Agents’ duty of disclosure – What to do when you are asked to ‘hide’ a repossession

At the TPO Office we receive many queries from agents seeking advice on what to disclose in property particulars.

The TPO Codes are quite clear that material information must be disclosed to potential buyers and tenants at the earliest opportunity.

However, this is not always straightforward for agents when taking into account instructions received from sellers and landlords.

One recent query concerned whether or not to disclose that the property had been repossessed. This is clearly material information to any consumer. and therefore under the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and the TPO’s Codes, the information must be disclosed.

The seller in this case was a corporate body. The seller’s instruction to the two instructed agents was to not only remove the reference to the property’s repossession status, but to physically remove the black and yellow hazard tape from parts of the building before photographs were taken and then replace the tape.

The seller insisted that the repossession status should only be disclosed to a buyer after they had made an offer.

The agents’ response was to point out that these instructions put them in breach of not only the TPO Code but also the CPRs, leaving them open to prosecution. Furthermore, one agent explained that it was simply not fair to withhold this information as, on a practical level, buyers of repossessed properties were often inundated with debt collection letters for years after.

The seller maintained that the property should be marketed as per their instructions despite being made aware that they were asking agents to breach regulations. Both agents lost the instruction, as they were not prepared to follow the seller’s instructions, and out of sheer frustration contacted my Office.

Repossession companies do not fall under the jurisdiction of TPO. However, where an agent is losing business through their determination to comply with regulations and to provide a fair service, this is clearly a matter of great concern.

Perhaps even more concerning is that the only reason that a seller can insist that an agent withholds material information is that they know some agents will agree to do so to gain the instruction.

So how can problems such as this be addressed to ensure that compliant agents, wanting to do the right thing, are not disadvantaged?

Whilst TPO has a duty to feedback matters of best practice and emerging issues to the industry and its regulators, Ombudsman schemes can only accept complaints from consumers – this is defined under the Government’s various approval criteria for redress schemes.

Trading Standards and other official bodies such as the Competition and Markets Authority and the Advertising Standards Authority are not limited to consumer complaints.

Putting aside the debate about enforcement resources, the fact remains that where the industry can collectively present a persuasive case for action to be taken, resources are likely to be made available.

The problem of portal juggling is a case in point. The practice is not yet eradicated, but the fact that it is being addressed in the first place is because concerned agents came together to raise the issue and push for action to be taken.

So the message is simple.

The more the industry can put aside its internal differences and come together to publicly highlight problems which disadvantage both consumers and compliant agents, the closer the industry will get to achieving a level playing field.

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30 Comments

  1. PeeBee

    “…whether or not to disclose that the property had been repossessed. This is clearly material information to any consumer.”

    I am at a loss as to why this is “clearly material information”.

    The property is for sale.  The current owner is selling it. What gives?

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  2. PRman

    Poor PeeBee. Only January 3 yet already too tired to read beyond the bit that irritates him near the top of the article. The explanation is obvious if you read to the end. It’s definitely material to buyers if they are to be showered with debt collection letters for years and maybe find their own credit references disrupted by others’ activities. Never mind what gives, what sucks is the attitude of dinosaur agents like you who can’t see beyond their own profit at whatever cost to innocent buyers. Time to catch up with modern legal standards or join the dinosaur’s tour of the UK shortly heading out of London for the provinces. Happy travelling!

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    1. PeeBee

      PRman

      IF you were actually an Estate Agent; IF you ever dealt with people AFTER they bought their new dream homes; and IF you had a modicum of grip on reality – then you would know that such things happen quite frequently even if the previous owner were minted and lived there right up to the point of key release.

      “…what sucks is the attitude of dinosaur agents like you who can’t see beyond their own profit at whatever cost to innocent buyers.”

      What REALLY sucks is the attitude of numpties like you whose posts are basic kneejerk presumptions based upon dinosaur – and idiotic – beliefs that every Agent can be (and therefore IS in your narrow, putrid mind) tarred with the same dirty brush you yield.

      For the record – I DON’T MARKET REPOSSESSIONS.

      You clearly wouldn’t understand why.

