The advertising watchdog has upheld a complaint against an estate agent who advertised their fee as 0.9% plus VAT.
The Advertising Standards Authority has ruled that this was a breach, and rejected the agent’s offer to show their fee in future as 0.9% plus 20% VAT.
Instead, it has ruled that the agent should show the fee as 1.08% – ie, inclusive of the fee plus 20% VAT.
It is not clear what the effect of this latest ruling will be on other agents, as it precisely and exactly lays down how an agent should show their percentage fee.
However, it does reinforce earlier guidance (see links at the end) which confirm that agents must quote fees inclusive of VAT.
Yesterday, ombudsman Christopher Hamer told Eye: “I am not sure if the adjudication by ASA applies across the industry or is related to the specific case.”
However, he warned that if all agents have to show the exact fee including VAT, there would be some “odd looking fees”, which agents would round up.
In the case, there was one complaint against IMS Residential, which has seven branches and is headquartered in Derby. The firm has been a previous ‘medium sized agency’ gold winner in the Times and Sunday Times awards.
The firm had advertised in the regional press “0.9% SELLING FEE” in large bold text. Smaller text stated: “+ VAT”.
The complainant challenged whether the price claim was misleading because it was not inclusive of VAT.
IMS Residential said all of their customers knew the fee was 0.9% + VAT of the selling price. They had never received any complaints or misunderstandings about their fees before.
They maintained that the Government’s business website stated that they could quote VAT as a percentage because the final selling price was not known. They acknowledged that they also needed to include the current rate of VAT (20%) in the ad. They said that they would ensure that the rate of VAT would be added to their ads immediately.
However, in its assessment, the ASA said: “The ASA understood that the government’s business website to which IMS Residential had referred was the BIS Pricing Practices Guide (PPG).
“The PPG advised that, where a fee was based on an as yet unknown sum of money (for example, the sale price of a house), advertisers should either quote a fee which included VAT or, if it was difficult to calculate, make it clear that, in addition to the fee, consumers would have to pay VAT at the current rate.
“The CAP Code required that quoted prices include non-optional taxes, duties, fees and charges that applied to all or most buyers. However, if a tax, duty, fee or charge could not be calculated in advance, ads must make clear that it was excluded from the advertised price and state how it was calculated.
“We noted that in this case the selling fee was a percentage of the selling price, and we understood that VAT was charged on the fee.
“The total fee, including VAT, therefore could have been expressed as a percentage of the selling price.
“Rather than ‘0.9% + VAT’, the total selling fee could have been given as ‘1.08%’, because that would be the total fee including VAT, regardless of the amount of the selling price.
“Therefore, we did not consider that IMS Residential would have been unable to state a fee which was inclusive of the rate of VAT, even though it would be expressed as a percentage, rather than a fixed price.
“Although we acknowledged IMS Residential’s willingness to amend their advertising, we did not consider that their proposed changes were sufficient.
“Because it was possible for a VAT-inclusive fee to be calculated in advance as a percentage, we considered that the stated percentage fee should have included VAT. Because that was not the case, we concluded that the ad was likely to mislead.”
IMS Residential has been told to ensure that all their price claims include “non-optional taxes, duties, fees and charges which could be calculated in advance”.
We asked the Property Ombudsman for his view as to whether this ruling could be a precedent for all estate agents.
He told us he believes not – but if it is, it is a moving of goal posts.
Christopher Hamer told Eye: “I have a copy of the ruling and it does not appear to imply that this is now a precedent.
“The BIS Pricing Practice Guide advises that where a fee is based on an as yet unknown amount of money, such as a house sale, the advertiser should either quote a fee which included VAT, or if difficult to calculate, should make clear that VAT is excluded but how it is calculated.
“That is how the TPO Code reflects the position.
“If this is a precedent, then it does seem to move the goal posts and agents could be quoting some odd looking percentage fees – but of course they would round it up and it could be that this ASA ruling will have the consequence of meaning sellers pay more.”
Guidance about how agents must show fees inclusive of VAT is here:
https://www.gov.uk/government/publications/consumer-protection-law-for-lettings-professionals
If it is policed, then fine.
But we are still the only Letting agent in our area complying with the asa's ruling to advertise a breakdown tenancy fees. The ONLY one of MANY. Why is that? Because it is not policed…
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Hi Mark, If it is any consolation I think it is the same right across the country and like so many of these rules they are not policed and the industry just does what it can get away with. You could try: http://www.asa.org.uk/Consumers/How-to-complain/Online-Form/Step1.aspx
No surprise that TPOS have put their heads in the sand on this. This is all about clarity of what services are going to cost the consumer and if it makes it clearer TPOS should be promoting it instead of protecting it's membership levels
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Glad to see they have totally ignored it http://www.imsproperty.com/
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If they're charging 0.9% (in Derby) then I would suggest they have bigger problems to worry about!
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I see this as good news as it makes all those cheap agents and of course the online only agents who market themselves with the price as the headline figure, having to potentially change their advert. I feel a few complaints to the ASA coming on…..
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@realagent took along time but finally we agree on something !! transparency is key now lets see all those advertising be they shop or online show all their charges upfront inc vat and transparently so the customer knows what they are paying and what for !! Perhaps we can name and shame ! Looking at the evening standard there are still letting agents not showing their fees as they should be.
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Unfortunately these sort of things are not policed so unless people (preferably consumers) make formal complaints the businesses will do what they can get away with. This is one of the reasons I am anti 'more regulation for agents' as we struggle to enforce existing regulations/codes without introducing yet more that only the good guys will comply with anyway
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This might be a little bit petty.
But when we all are forced to comply and include "+ 20% Vat" in all our ads, flyers, displays etc.
Then, are the government going to pay for all the re-printing costs involved whenever they change the VAT Rate to 17.5% or 22.5%?
Or should i just shut up and go buy into a printing franchise?
Never read such a crock of …. in a long time!
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Good idea, but it's far too logical. You should know by now that you sir – are on your own. Politicians etc keep changing the goalposts and you are expected shut up, cough up and take it like a man.
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