The buyer is polite, impeccably turned out, and ticks all the boxes. A cash buyer, all the documentation in hand, ready to go. He wants to complete rapidly and has a prestigious law firm lined up for the conveyancing. After weeks of waiting, your commission is tantalisingly close…

You photocopy his passport and a couple of other proofs of ID, and you’re ready to go. Or are you?

Appearances can be misleading. It’s all too easy to assume that someone is above board, when in fact that could be far from the case.

And these days, HMRC, which enforces anti-money laundering legislation (AML) is cracking down on agents who don’t carry out thorough AML checks. Under AML rules, agents are required to verify the identity not just of the vendor but also the buyer.

HMRC figures show that from May to October 2022, 68 estate agents were fined a total of £519,000 for not complying with rules designed to stop criminals laundering money from illegal activity. A further 56 fines were levied between 1 January and 31 March 2023.

In most cases the fines are for failing to register with HMRC, or registering late, with fines ranging from anywhere between £2,000 and £15,000.

Complacent about compliance

Martin Cheek, Managing Director of SmartSearch – one of the biggest providers of AML checks and verification, which carries out more than three million checks a year – explains that agents must not only register with HMRC but show they have proper risk-assessment procedures in place.

“They all have a duty to complete due diligence and check they are not dealing with anyone on a sanctions list,” he says.

“The majority of agents really don’t feel they have to comply. I think generally the industry feels it’s a sledgehammer to crack a nut because they don’t handle any cash.

“It is quite a complex area for them. They just want to get on selling properties and I think most of the agents I speak to find it an unwelcome distraction.”

Most of the agents I speak to find it an unwelcome distraction.”

According to Cheek, the biggest issue that agents tend to fall down on is carrying out satisfactory client due diligence – they have to prove to HMRC that they have adequate risk-assessment policies and procedures in place.

Martin Cheek, SmartSearch

Using SmartSearch, agents simply log on to an online platform , enter the name and address of the individual and click what kind of check they want. An app will then allow them to take a photo of the passport or driving licence and compare it instantly with a ‘selfie’ of the person.

“I would hazard a guess that we get a couple of thousand fraud cases a year in some shape or form. Some are really obvious – someone has stuck a photo on a stolen passport – but some of them are quite sophisticated.”

Increasing pressure

Emma Burdis, Head of Compliance at Iamproperty, which offers verification checks via its movebutler platform, says property fraud is increasing.

“Criminals are constantly finding new and sophisticated ways to use property to launder money,” she explains. “This places an increasing amount of pressure on the industry to also be more sophisticated in their efforts in preventing them from doing so.

Whilst some agents still prefer the more traditional verification methods, these methods alone are no longer enough.”

“Whilst some agents still prefer the more traditional verification methods, these methods alone are no longer enough to be fully AML compliant – fraudulent documents are becoming more difficult to spot, and criminals are often those we least expect.”

Emma Burdis, Iamproperty

It’s not just Russian oligarchs that agents need to be wary of – organised crime is also a big player, along with individual fraudsters.

Burdis highlights a case that came to light in 2021 which received a lot of media attention.

“A property was sold whilst the legal owner was away and the owner returned to find someone else living in their home,” she says. “The legal owner’s identity had been stolen and illegal documents created. These crimes highlight the importance of adopting robust processes and the use of AML and ID verification technology.

“Most agents are concerned about money laundering, unfortunately ensuring compliance can be time consuming and with the risks and obligations ever changing, confusing.”

Culture of control

Harriet Holmes, AML Services Manager at compliance platform Thirdfort, emphasises that agents must implement robust policies, controls and procedures to deter fraud and money laundering.

“Agents should foster a culture where staff actively participate in the compliance process, alerting managers to issues and concerns as they arise,” she stresses. “Firms must consider the controls they can deploy to mitigate the risks associated with non-compliance and document the process they are going through, and record their considerations.

Agents should foster a culture where staff actively participate in the compliance process.”

“Making such records helps agents reduce the risk of money laundering and fraud failings. It also provides evidence to the regulator of the steps the firm has taken to be compliant.”

She says it also crucial to have a comprehensive training programme in place for staff, so that they are aware of the risks, and the procedures in place to deal with them.

Holmes warns that agents may leave themselves open to criminal prosecution, regulatory fines, professional negligence claims and reputational damage if they do not conduct client due diligence and AML checks to the required standard.