       

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    2. smile please

      FYI – It is the individual that is black listed not the property. as for chase letters. Call them and inform them they no longer live there. Its no difficult every mover has this to some extent over post.

       

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    3. Robert May

      “Time to catch up with modern legal standards” fantastic irony there; Peebee is one of the key  agents  who  as Katrine mention “came together to raise the issue and push for action to be taken”

      CPR and BPR are being broken on an extensive and continued basis in defiance of TPO and NTSEAT, Peebee is one of those who sits up late into the night  documenting  the breaches and submitting it as evidence.

      There is case law that governs this industry, that can’t be changed by anyone other than the courts so while you might think the industry can be disrupted by modern ways, it can’t. Any efforts to uphold the law isn’t some archaic Luddite mentality it is simply ensuring those who regard the law as something they can break or ignore comply with the laws that restrict those who have the decency to trade within the law.

       

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  3. docklander52

    Perhaps I have had too much happy-New-Years-juice but, for once, I may be with PeeBee on this one. Can you explain PRman how many repossession sales you have been involved with and how many times your purchasers have complained about this seemingly never ending barrage of debt collection agencies? I ask because my own agencies have, as a result of being on the panel of several asset management companies, sold quite a few and never have we had a buyer say “property is great, thanks, letters chasing for money are a bit of a pain”. And yes, we do stay in touch with our buyers.

    So, if the fact the property is a repo does not affect the buyer or the resale of the property, why does anyone think its a material fact? I am open to persuasion if there is a sensible answer to this question. Do we have to disclose divorce led sales, or sales because someone is moving up the property ladder? Or down it?

    Would I be annoyed if I purchased a property that someone was murdered in and the agent did not tell me? Absolutely. Would I be annoyed if the previous owner could not afford their mortgage and the agent never informed me. Of course not.

    I am a total believer in transparency and ethical trading but is this even a story?

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    1. PeeBee

      Thank you, Docklander52.

      As long as we agree on more things than we disagree on – we’ll get along just fine!

      Happy New Year to you and all ;o)

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  4. pierce

    If lenders want to hide this, maybe they will overlook the fact someone has had a property repossessed when they are applying for a mortgage, fairs fair?

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  5. Eric Walker

    Lenders don’t like buyers knowing that a property is a repossession as it seems this is code for a ‘bargain’. It’s ridiculous really. at the viewing, it’s pretty obvious with the systems drained down, tape over the toilet marked ‘Do not use’; a viewing log on the kitchen worktop and often a chattels notice on the door. This is of course often followed by the madness of an asking price offer or better being rejected until at least 2 ads have appeared in a paper no one reads followed by another notice which mentions ‘the mortgagees in possession’

    I get the lender’s asset managers request for anonymity, but it practice it’s a moot point. People aren’t silly.

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  6. Comp29

    I’m not sure if I’m missing the point here. Surely this should be disclosed as the very nature of selling a repossessed home and the specific procedure that requires as per legislation would be ‘material’ to a buyer/viewer. CPR applies to people taking the time to view. Most buyers would want to know if offers would still be invited on a property once a sale ‘agreed’ and in my experience, this would put many buyers off.

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    1. Eric Walker

      “Most buyers would want to know if offers would still be invited on a property once a sale ‘agreed’ ” This is a legal requirement under the Provisions of Information Act and TPOS code (clause 9d) – You MUST advise the buyer in writing if a property is to remain on the market once an offer is accepted. 

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    2. PeeBee

      Now THAT is a different kettle of fish entirely, I would suggest – and one which opens up an entirely different debate.

      How many Agents I wonder actually explain to the people who offer on a property in lender’s possession their obligation under MCOB13 to achieve best price and the requirement to forward any offers received up to the point of exchange of Contracts – or, for that matter, the same obligation under The Estate Agents Act 1979 which relates to EVERY property transaction?

