In collaboration with Paragon, Beale & Company Solicitors LLP, who manage our LawSelect claims and circumstances, we have produced this article examining the impact of recent changes to the Law Society’s Property Information Forms.
On 25 March 2024, The Law Society published updated versions of the TA6 Property Information Form and TA7 Leasehold Information Form to reflect the latest guidance issued last November by National Trading Standards to property agents in its Material Information in Property Listings guidance note. Initially, many firms were required to adopt the new forms from June this year. However, the Law Society has now deferred their introduction amidst widespread criticism. This article delves into the context of the new forms, the changes introduced, and the initial reactions to them.
Background
The Consumer Protection from Unfair Trading Regulations 2008 (‘Regulations’)[1] impose obligations on businesses based in the UK, including property agents, regarding the disclosure of material information (‘MI’) in property listings, prohibiting the making of a ‘misleading omission’. The introduction of the Regulations led to the repeal in 2013 of the Property Misdescriptions Act 1991 which had made it an offence for sales agents to provide false or misleading statements but did not mandate the provision of information.
The Regulations define MI as “the information which the average consumer needs, according to the context, to take an informed transactional decision.” Under the Regulations, a business commits a misleading omission by omitting or hiding MI, or providing it in a manner which is unclear, unintelligible, ambiguous or untimely, such that it causes or is likely to cause the average consumer to take a transactional decision they would not otherwise have taken.
Compliance with the Regulations presents a particular challenge to property agents (including property portals) in circumstances where there is often a range of information which may be material to the average purchaser in respect of any given property. In the case of property sales, a ‘transactional decision’ is not limited to a decision to purchase, but could include earlier steps such as arranging a viewing, making an offer, instructing solicitors etc. There was, moreover, a concern to improve the sales/letting process and to reduce abortive transactions and wasted costs by the earlier provision of MI. This prompted the National Trading Standards Estate and Letting Agency Team (‘NTSELAT’) to form a steering group in 2020 to acquire a better understanding of buyer expectations and make recommendations regarding industry best practice for property agents in providing MI. The vast majority of consumers responding to the consultation said, unsurprisingly, that they would prefer to have access to all key information about a property when first searching on property portals.
NTSELAT reported that, where a property transaction falls through, the average loss to a consumer is over £1,500, and whilst acknowledging that there can be many reasons for a transaction falling through, it concluded that the provision of MI at the start of a buyer’s property search would both reduce instances of buyers incurring wasted professional fees and result in property agents’ time and resources being deployed more profitably. This exercise resulted in the publication in November 2023 of NTSELAT’s ‘Material Information in Property Listings (Sales)’ and ‘Material Information in Property Listings (Lettings)’ notes (‘Guidance’), to be considered by agents alongside the Regulations and NTSELAT’s 2015 ‘Guidance on Property Sales and Lettings’.
The Guidance
On the basis that the average buyer will commence their property search through an online property portal, the Guidance provides that agents proactively request MI in order to prepare the property particulars and that MI should be prominently and clearly displayed in all published listings and updated promptly as required. Ultimately, the NTSELAT’s aim is that listings without the required minimum MI will be prevented from being uploaded to online portals.
The Guidance sets out 3 types of information for agents to consider – Parts A, B and C (summarised in the table at the end of this article). NTSELAT considers that all Part A information (price, tenure and council tax/rates) will constitute MI for all property listings. Part B information includes information such as the physical characteristics of the property, number and type of rooms, utilities, and parking, which the Guidance states may constitute MI where it may involve some cost of maintenance or repair, impact the ability to mortgage or insure the property or affect the use or enjoyment of it. Part C concerns issues such as building safety, restrictions/rights, flood risk, planning permissions/proposals, property accessibility, and coalfield/mining information. The Guidance provides that Part C information may or may not need to be established depending on whether the property is impacted by the issue in question, but recognises that property agents will generally not be qualified to determine what information may be required under Part C, or indeed Part B (an assessment of which is likely to require input from a conveyancer and/or surveyor).
It follows that compliance with the Guidance may often require agents to encourage their clients to engage other professionals at a much earlier stage in the sales process; not after an offer has been accepted but before marketing of a property is begun, to ensure that prospective buyers are provided with accurate MI when the property is listed. To facilitate that process, the Guidance encourages sellers and their agents to make use of property information questionnaires by vendors/agents (such as the Law Society’s TA6 form) as a template to gather the required MI at the outset.
Updated Property Information Forms
It is in support of the Guidance that the Law Society’s 5th edition of the TA6 Property Information Form (with updated explanatory notes) and TA7 Leasehold Information Form were introduced in March this year, updated to reflect the types of MI addressed in the Guidance. They are designed to be completed by the seller, from their own knowledge. As the explanatory notes confirm, the seller is not expected to have expert knowledge of “legal or technical matters” or of “information that can only be obtained by carrying out surveys, local authority searches or other enquiries.” As the forms themselves confirm, their completion is not mandatory but omissions or delays in providing information may affect the sale.
The aim is that if the TA6 is completed by a seller with the assistance of a conveyancer in tandem with the property agent’s production of the sales particulars, the agent can obtain relevant MI from the completed form in order to complete the listing in accordance with the Guidance. Proceeding in this way, once an offer has been accepted, it is envisaged that the information disclosed by the seller to the buyer during the conveyancing process ought then to match what was disclosed during the marketing phase.
Changes to the TA6
Updates to the TA6 form include the following changes:
Reaction
Whilst it remains to be seen how the property industry will adapt to the Guidance, it will undoubtedly lead to agents relying increasingly on PropTech solutions and turning to lawyers and surveyors to ensure that MI is provided in compliance with the Guidance at the marketing stage. Law firms will have to review how best they can serve their clients’ needs as a result of these changes.