“It’s a huge amount of work to stay compliant while keeping admin from skyrocketing,” she says. “Some agents are still using traditional or manual approaches to client due diligence where agents manually check the client’s passport, identification, or bank statement. However, such manual processes have significant drawbacks, both in terms of the risks of manually checking documents and the time it takes.”

Harriet Holmes, Thirdfort

She adds: “Agents would naturally prefer to spend their time focused on sales, rather than compliance, which is why agents are increasingly adopting digital tools to help stay compliant while reducing the time associated with fraud and AML checks.

“Forward-thinking agents know that relying on human judgement alone for AML is risky and are increasingly turning to technology to help reduce the risks.”

Thirdfort has also recently launched a Secure Share product that allows agents to share verification with conveyancers.

Removing repetition

“During a property transaction, both the estate agent and the conveyancer will ask the buyer and seller to complete the same know your customer, AML and source of funds verification,” says Holmes.

“However, this needless repetition slows down property transactions, delivers a poor experience for home movers and creates unnecessary friction between the agent and lawyer. To overcome these issues, property professionals can now offer simple and secure report sharing for their clients and the other professional advisors involved in the process.”

The message to the industry is clear – don’t take shortcuts when it comes to AML checks, or it may come back to haunt you.

The post ‘Don’t take chances on AML checks – the risks are real’ appeared first on The Negotiator.

I wasn’t earning enough in those early days to pay this tax rate myself but my boss was and he seemed to spend at least half of his working day trying to find ways around it.

It now seems almost certain that we will have a Labour government by the end of this year so what can we expect them to do on the tax front?

So far, they have kept their tax plans deliberately vague for fear of frightening the electors. They have said that they will impose VAT on private school fees. I doubt it will generate much tax revenue but the parents who pay school fees don’t generally vote Labour so they don’t mind about alienating them.

They have also said they are going to end the tax concessions for non-doms, but this too will raise very little money. Most of them will simply leave the country, but foreign nationals aren’t allowed to vote in a UK election so they don’t care.

However , these tax increases are not nearly enough to pay for all their spending pledges or to satisfy their ideological zeal to tax the rich. So what else are they likely to do?

Boosting business sale tax

As a business sales broker, my greatest fear is that they will get rid of the 10% tax rate for people who sell a business (the business asset disposal relief scheme). If they do , the owner of a business worth £1 million will pay £200,000 tax on the sale proceeds rather than £100,000.

We are already getting a huge number of enquiries from people wanting to complete a sale before the expected election date in November. However, if this tax charge does come in, then a lot of business owners who miss the deadline will postpone their sales and the government will get 20% of nothing.

CGT abolishment

A second concern is that they might abolish Capital Gains Tax (CGT) altogether. This would mean that everyone would pay income tax at up to 45% on all their income however it was earned. This would be catastrophic. Buy-to-let landlords would not be able to sell their properties and shareholders would not want to dispose of their shares. It would bring the economy to a grinding halt and have a huge impact on estate agents and letting agents.

I doubt this would raise much tax either because investors would postpone their sales. However, it is a policy that would no doubt generate very positive headlines in the tabloid press and any attempt to reverse the policy would be difficult because it would be seen as tax cuts for the wealthy.

Risk of recession

The greatest threat however is the risk of a recession. The top 10% of taxpayers pay around 60% of all tax revenue and the top 1% pay almost 30%. If large tax increases are introduced then there is a great deal that these people can do to avoid paying them. Some will leave the country. Some will pay expensive tax lawyers to find ways around the legislation. Some will delay taking their capital gains. Some might just retire early.

The loss of tax revenue could be huge. When Margaret Thatcher reduced the top rate of tax to 40% in 1989 , there was an immediate increase in the amount of tax that was collected from higher rate taxpayers. It is well understood that when the tax rate increases above a certain rate the amount of revenue actually reduces.

Your options are to sell your business, your shares and your property investments now.”

So, what can you do to prepare for all this? If you don’t want to leave the country and can’t afford £1,000 per hour for a top-notch tax adviser your options are to sell your business, your shares and your property investments now to crystalize your capital gains at the current rate and advise your clients to do the same thing. Then batten down the hatches and wait for the electoral cycle to run its course and for the storm to blow over.

I hope that I am wrong about all this and that our next government will have Blairite tendencies, not Corbyn-like tendencies, but as the old saying says, we should hope for the best and prepare for the worst.

The post BLOG: Are you ready for Labour’s tax bombs? appeared first on The Negotiator.