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      1. Comp29

        Yes of course buyers must be informed in writing if offers are still invited but we are talking about PRIOR to offers being accepted. I don’t understand the initial discussion and the focus on debt letters when quite simply the fact that a property is a repossession is most definitely a material peice of information, if only because of the process that will have to be followed. In my opinion dialogue about buyers being able to see when they view that a property is a repossession is in direct conflict with CPR. The whole point of the regs (whether you agree with them or not) is to give potential buyers material info before they make a ‘transactional decision’ which includes the decision to view.

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        1. PeeBee

          “Yes of course buyers must be informed in writing if offers are still invited but we are talking about PRIOR to offers being accepted.”

          Therefore the same rule should apply.

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      2. Comp29

        It is not a different debate. It is the same one. The legislation to which you refer is material information which a buyer is entitled to receive before viewing.

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        1. PeeBee

          That being the case it surely needs applying to EVERY property – yes?

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  7. Romain

    ‘material information’ means “the information which the average consumer needs, according to the context, to take an informed transactional decision”.

    Also, not sure that disclosing after the offer would necessarily be a breach because at the point there is no agreement and the potential has committed nothing.

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  8. Oldtimer

    I am no lawyer but the key word is ‘material’ what is material ie important to one person may not be to others and I take the view that if I am asked about something then it is material. However I am often asked if the owner died in the property but where does that leave us if we are not asked, is it material if they did not die naturally but not material if they did, is a ghost material (we have had a few houses reputably with ghosts over the years), do we need to do a flood risk assessment or radon check, the list goes on.

    Regarding selling for asset management companies and the like I don’t find there is a problem with having to keep properties on the market if the background reasons and law are explained to buyers when an offer is made, as PeeBee says all offers have to be reported anyway.

    What I do find odd is that the asset management company have, in more than one instance, undertaken electrical work and completely replaced the bathroom suite in houses that need total refurbishing anyway, which to me seems pointless. There is never a good explanation for this so I am tempted to think of dubious reasons, maybe I am being unfair……

     

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  9. ringi

    Given that on a repossession property it is much more likely the seller will take another offer that is a little higher than yours AFTER you have paid for the survey, legal costs and mortgage fees a buyer should take the additional risk into account.
    Someone buying with a mortgage and little spare cash is ill advised to even view a repossession property unless they expect that a offer would be excepted for a lot less then what they can afford.   (Lost legal costs etc should stop them buying anther property.)
    The banks by their selling methods have reduced the demand for the properties that they are legally required to sell in a way to maximums demand!
     
    Hence I believe all estate agents have a duty to disclose that they are acting for a mortgage company (directly or indirectly) at the top of all on-line listings, so that people don’t waste their time (and hence money) reading the rest of the listing…..   The risks of the property remaining actively on the market until completion should also be explained in all such listings, and not just in the small print.

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  10. PeeBee

    “Repossession companies do not fall under the jurisdiction of TPO.”

    Then either they should – or I suggest they already do – by virtue of the nature of their business activities.

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  11. Aurora12

    If you haven’t given up reading this far down (:) I’m on the other side of the fence from Agents. I purchased a Repo in 2008, as a BTL. The E/Agent didn’t disclose it was a Repo back then. I’d chatted to neighbours and was aware from local press that (whom I understood was) the owner had ‘done a runner’ when “wanted” by the Police. Turned out a) I was effectively buying from the mortgage lender b) the current owner was the wanted guy’s girlfriend , not him – she’d “bought it ” from the boyfriend at a purchase price £10K OVER the market value (allowing her a higher mortgage loan, none of which she’d ever paid back). He then began claiming housing benefit as the g/friend’s “lodger” – 2 years + by the time I saw the mail and notifed L/A.

    As a Repo, Land Registry DON’T publicly register/disclose such a transaction as a sale (so does that mean agents looking to market in the future aren’t aware of the Selling Price/date of that sale?).