Although it would seem difficult to argue with the premise of the Guidance that the provision of more extensive MI at an earlier stage ought to result in a sales and conveyancing experience which is more consistent and efficient, with fewer surprises and a reduction in complaints, concern has been expressed on behalf of property lawyers regarding the extensive revisions to the Law Society’s property information forms intended to bolster the Guidance.
Conveyancing Quality Scheme (‘CQS’) accredited lawyers (the Law Society’s accredited conveyancing quality scheme), required to use the Law Society’s Conveyancing Protocol, were initially required to start using the new forms by 25 June 2024 at the latest. However, the Property Lawyers Action Group (‘PLAG’) urged the Law Society to postpone implementing the latest version of the TA6 form indefinitely, arguing that setting out a more extensive range of enquiries in the new form “flies in the face” of the CQS’s longstanding policy of avoiding scatter-gun property enquiries in favour of more targeted, relevant ones. It expressed concern that the Law Society did not consult with solicitors before implementing the changes which it fears will only increase the cost and complexity of transactions. The Society of Licensed Conveyancers, whose members are not required to use the new forms, has likewise expressed disquiet at not being consulted on the changes and observed that the provision of increased MI in property information forms completed during the conveyancing process does not assist in the provision of information at the pre-offer stage, unless (as the Guidance envisages) agents are going to complete the forms or conveyancers are instructed prior to marketing.
Concern has also been expressed to the Law Society that adoption of the more expansive TA6 may increase lawyers’ exposure to liability under the Regulations. The Society has for some years recognised the possibility that breach of the Regulations could give rise to criminal sanctions against solicitors, a view set out in its ‘Consumer Protection Regulations in conveyancing’ practice note (‘Practice Note’ – first published in 2016 and updated in 2020). Previous versions of the Practice Note had acknowledged that the application of the Regulations in the context of residential conveyancing was untested and unclear and advised solicitors to err on the side of caution. The Law Society cautioned solicitors to consider if they can continue to act in a transaction where they become aware of MI which their client has not disclosed and of which they refuse to authorise disclosure. Ultimately, the Practice Note offered some words of reassurance in the Practice Note in these terms:
“Many of the obligations placed on you as a solicitor under the [Regulations] are already covered by your obligations under the SRA Standards and Regulations and, provided that you treat consumers fairly, you are unlikely to be in breach.”
Reacting to the criticism, on 3 June the Law Society confirmed that it had engaged with a range of practitioners, professional support lawyers and academics prior to introducing the revised forms. It published responses to some of the concerns raised about the changes and at the same time issued the third edition of its Practice Note. The Society confirmed that, as with previous versions of the forms, sellers are only required to respond to questions within their own knowledge. Whilst it observed that the new forms do not extend civil liability for solicitors merely by virtue of having to provide more MI pursuant to the Regulations, it recognised that with more expansive MI requirements there was at least the potential for increased complaints that solicitors had failed to advise properly on disclosure.
In terms of criminal liability, the Society considers this “very unlikely to be an issue” for solicitors and that liability would only arise where a solicitor acting for the seller behaved towards a buyer in a way which constituted an unfair commercial practice. It gives the example of a solicitor engaging in aggressive or threatening behaviour towards a purchaser who was a vulnerable elderly pensioner, noting that this would not only be a clear breach of the Regulations, but also of the SRA Principles and the Code of Conduct in any event. Its note emphasises (following Office of Fair Trading v Purely Creative Ltd [2011] CTLC 45) that what a buyer of real property needs to make an informed transactional decision has to be understood in its proper context, which includes both the fact that sellers can rely on the common law principle of caveat emptor (let the buyer beware – a principle limiting the seller’s duty to disclosing latent defects in title on the basis that it is implied by law that good title should be shown in dispositions of land) and that their solicitors owe them a duty of confidentiality. There is therefore unlikely to be a breach of the Regulations where a solicitor does not disclose information which is either confidential or falls within the caveat emptor principle. The point is underlined in the Law Society’s updated Practice Note, which is otherwise largely unchanged from the 2020 version.
Amidst mounting criticism, however, on 14 June the Law Society confirmed that it would be deferring the compulsory use of the new forms by CQS members until January 2025 to allow for an extended period of consultation with the profession. That announcement has failed to satisfy PLAG who continue to call for the new forms to be scrapped altogether.
Absent reliable data as to how significant a part the late provision of MI plays in property transactions falling through, no sensible predictions can be made as to how the Guidance might impact the number of abortive transactions going forward. Whilst having better information at an earlier stage ought to make for a smoother and speedier conveyancing process later on, it will inevitably prolong the period before a seller can bring their property to market and is likely to front-load costs for them before they have even received an acceptable offer to purchase. Sellers will have to adapt to these changes. It should, hopefully, make the overall process of buying and selling, and the associated costs, more predictable.
The Law Society considers that the Guidance is “driving transformation across all those involved in the home buying and selling process” and it will be interesting to see how business adapt and the extent to which input will be sought from solicitors at an earlier stage in the sale process. Those acting for sellers will wish carefully to consider this month’s updated guidance from the Law Society and to ensure that their clients receive a clear explanation from the outset as to what might be considered MI for the purposes of their transaction and of their own obligations as solicitors not to mislead buyers.
As for the new TA6 form, it remains to be seen what impact the further consultation period will have on the current proposal for its mandatory adoption by CQS lawyers in January 2025.
This article has been written by Martin Jensen and James Stretton of Beale & Company Solicitors LLP. If you have any questions about Beale & Company, Paragon or the above article please do not hesitate to get in touch.
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[1] SI2008/1277, as amended by the Consumer Protection (Amendment) Regulations 2014 (SI 2014/870).