Your legs turn to jelly as you consider the possible consequences – rental payments that could be compromised; completions that won’t take place; the leaking of confidential client information, the potential fines that could follow… The loss of reputation, the legal costs… it doesn’t bear thinking about.

You phone your IT provider, but a few hours later you are no further on. He’s had a look, but says he can’t help you – you need a cyber security expert.

In a panic, you phone your insurance broker. “We’ve got cyber cover, haven’t we?” “I’m afraid not,” she says.

Deep down inside, there’s a gut-wrenching fear that this could be the end of your This is the scenario being played out all too frequently across an industry that is surprisingly complacent about protecting itself from cyber attacks. Just a few weeks ago, hundreds of property sales were left in limbo after conveyancing tech firm CTS was hit by a cyber incident, in an apparent carbon copy of an attack on conveyancer Simplify in 2021.

There have been many more attacks that have gone unreported as firms scramble to keep information out of the media in a bid to protect their reputation. Research released by insurer Hiscox in October found the property industry was the most at risk from cyber attacks, while 53% of businesses in all sectors had experienced an attack over the past year – up from 48% in 2022.

Despite the figures, it’s a risk that many estate agents are still complacent about, according to Oliver Wharmby, Client Director at cyber specialist Mint Insurance Brokers. “Ten to 15 years ago it was financial services that was being targeted, but everyone has tightened up in the regulated sector. Estate agents are not regulated so they are left to their own devices when it comes to cyber security, and I think a lot of them have got their heads in the sand, and don’t quite appreciate the risks that they face,” he explains.

I think a lot of them have go their heads in the sand. Oliver Wharmby, Mint Insurance Brokers.

“A lot of them have really quite old security systems – they are not updating them, they are not updating passwords, they don’t have multi-factor authentication.

“We run risk assessments all the time for our policyholders, a simple non-invasive scan of their domain, and it highlights vulnerabilities. You would be absolutely amazed – some of these risk assessments we are getting back for quite well-established companies are showing major gaps in their IT. That means that at any given moment, they could be shut down.” Estate agents are not regulated so they are left to their own devices when it comes to cyber security.

Targeting data

Natasha Barrow, Head of Affinities at broker Arthur J Gallagher, agrees. “It is a risk that is becoming more important for organisations, as we live in a world where cyber-related incidents are common,” she says. “Cyber criminals are constantly evolving their means of attack and therefore all businesses must have preventative measures in place as well as a robust incident response plan.

Cyber criminals are constantly evolving their means of attack and so all businesses must have preventative measures in place as well as a robust incident response plan. Natasha Barrow, Arthur J Gallagher.

“While businesses cannot prepare for every eventuality, they can increase protection against cyber exposure by monitoring and strengthening their digital defences. In addition, it is vital that a business keep employees up to speed with cybersecurity training as we know that one of the biggest threats to any organisation’s cyber security is human error, which equates to 95% of all data breaches.”

Wharmby stresses that it’s important for agents to understand that they are being targeted because of the data they hold. “They hold some quite sensitive data like passport numbers, bank account details, address details, contact names, phone numbers. They may have alarm system codes, details around proof of funds. That is quite sensitive information. They are holding onto all that information and it may not be secure, it may not be encrypted.”

He says that having cyber insurance in place can literally be the difference between your business surviving an attack or going under.

“If they get hacked and they ring up and say, ‘Have we got cyber?’ and we say ‘No’, they are stuffed,” he warns. “We had a client who was down for two weeks, and as they were using internet calls – VOIP – they couldn’t even make or receive calls; they had no access to their IT systems; they were shut down, basically.

You can’t trade, you can’t complete property transactions and you’re reliant on a forensic engineer to get your business back up and running.

“You’ll have an ICO investigation, you may have an ICO fine if your cyber security is not adequate, you may then have a third-party claim from anyone where you have not protected their confidential information properly.

“While you are juggling all that, your business is shut down, you can’t trade, you can’t complete property transactions, you can’t manage portfolios and you’re wholly reliant on a forensic engineer to get your business back up and running. If they can’t, are you going to pay a ransom? We know some big corporates recently have paid ransoms – very meaningful numbers.

“You need to know that on a Monday morning, when your emails are down and your screen is flashing ‘You’ve been hacked’, that you can pick up the phone and within a matter of minutes you’ve got a forensic team parachuting in their experts to sort you out.”

