Business, Legal & Accounting Glossary
Estate Agent is a British term for a person or business that arranges the selling, renting or management of homes, land and other buildings, although an agent that specialises in renting is often called a Letting Agent. Estate agents are mainly engaged in the marketing of property available for sale and a Solicitor or Licensed Conveyancer is used to prepare the legal documents. In Scotland, however, many solicitors also act as estate agents, a practice that is rare in England and Wales.
It is customary in the United Kingdom and in Ireland to refer to real estate or real property simply as property.
The term originally referred to a person responsible for managing a landed estate, while those engaged in the buying and selling of homes were “house agents”, and those selling land were “land agents”. However, sometime during the 20th century “estate agent” started to be used as a generic term, perhaps because it was thought to sound more impressive. Estate agent is roughly synonymous in the United States with the term real estate broker.
The full legal term and definition of an estate agent within the UK can be found on the Office of Fair Trading (OFT) website. Enforcement of these regulations is also the responsibility of the OFT.
In the United Kingdom, residential estate agents are regulated by the Estate Agents Act 1979 and the Property Misdescriptions Act 1991, as well as the more recently enacted Consumers, Estate Agents and Redress Act 2007.
Some estate agents are members of the Royal Institution of Chartered Surveyors (RICS), the principal body for UK property professionals, dealing with both residential, commercial and agricultural property. Members, known as “Chartered Surveyors”, are elected based on examination and are required to adhere to a code of conduct, which includes regulations about looking after their clients’ money and professional indemnity insurance in case of error or negligence.
For residential property, there is also a trade association, the National Association of Estate Agents (NAEA), but it has limited scope for disciplining members. The Ombudsman for Estate Agents Scheme, which obtained OFT approval for the Code of Practice for Residential Sales in 2005 and, as of November 2006, claims to have 2532 member agencies.
There is no legal requirement to belong to either organisation in order to trade as an estate agent. Because of the lack of effective regulation, dishonest and fraudulent practices tend to exist in the business.
A handful of national residential estate agents chains exist, such as Connells and Countrywide plc, with the majority being locally or regionally specialised companies. The number of UK Estate Agent offices operating in the UK, as of August 2007, is over 18,000 according to Home.co.uk.
Several multi-national commercial agencies exist, typically being Anglo-American, pan-European or global. These firms all seek to provide the full range of property advisory services, not just agency.
Only a handful of large firms trade in both commercial and residential property.
Estate agents who handle lettings of commercial property normally charge between 7–10% of the first years rent as fees, this is in addition to taking the first month’s rent in its entirety. This will be the total fee. If, say, two agents are charging 10%, they split this between them. Estate agents selling commercial property (known as investment agents) typical charge 1% of the sale price.
The fees charged by residential Letting Agents are extremely variable, depending on whether the agent manages the property or simply arranges new tenants. Charges to prospective tenants can vary from zero to £300 in non-refundable fees usually described as “Application”, “Administration” or “Processing” fees (or all three). There are no guidelines for letting agents on charges except that they are forbidden by law to charge a fee for seeing a list of properties; otherwise, they are free to charge as they please.
The first month’s rent in advance plus a refundable bond (usually equal to a month’s rent) is also generally required. Most residential lettings in the UK are effected through a particular form of contract known as an “assured shorthold tenancy”. Assured Shorthold tenancies (generally referred to simply as “Shorthold”) give less statutory protection in terms of security of tenure than earlier, mostly obsolete, types of residential lettings. Shorthold Tenancy agreements are standard contracts generally available from legal stationers and the internet for around £1, the average lettings agent will charge £30 to provide such a contract.
Estate agents selling residential property generally charge between 1/2% to 4% of the sales price plus VAT, depending on the contractual arrangement and whether an individual firm has sole rights to the sale.
Since around 2000, online estate agents have provided an alternative to the traditional fee structure, claiming cheaper, fixed fee selling packages. These online estate agents claim to give private property sellers the ability to market their property via the major property portals (the preferred medium used by traditional high street estate agents) for a fraction of the cost of traditional estate agency.
New types of property portals based in the United Kingdom have started to encourage the UK and worldwide estate agents to collaborate by showing all their properties, thus allowing site visitors to see a vast array of UK and overseas properties all on one website.
Many estate agents are using the latest technology to assist in the sale of houses, with companies enabling home buyers to receive property details while outside a house using a mobile phone.
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This glossary post was last updated: 1st May, 2020 | 1 Views.