01 March 2013
The Government announced the Property Misdescription Act (“PMA”) is to be repealed in late 2013 in line with the Government’s policy to repeal unnecessary legislation. It is considered that the provisions of the Consumer Protection from Unfair Trading Regulations 2008 (“the CPRs”) provide a better mechanism to protect property buyers.
What is the PMA and why is it being repealed?
The PMA is a purpose built piece of legislation which makes it an offence to make a false or misleading statement in the course of property development or estate agency business when offering property for sale.
Unlike the PMA, the CPRs apply to all business sectors and make it an offence to give false or misleading information to consumers or to withhold material information from them. Material Information is defined as “the information that the average consumer needs, according to the context, to take an informed transactional decision” e.g. that the flat for sale is on the top floor and there is no lift where the agent knows the prospective purchaser is elderly, disabled or has small children.
The CPRs are principle based and it will be for the agent to decide, acting with the standard of care and skill that is in accordance with honest market practice and in good faith, what information need be given.
What does this change mean?
The change aims to provide consumers with deeper protection from unfair business practices as material information can no longer be hidden from consumers and must be brought to their attention.
A positive change which has resulted from the CPRs was the implementation of the Consumer Code for House Builders (“the Code”) which was launched in April 2010 and provides increased protection for house purchasers. This Code has led to around 16,000 house builders which are registered with NHBC, Premier Guarantee or LABC Warranty having to comply with the requirements of the Code. If they fail to do so they can be excluded from these registers and thus the homes they build will effectively be unmortgageable. (Consumer Code for House Builders, http://www.brand-newhomes.co.uk/consumer-code.htm, viewed on 14 March 2013).
Complaints procedure under the CPRs
Individuals can make complaints to the Office of Fair Trading and Trading Standards Agencies. These authorities can bring civil and criminal proceedings against businesses which they believe to be in breach of the CPRs. This can result in fines, prohibition from carrying on the business, and ultimately prison.
The aim of repealing the PMA is to stop unnecessary duplication of law and to prevent the inconsistency between the PMA’s prescriptive approach and the principles based approach of the CPRs. The introduction of the CPRs has led to businesses having to lay out procedures for ensuring acceptable standards of consumer protection, but only when the PMA is repealed later this year will we be able to see how this affects the property industry as a whole.