Natasha Barrow points out that the Information Commissioner’s Office (ICO) can impose fines of up to £17.5m or 4% of a business’s annual turnover for a serious breach, meaning the financial impact of cyber attacks could prove substantial to estate agents, especially if they are relatively small. As well as experiencing a loss of income through fines, businesses could also face additional costs such as legal fees.

“As well as the direct financial implications, cyber events carry a reputational risk which could prove costly and time consuming,” she says.

“Along with reviewing digital defences and staff training, it’s important to have a response plan in the event of an attack or outage. We work with clients to put this in place so that all employees know what to do if an incident occurs. This can prevent delays in fixing the problem and help with mitigating any potential further damage.”

Huge legal costs

Levi Redman, Commercial Account Handler at Hamilton Fraser, says many agents are totally unprepared. “There is still quite a lack of awareness of knowledge of the need for cyber and data insurance,” he observes. “A lot of agents don’t have cover in place, unfortunately. The legal costs alone can be massive with things like this.

The hackers might be able to access personal data on some of their clients, and they might potentially have to pay compensation to the victims. There may be fines as well. Levi Redman, Hamilton Fraser.

“The risk of cyber attack has multiplied over the years – it’s something that is becoming more and more prevalent – a lot of people assume it’s just the big companies it happens to. Of course, you only hear about the big companies as they are newsworthy, but a lot of them target smaller companies quite regularly and you just don’t hear about it.”

He warns that simply being unable to use their computers for a few days can be a hammer blow for firms.

“The hacker might have caused some damage or corrupted the computer systems and programs, there are all sorts of costs that might come into it,” he explains. “Then there is the extortion, which is going to be the main factor in the ransom demand.

“Costs can start to build up when you consider other things they may have to pay out for – the hackers might be able to access personal data on some of their clients, and they might potentially have to pay compensation to the victims. There may be fines that come with that as well, depending on the breach and whether they were as well protected as they should have been.”

He says that firms that don’t have cyber cover in place are playing with fire. “It could easily be the end of any business if they experience a cyber attack,” he states.

How insurance helps

Natasha Barrow says cyber cover can help manage a cyber incident in a number of ways, including:

• Legal services to support with the legal and regulatory consequences
• Digital forensics and incident response to help determine the existence, cause and scope of the incident on the affected computer system and help ensure the cyber-criminal no longer has access to the IT systems
• Ransomware negotiations, notifications to affected 3rd parties, a specialist team to help notify and protect the customers, suppliers and stakeholders that may have been impacted by the breach
• PR and crisis management guidance to help manage the business reputation during and after an incident.

Security protocols

Both Oliver Wharmby and Levi Redman stress that firms will be expected to have protocols in place to help prevent potential attacks – and that if you fail to do so, you could be left uninsured. “If they haven’t answered those questions truthfully or they haven’t lived up to their responsibilities, then obviously they have the real risk of not having a claim paid out,” says Redman. “Those assumptions would be things from the basics [eg strong, secure passwords] to having encryption on all your computers, laptops and USB sticks – anything that holds or processes personal data; that you back up your data weekly off-site; and that you have anti-virus software in place and regularly apply updates.”

Wharmby agrees that insurers will expect you to meet minimum requirements in terms of security, and unless you satisfy those you won’t even get cyber cover from the specialist insurers he deals with.

“But it’s in your interest to meet those requirements because it’s your business at the end of the day,” he explains.

“I always say to clients, ‘If you had a vintage car you would take it to a specialist mechanic who understands it; so it gets properly looked after. Why would you not do the same for your business? It’s your livelihood and it’s keeping a roof over your head, why would you not make sure you are protecting it with proper cyber security systems and cyber insurance.”

HOW DO THE HACKERS GET IN?

Oliver Wharmby gets inside the heads of cyber criminals

“People are complacent – staff are probably going to be buying Amazon orders and looking at eBay on their work systems, and they are likely to get emails coming through. They will click on a link and inadvertently allow third-party access.

Oliver Wharmby

Once they have gained entry to your systems, the hackers will probably sit there for months, if they can, until proper password updates take place. And even then they can still get in – if they want to get in, they will get in.

They will typically hold you to ransom on a Wednesday and give you 24 or 48 hours to pay a ransom.

They will typically familiarise themselves with the day-to-day operations, who has got authority, who is in accounts, who is signing off payments, who the third-party contractors are, what the busy periods are.

