consumer law in terms of what it offers consumers of services? (6.69-71)
X Yes No Not sure
Comments:
RICS as a professional regulator is responsive to the demands of the sector and the surveying profession to ensure professional and ethical standards are maintained and promoted for the public good. Where considered to be appropriate given the issues/risks involved, and to demonstrate acting in the public interest, these standards go beyond existing legislation, including current consumer protection law.
The RICS rules of conduct for members require all RICS members to demonstrate they follow RICS global professional and ethical standards. They also require members to demonstrate they are each undertaking and recording at least 20 hours of continuous professional development per annum.
The RICS rules of conduct for firms require all RICS Regulated Firms to have in place and publicise to consumers a complaints handling procedure, including access to an approved alternative dispute resolution service provider if that procedure is exhausted. These rules also place requirements on RICS Regulated Firms regarding Professional Indemnity Insurance, and Client Money Protection.
RICS rules of conduct for members and firms provide confidence to consumers and others about the reliability and high standards they can expect when using the services of a RICS member or RICS Regulated Firm.
RICS Regulation actively monitors members to check for compliance against the rules. Wherever possible RICS seeks to work with members to ensure compliance, but takes formal disciplinary action where necessary when members fail to respond to this partnership approach.
Q33.Do you agree that moving to a statutory guarantee will be easier for consumers and traders to understand? Do you foresee any problems with this approach? (6.78)
X Yes No Not sure
Comments, including any problems you envisage:
RICS supports this approach, provided the statutory guarantee is written in a way that is easily understood by traders, and the average, well informed and circumspect consumer. Otherwise there will be little added value in the statutory guarantee.
Q34.Do you agree that there should be a statutory guarantee that a service will meet the description given pre-contractually including the information as to price and time for performance? (6.80-84)
X Yes No Not sure
Comments:
The proposed approach here may not fit well with certain market models, particular in relation to the provision of particular professional services. For example, it will be reasonable to expect a RICS member to specify time performance in delivery of a building survey or valuation. However, it will be more challenging for RICS members to do so in circumstances where they are a sales agent or letting agent commissioned to find a property for a prospective purchaser/tenant as uncertainties associated with the latter’s requirements and/or market conditions will make it difficult for the agent to predict accurately when they can deliver their service to their client. In framing the information required in a statutory guarantee regarding time for performance, there should be regard to the types of service provision detailed above.
Q35.Do you agree that there should be a “default” period of 30 days in which a service must be carried out? (6.87)
X Yes No Not sure
Comments:
In most circumstances, yes. But the example outlined in the response to question 34 above is relevant here as well. RICS notes the consultation paper acknowledges (6.87) the potential for traders and consumers in particular circumstances to agree to longer periods in terms of service delivery.
Q36.Do you agree that the statutory remedies for “faulty” or substandard services should be as similar as possible to those for goods? (6.89-96)
X Yes No Not sure
Comments:
Such an approach will increase the potential for a simple, easily understood consumer rights framework.
Q37.Do you agree that we should specify that the reduction in price should cover the element which has not been performed with reasonable care and skill? Or should we use the same wording as used in relation to goods; i.e. “an appropriate amount”? (6.95)
X Yes No Not sure
If No, should we use the same wording as used in relation to goods?:
Yes No Not sure
Comments:
Such an approach will increase the potential for a simple, easily understood consumer rights framework.
Q38.Do you think that the tier 2 remedy should always include a facility for the consumer to terminate the contract from that point forward? (6.104)
Yes X No Not sure
Comments:
The proposed approach here is not proportionate. There may be some circumstances where termination of the contract is appropriate, but in other instances a reduction in price will be a more proportionate sanction.
Q39.Alternatively, do you think that the right to terminate the contract should only be available in response to a failure to meet pre-contractual information requirements, or perhaps not at all? (6.105)
X Yes No Not sure
Comments, including if you think it should not be available at all:
The 2009 RICS report “Transparency in Professional Fees” (see detail at following a RICS consultation exercise noted there should be transparency around the service firms are providing to their clients; the scope of the service on offer; charges and the circumstances under which they become payable; and that agents should also be entirely transparent about what other monies they receive and from whom.
RICS considers that traders should be required to be transparent in the pre-contract information they supply to consumers, and failure to deliver performance as described in such pre-contractual information should result in consumers having the right to terminate the contract.
Q40.What would be the impact on your business of making such remedies available? (6.89-105)
Comments:
RICS considers it is difficult to quantify the likely effects of the proposed change on operation costs and profitability of businesses. The effects are likely to be greater if the proposed changes are not clearly articulated.