    In terms of “material information”, you can’t guestimate the future potential hassle – OR the DEGREE of inconvenience, harassment, and how time-consuming it is FOR YEARS afterwards – for both me as the owner – and my tenants!! What doesn’t help is that each debt collection agency simply sells the debt on – and the spiral continues. No, it doesn’t affect Credit Ratings but it takes up disproportionate time thereafter! Here is a flavour:-

    I found that the TV box left was full of mail comprising 100’s of debt collection letters. As I didn’t want my tenant’s enduring the inconvenience, I dealt with every item. It has always been time-consuming and occasional mail still continues to this day, 8 years later. Despite me notifying the local Police, and providing them with info., my female tenant had 2 separate “knocks on the door” at 6a.m. by the Police seeking to raid the premises. She was listed on E/Roll, her car, reg’d in her own name with DVLA, was in the drive. Her name was on the Utility Bills. The Police should’ve/would’ve done these checks up front! I returned his Speeding fines, etc. to DVLA with my own postage (DVLA don’t want/provide “returned Mail” details) YET, knowing he wasn’t iving there, they even renewed his licence (after a ban) to my address, years after my property purchase!! He’s still in the local area; he’s used the address for video hires he’s never returned, etc. High level dealers (jewellers, flash motor Cos, casino’s, holiday Cos.etc). are on the list

    Had the “Repo” fact been disclosed to me up front, I’d also have wanted information about exactly what that potentially entailed for the future – to enable me to make an INFORMED decision. I may well still have proceeded – but at leat I’d have had some idea what I could’ve expected before agreeing the purchase.

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    1. PeeBee

      “As a Repo, Land Registry DON’T publicly register/disclose such a transaction as a sale (so does that mean agents looking to market in the future aren’t aware of the Selling Price/date of that sale?).”

      1.  They do now

      2.  Why should that matter? The property is ‘worth’ what a buyer will pay for it at the time of marketing – what it WAS worth at a point in the past is irrelevant.

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  12. Michael

    I was one of the 2 agents asked to market this repossession property. The client was/is the biggest in the business. I am a 1 branch independent and do what I can to behave ethically. My (potential) client objected to my marketing proofs as they showed the black & yellow tapes and stated that the property was in repossession. I told him that CPR’s require me to be able to show that I had advised a potential buyer before they even booked a viewing of anything that an average buyer might deem negative.

    We have deliberately only handled a few repos and avoid doing so where we have enough stock to be choosy. But in several cases the new occupant has reported distress at the volume of letters for the previous owner, unpleasant phone calls where the number had been retained, aggressive debt collector visits including attempts to claim items of their furniture and embarrassment when obtaining credit … which can even involve opening a utilities account … when the address was stated. All these issues are overcome in time but can be distressing to have to experience…. and even more so if the buyer is a vulnerable person.

    I was told in no uncertain terms to remove the tape for the photos and to ensure the viewer had no idea at all of the repo status until they entered the house. I was told that I would be mystery shopped to ensure compliance and would be fined if it was discovered that I had revealed the property status. I pointed out that this was unethical, against CPR’s and would harm my reputation as the buyer would, upon seeing inside the house, have good reason to distrust me for having hidden such obvious information. The client said that no agent had ever before objected to playing his game.

    As a tiny agent I walked away from work from the biggest supplier in the country, something I can ill afford to do. I complained to TPO who have been good enough to listen but say they can do nothing. Great. And yet TPO would have come down on me like a ton of bricks had I complied and the buyer later complained to TPO.

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    1. PeeBee

      WELL DONE YOU! Michael!

      Many would have complied with the demands of the company.  You had the ‘nads to hold your ground and to NOT put profit before people as has been suggested above – I just wonder if ‘PRman’ has the ‘nads to post something to that effect.

       

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  13. PRman

    Well PeeBee here I am, ‘nads intact! Sorry it’s the morning after but I had a busy start to the year so I only look here once a day. Not sure what you want me to post, but it must be along the lines of “well said Michael” as he underlines the point I was making, as does the unfortunate landlord who bought a repo. He’s right about the CPRs, too, and if you all complied with them and the TPO Code then the client in this case would have no choice but to comply, too, in order to find an agent. Of course, he could do the job instead but then would also be an agent and have to comply. Job done if you all hold your line. You know, of course, that I am not an agent but I have worked alongside some very good ones for 27 years, luckily those with standards they uphold rather than looking the other way to get their money.

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    1. PeeBee

      Well… the PRman has returned armed with all the spin of a Hoover twin-tub.