Typically, they are quite strategic in the way they hold agents to ransom – they tend to know that Friday is an important day in the sales sector, being completion day, and the end of the month is quite an important day as well – you’ve got payday, if you can’t pay your staff they are going to shut you down.

They will typically hold you to ransom on a Wednesday and give you 24 or 48 hours to pay a ransom, otherwise they will threaten to send emails out to your database. Emails will get sent to tenants, saying, ‘We have changed our bank details, please pay your rent into the following account’.

These are emails that are sent from your firm’s email address – because they have been hacked they are able to send emails from the company’s server. The disclaimer on the bottom will even say ‘Please beware of cyber threats, don’t make payments unless you are absolutely sure of the authenticity of the email’. The tenant has no reason to believe they are not genuine.

The hackers know full well that businesses will be shut down over the Christmas period and they are tactically going after companies while they are shut down to cause maximum damage and cover as much ground as they can while the businesses are dormant.

They will be downloading email inboxes without you knowing, they will be going into sensitive files and taking data, and then they will hold you to ransom.

They are criminals, these guys, and no-one is catching them – they operate in lawless territories and they are very, very clever, organised gangs that have access to lots of sophisticated tools and kit, and they’ve been doing it for a long time now. They are working with teams of people that are incentivised and motivated. We are not talking about a 17-year-old guy in his bedroom at his parents’ home anymore.

COSTS

(inc Hamilton Fraser standalone policy)

Hamilton Fraser add-on policy – £140 for £100,000 of cover; cover also available up to £1 million.
Mint – a typical standalone policy will cost £500 for a business with £500,000 of income.

The post Cyber-crime – ‘You’ve been hacked!’ appeared first on The Negotiator.

And there the Minister was, looming large on a huge screen overlooking a hot chandeliered ballroom in a quiet corner of Birmingham Airport. ‘The Minister’ was Michael Gove, Secretary of State for Levelling Up and of course housing too, peering out bemused over delegates like an all-seeing Orwellian Big Brother.

Nigel Lewis

The 1,000-odd people in the hall had bristled with anticipation before his virtual arrival while NRLA boss Ben Beadle sweated quietly on the podium, having clearly been less than certain Gove would log on.

I gather that it was a close-run thing – Rishi’s Cabinet meeting had overrun that morning and a meeting with Jewish leaders had taken its toll on his diary too – unsurprising given the horrors in Israel and Gaza unfolding at the moment.

Renters red tape

But now Gove had something more mundane to discuss – the belief that his nearing and much-debated Renters (Reform) Act, which will make life more difficult for both landlords and letting agents once it gets Royal Assent sometime next year, was a good thing.

Overall, most of the delegates didn’t seem too bothered by the extra red tape they would face. This includes national registration in England via the Property Portal; signing up to and paying for a redress scheme to deal with tenant complaints (something agents already have to, of course) and at some point (following a delay announced by Gove earlier that week) the abolition of Section 21 no-fault evictions.

This will make evicting bad tenants more difficult and expensive.

This will make evicting bad tenants more difficult and expensive going forward, whatever Gove says.

What really got the audience going, which is something the Housing Secretary didn’t mention until prompted by Beadle from the podium, was the issue of taxation. It’s clear most landlords are still hopping mad about George Osborne’s 2015 decision to phase out allowing landlords to claim their mortgage interest payments against personal tax, and the only time Gove got heckled was when he tried to defend it.

His was a familiar but odd argument – that it’s unfair to give landlords tax incentives when home buyers and in particular first-time buyers don’t get tax breaks.

And yet they already get help; many first-time buyers have purchased their homes through Help to Buy, which by any yardstick is a Government subsidy, and a significant proportion of home buyers don’t pay stamp duty at all on their property purchases, while landlords have to pay an additional 3%.

Shouty landlords

But despite the shouty landlords in the audience, Gove overall proved his prowess as a politician; unlike Sunak he has the common touch and can be self-deprecating when necessary but unlike piffle-paffle Boris, he talks well-argued sense on most subjects.

It’s easy to see why some people at the conference thought he might become the next Tory leader, assuming the party’s likely decimation at the next General Election. Remember Labour remains 20 points ahead in the polls.

But as one industry leader pointed out to me after Gove’s speech, he’s also good at talking the talk in front of audiences and editing his politics to suit them, as all politicians do.

Whether his mood music about giving landlords tax breaks and his soothing talk about the Renters (Reform) Bill being a bulwark against bad landlords and not something good landlords and letting agents need worry about, is true or not remains to be seen.

