Government mulling over need for greater transparency over disclosure by agents of referral fees paid to them by conveyancers

National Trading Standards' (NTS) estate and letting agency team, has revealed the NTS is to discuss with the Government whether stricter rules are needed to require estate agents to disclose receipt of referral fees from conveyancers. Shortly before lockdown in 2020 NTS published a report recommending mandatory disclosure rather than an outright ban on referral fees. The purpose of the imminent discussions will be to analyse whether there has been a change in practice concerning referral fee disclosures in any meaningful way since the initial recommendation in 2020. It is anticipated that if the NTS conclude there remains a continuing lack of transparency that legislation will be passed to force disclosure upon agents. A change in the law could be achieved by amending the Estate Agents (Undesirable Practices) (No. 2) Order 1991 to include such a requirement.

Solicitors and conveyancers are already under duties to disclose payment of referral fees to agents but the extent of manipulation of the rules and outright non-compliance is uncertain. A change in the rules may require disclosure from both solicitors and agents.

Some conveyancers pay many hundreds of pounds to agents for successful introductions to conveyancing clients which can generate a significant revenue stream for agents which will inevitably come under greater scrutiny. More onerous disclosure requirements will result in conveyancing clients being made aware how much of their legal fee is paying for referrals and give them the opportunity to decide for themselves whether they want to use a conveyancing practice which has to pay significant sums for referrals rather than rely on reputation, expertise and high levels of client service and satisfaction.

The outcome of the discussions are awaited with interest.