      What you state to be Michael’s ‘underlining of your point’ was with the thinnest of pencil marks.  A few of a few buyers in his experience as selling Agent of ‘repossessed’ properties experienced some issues. Sorry – but same goes with other forms of ‘distressed – even ‘normal’ – sales, as I’m sure Michael and others would attest.

      We bought our first marital home from a couple who we later found out were divorcing.  We were bombarded for months afterward with debt letters; had a couple of ‘heavies’ banging on the door to ‘repossess’ our TV – for some strange reason they changed their mind when offered them the 14″ portable we were using at the time… and ‘suffered’ all the malarkey that ‘Aurora12’ endured to secure herself a nice cheap renter-outer. Far from being the living Hell that is being portrayed here – it was a bloody hoot wondering what would turn up next!

      I reiterate my previous point – 5h!t can (and frequently does) happen.  Buyers want wrapped in cotton wool. Pressure groups see column inches and support opportunities in campaigning on their behalf – and politicians crave the votes of the hard-done by.  Read The Estate Agents Act 1979 – the bit where HM empowered Estate Agents to work in the best interests of THE VENDOR and/or THE PROPERTY.

      Not disclosing in 48-point bold, italic, underlined and highlighted Dayglow Yellow that a property is in the possession of a lender has never and will never stop the world spinning; cause the untimely death of a pet hamster or otherwise endanger man nor beast – and I very much doubt that it has made a material difference to a single soul as to whether they would have viewed that el-cheapo semi they were brutally forced under extreme physical and mental duress to drag their carcasses around.

      TPO might do well to consider that little factoid.

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  14. Beano

    The key issue here is not disclosure, it is the deliberate changing of normal visuals to apply a smoke screen for potential viewers. Clearly any buyer who attends a viewing for a repossession will realise there is something different about the house and if not familiar with why, they will ask.

    In my past years of handling repossessions, this was never an issue, the house was for sale, the viewers attended and asked questions as they would any other house. Most could tell it was a repo by the photos, the smallprint or more usually just by the price. Most novices needed a lot of explaining about how it was difficult for normal buyers to buy without risk, to the point where they start thinking your are up to no good and wish to buy it yourself!

    When they didnt heed the risks, it was us that got the stick as the other agent introduced a cash buyer with a slightly higher  (0.05%) offer that was then dropped by 5.% the day of exchange! Unless you really need to Don’t touch them.

     

     

     

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    1. PeeBee

      Hi Beano – and #HNY2017 to you!

      If I may pick up on one line of your post which I seriously believe deserves further discussion:

      “…it is the deliberate changing of normal visuals to apply a smoke screen for potential viewers.”

      THAT, I would suggest, is a worthy thread on its own.

      ‘Honest’ photography, for many players, has left the building some time ago.

      I was brought up on the wise saying that ‘the differential between expectation and reality often equals disappointment’.  Looking at many images passed off on t’interweb as being a representation of a subject property, I have no doubt whatsoever that this has never been more true.

      Agree?  Disagree?

      I would respectfully request that the usual suspects actually POST your responses – hitting the ‘Dislike’ button like a demented Duracell Bunny achieves nothing more than the warm fuzzy feeling you give yourselves…

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      1. Beano

        HNY To you too PeeBee……..The most I have been accused of is making a house look better in photos than it does in real life! but Im sure we are not talking about great photography here!

        The problem agents have is our need to impress our current and clients with how we present, so naturally, we need our properties and photographs to look good. This always means that the ugly side of property will be ignored in photographs.(Unless seemingly you are an internet firm)

        Will a viewer then feel disgruntled on a viewing? Is this significant information?

        Lets stick to the pertinent facts, anything else is surely the job of the buyer (to beware) and their solicitor/surveyor. In any event the seller risks losing their sale or having the offer downgraded if they neglect to disclose anything reasonably expected of them. Always be open and honest when questioned and dont deliberately hide facts. Surely this is fair?

        In answer Ive been out of sales for too long to notice any shenanigans with regards my competitors and their photoshopping skills!

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