Just £10 extra

Recent research by his department claimed the legislation will cost landlords or letting agents just £10 a year more in additional administration, something most within the property industry consider to be more wishful thinking given that the extra cost of all evictions going to court will be considerable for many property managers.

And so Gove wished the conference farewell and, one assumes, some young parliamentary private secretary gopher hit the Leave button on his laptop.

“Well, that was fun, wasn’t it,” said Beadle, still grasping the podium. I guess it was, if the fine detail of crafting private rented sector legislation is your bag.

The post Gove’s government appeared first on The Negotiator.

Nigel Lewis

The most obvious for sales agents is that housing ministers love to talk about building more homes while the rump of Tory voters don’t want more homes built in their area. Successive Governments have tried to handle that by pretending to back both camps at the same time with predictable results – too few homes are being built.

For letting agents the most recent example of ideological idiocy is the Renters (Reform) Bill which, anyone with any level of thoughtfulness knows, will achieve the opposite of what it hopes to achieve, i.e. a better-quality private rented sector. The current Tory government, and several of those before it, have embraced the Shelter approach to housing – namely that most landlords who are given a free hand in the private rented sector will provide terrible homes.

It is clear that political ideology and on-the-ground practicality are colliding.

The answer to this of course is more legislation and for successive Tory housing secretaries and ministers to position themselves as ‘pro tenant’ and ‘anti landlord’. This makes sense politically – there are at least nine million tenants in the UK within the PRS many of whom the Tories would like to vote Conservative, while most of the country’s 1.5 million landlords probably already do.

No sense

But it doesn’t make sense for landlords, agents or in the long run tenants. Higher taxes, regular drubbings in the media and Parliament, plus greater red tape, will persuade enough landlords to leave the sector that it will shorten supply and jack up rents even more. This is already happening. And it’s not just over-statement by trade organisations like the National Residential Landlords Association or Propertymark; data from independent organisations including Savills and the Office of National Statistics show more landlords than normal are quitting the sector, not helped by spiralling interest rates for BTL mortgages.

It is clear therefore that political ideology and on-the-ground practicality are colliding. The annoying bit is that this makes it difficult for letting agents and tenants, both of whom need more properties within the PRS, but also the Government which has created a situation where rents are spiralling out of control particularly in London and the South of England.

I am not exaggerating here – the main rental indices including Rightmove, Goodlord and the ONS have all reported historic average rents across England and Wales, and at least two of them have cited the landlord exodus as a contributing factor.

BTR to the rescue?

The Tories say they have a solution to this – the build-to-rent sector. Billions of pounds are being poured into this kind of corporate accommodation and the sector’s advocates like to point out how its tenants get ‘professional’ property management, insinuating agents and private landlords are ‘amateurs’.

But it’s going to take decades before BTR makes an impression on the housing market. Even its keenest supporters agree there are only 80,000 completed, a similar number under construction and 110,000 in planning within a market of 4.5 million privately rented households – or 5%. Those completed represent just 1.7%.

It is also disingenuous of politicians to hang their hopes on this sector. BTR developments are land-hungry and despite protestations to the contrary, are largely affordable only for professionals in city centres.

I would urge Labour, who (it is very likely) will be running housing policy from next year onwards, to take a less ideological and more practical approach to running the private rented sector. It needs it.

The post Practicality, not politics appeared first on The Negotiator.

Breaches of these rules can cost businesses up to £500,000 in fines, prohibition on their business activities and serious damage to their commercial reputations. Not forgetting the potential liability of the company directors for the same eye-watering fines – and disqualification if the fines are not paid.

Yes, the UK General Data Protection Regulation (GDPR) and Data Protection Act (DPA) are important, but companies often overlook, or in lots of cases aren’t aware of the rules that they are most likely to fall foul of, The Privacy and Electronic Communications (EC Directive) Regulations 2003 (PECR).

Definition of direct marketing

‘Direct marketing’ is the communication by whatever means of advertising or marketing material which is directed to particular individuals. It covers any form of marketing when you are doing so to named people. It can be in any form, via phone, emails, texts, social media and so on.

Direct marketing covers any form of marketing when you are doing so to named people.

Andrew Swan

Many companies are doing, but not always aware that they are engaged in direct marketing, which could be contacting people who have previously indicated an interest in buying, selling or renting a property or other forms of sales.

‘PECR’ sets out what you can and can’t do when it comes to direct marketing. The regulations dictate what you must consider when telemarketing, like adhering to the rules of the Telephone Preference Service or people’s preferences for your marketing. Likewise, they tell us what you can do with electronic marketing, such as emails, and when you need consent.

Relevance to agents

Why is this of interest to the property sector? ICO investigations and enforcement are very often triggered by complaints being received about particular companies. These are directly from members of the public and through third parties, such as the Telephone Preference Service, a blocking service for unwanted marketing calls, and the 7726 Spam Reporting Service regarding unwanted text messages. The ICO will monitor the complaints being received and, if they are significant in volume, they may start a formal investigation.

However, they will also closely monitor the sectors that are being most complained about and pay particular attention to companies within them. As an example, they have recently been investigating a lot of companies in the energy and home improvement sector, which they called ‘Operation Tinago’.

This is because the sector generated a high level of complaints from its collective marketing activities and therefore came to the attention of the ICO. Some of the companies involved have received hefty fines, for example a company in Preston called Crown Glazing Limited has just been fined £130,000 for breaching PECR.

Agents targeted

The ICO publish its monthly complaint figures and it seems property and estate agents are creeping up the leaderboard. In May 2023, the sector generated 191 complaints to the ICO, which was mainly from email marketing. Whilst the home improvement businesses generated 440 complaints in the same month, the number is still high and places the property sector in the top 10 most complained about.

Given this unfortunate league table position, it may only be a matter of time before the ICO turns its attention on the sector and starts knocking on the doors of property companies and estate agents. If the figures do not improve for the property sector, it looks as if it is just as matter of time before it becomes the focus of the ICO’s attention and individual investigations will follow.

Keeping the ICO at bay

The easiest, quickest and cheapest way to protect your business is to get savvy and train your staff. One of the main problems I encounter when representing such companies is that they have not paid any attention to the rules and, in particular PECR. The ICO expect that they have provided relevant training to their staff and have suitable PECR policies and procedures in place, but very few companies ever do. Their lack of attention to the marketing rules can actually aggravate the situation and make matters worse.

The ICO requests a lot of information at the start of an investigation but the one sticking point for most companies always comes in the form of this request: “Please provide copies of any policies, procedures or training materials used to inform staff about PECR.”

Most companies struggle to provide such materials. How would you do? If you are doing any direct marketing at all, you should make sure that you understand the laws that apply. You should provide staff training and have relevant policies and procedures. If you don’t, you are more likely to get it wrong and have the ICO knocking at your door.

Andrew Swan is a a leading specialist solicitor in the UK, defending companies subject to regulatory investigation and enforcement, in trouble with the ICO. He offers training and advice on direct marketing laws.
www.andrewswanlaw.co.uk

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Nigel Lewis

She asked for the deletion of the whole article on the basis that my article had published her name and address and by not deleting it had infringed her ‘right to erasure’, even though the article was based in part on a public document – in this case a First Tier Tribunal decision – which had named her along with the landlord. Her request was politely refused on the basis that it didn’t fall within the Information Commission Office’s rules for journalists – who have a much freer hand to publish a private individual’s personal information in the public interest. But what this illustrates, and should worry estate agents, is that more and more members of the public are becoming aware about their data rights. And that includes property data.

While retailers may be dimly aware of our preferences for food, clothes or tech, agents of all sizes – as well as the industry’s growing tech giants – hold a very wide range of information such as address, price history, mortgage details, the incomes of those that live there, property value, rent paid and much more.

Selling to data brokers

Talking to several industry insiders it is clear that it’s become increasingly common for information and photos created about homes to be kept for agents’ own use or sold on to data brokers for business gain. Given this is happening, do the highly ‘generalist’ nature of the GDPR data rules really fit the property industry adequately?

GDPR, and the rules it requires agents and all other businesses in the UK to follow, focus very much on the capture, storing and processing of personal information that can identify them – but does not cover information about the homes they live in. After all, there are specific laws and rules about how agents must treat their customers – for example how and when offers from potential buyers must be passed on. So why should there not be an industry-specific set of rules on how agents, portals and software companies handle data about homes supplied to them by their owners, landlords or tenants?

The property industry is risking its ‘Facebook moment’…

This issue is most obvious when you look at the big portals, all of which publish the details of how much properties have been advertised for in the past, and the Land Registry data on the final selling price. The current Zoopla TV advertising campaign sums up the argument succinctly – people feel uncomfortable discussing how much they paid for a property, so why not just go and find out online instead?

While most of the public seem happy with this arrangement, they might be less impressed that their historic and even current activity within the housing market is being captured and used to pass on leads to mortgage firms for a fee, for touting purposes and to be sold to non-property businesses such as white goods manufacturers?

Surveys – an area of concern

One argument is that where data has a role in ensuring the better operation of the industry – such as the freely available EPC online register and the lists of PRS landlords most council’s put online too – then it can be justified.

Nigel Walley of the Residential Log Book Association, points out another area of concern… surveys.

He claims that it has become ‘standard practice’ for the mortgage industry to enable the data within valuation surveys to be sold to data brokers.

“The surveying company retains the intellectual property for the survey and the brokers aggregate the data and sell it on to portals and other proptech companies,” he says. “No homeowner is given the option to keep the contents private, or to assume ownership of the data.”

Many agents may say that this has all been going on for a long time and to date no one has been outraged enough to cause a fuss.

But the property industry risks its ‘Facebook’ moment. This came for the social media platform when during the 2010 it became clear the platform had been involved in a ‘data harvesting’ exercise facilitated by UK firm Cambridge Analytica to capture people’s personal details and then use it to target them with political advertising via Facebook. It nearly brought down Facebook and the company was fined heavily while its CEO Mark Zuckerberg being given a public roasting during an official investigation.

I am not suggesting that such a scandal would ever envelop a company within the property industry. But if a public debate were to be ignited about what agents do with property data, some argue largely without consent, it could damage their already shaky reputation even more. Maybe it’s time to tighten up this area of data handling?

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This appeals to those who personally and commercially resent anyone sticking noses into their daily lives – which is most of us really – but on the ground it is beginning to have serious consequences for letting agents.

System in trouble

I talked to Paul Shamplina, he of evictions specialist Landlord Action, who has serious misgivings about the way the Government is operating the courts system – and he’s joined by the mighty ranks of the Law Society and the UK’s solicitors’ trade organisations in this view. They have all been warning for some time that a lack of investment in the justice system overall is now coming home to roost in the County Courts, where discretionary evictions hearings are conducted. Not enough judges are being trained and hired, too few courts have the capacity to get bona fide evictions expedited and, in recent weeks, it’s clear the bailiff system is now in trouble.

Nigel Lewis

Shamplina says the court system is on the brink of a severe bailiff crisis with a growing number of court appearances and warrants being put on ice or cancelled, leaving many landlords and letting agents high and dry. Some landlords are waiting six months, and sometimes 12 months, to evict tenants. The Ministry of Justice has said somewhat bizarrely that the bailiff shortage is being caused by many court-employed bailiffs not having enough personal protection equipment (which is a polite term for stab vests) and who have consequently been told to stand down until it’s delivered. This may be true, but there are plenty of people within the bailiff community who think the suspension of activity is more likely to be a result of low investment in the courts, who pay these bailiffs and provide their equipment.

Some landlords are waiting six months and sometimes 12 months, to evict tenants.

Several leading operators report County Court bailiffs managing their work schedules by only attending the serving of a warrant or an eviction for short periods of time – so if a tenant proves tricky the bailiffs just… bail.

Powerless

This may all sounds like the ramblings of the muttering classes, but if the bailiff system grinds to a halt – which it is right now – it will mean more landlords and letting agencies being powerless to get rid of errant tenants who refuse to move on and continue to rack up rent arrears. It is also places the Government’s promised Renters (Reform) Bill under the spotlight – how can the Government abolish Section 21 notice ‘no fault’ evictions when the system that will have to pick up the slack as the new and improved Section 8 notices all go to court shudders to a halt.

This is what happens when a Government constantly relies on promised reforms and improvement of the housing sector, but then delivers it piecemeal or not tall all.

Two examples spring to mind. The much-heralded reform of our estate agency sector via ROPA and the promise to build more homes. The former has disappeared into some very long grass, while the latter has largely failed to materialise.

These things matter – for example the estate agency industry expended a lot of effort and debate over RoPA, not to mention the huge input and long hours of Lord Best, whom I told is not happy that Ministers have so far failed to come up with legislation to implement RoPA.

And letting agents and landlords not having confidence in a shaky evictions system, along with the changes coming down the line within the Renters (Reform) Bill, will do nothing to improve their lives nor increase supply into the private rented sector, which is much needed. As the almost monthly sky-rocketing rentdata proves.

I hope the next Government, whoever that might be, has the will power to overcome this foot dragging and get moving.

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