Property Agency Faces Penalties for Breaching Consumer Rights Act and Client Money Protection Regulations

Citation: [2024] UKFTT 149 (GRC)
Judgment on

Introduction

The case of KK Rich Estates Limited v London Borough of Newham involves regulatory breaches committed by the appellant, a property agency, leading to the imposition of financial penalties (FPs). The case was heard by Tribunal Judge Findlay and dealt with specific legislative requirements under the Consumer Rights Act 2015 (CRA) and The Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations 2019 (CMPSR). This analysis focuses on the legal principles applied and elucidates on the tribunal’s application and interpretation of these laws.

Key Facts

KK Rich Estates Limited appealed against three financial penalties imposed by the London Borough of Newham for breaches of the CMPSR and CRA. The penalties were issued for the following reasons:

  1. Failure to display the Client Money Protection Certificate (CMPC) on the website under Regulation 4(c) CMPSR.
  2. Failure to display certain required information on the website, including landlord fees and membership details of a Client Money Protection Scheme and redress scheme under sections 83(4)(c), (6), and (7) CRA.
  3. Failure to display a full list of landlord fees at the office under section 83(2) CRA.

The appellant contended that these failures were due to human error, technical issues with their website server, and a lack of full inspection of the premises. The tribunal assessed these claims against the evidence provided, primarily consisting of video recordings and witness statements.

The tribunal based its decisions on the following legal principles:

  1. Regulation 4(c) CMPSR - This requires a property agent to display a CMPC on their website. The principle aims to ensure transparency and trust by guaranteeing that a property agent has in place necessary protections for client money.

  2. Section 83 CRA - This section deals with the duty of letting agents to publicize their relevant fees. Subsection (2) mandates physical display at the premises, whereas subsection (3) extends this requirement to the website. Subsections (6) and (7) obligate the agent to additionally state their membership in a CMPS and a redress scheme respectively, along with the list of fees on their website. These disclosures are meant to inform and protect the consumers by allowing them to make informed decisions based on fees and memberships disclosed.

The tribunal applied these principles by considering the evidence against statutory requirements, assessing whether the information was properly displayed and published so as to be ‘likely to be seen’ by potential clients as intended by the CRA. The purpose being to enable consumers to easily access, and compare, agents’ fees and protections offered.

Outcomes

The appeals brought by KK Rich Estates Limited were dismissed for the following reasons:

  1. The tribunal found that the appellant had indeed failed to comply with Regulation 4 of the CMPSR by not displaying the CMPC on their website.

  2. The appellant also breached sections 83(4)(c), (6), and (7) by failing to display the required information regarding landlord fees, membership in a CMPS, and a redress scheme on its website.

  3. There was a breach of section 83(2) of the CRA as the full list of landlord fees was not displayed in a position in the office where it would be ‘likely to be seen’ by visitors, thus not meeting the legislative intent.

Through examination of the evidence and witness testimony, the tribunal resisted accepting the appellant’s excuses for the breaches and maintained the imposition of the financial penalties, emphasizing the importance of adhering to regulatory requirements and ensuring consumer protection.

Conclusion

This case underscores the imperative for property agents to maintain compliance with regulatory requirements under the CMPSR and CRA, specifically regarding the display of essential information to consumers. The tribunal’s decision demonstrates that breaches due to technical errors, oversight, or human error are not acceptable defenses, especially in the absence of significant mitigating factors. KK Rich Estates Limited’s appeals were dismissed based on thorough examination of evidence and the lack of mitigating circumstances. Legal professionals can glean from this case the importance of consumer protections in the regulatory framework and the tribunal’s firm stance on upholding these standards. The rulings affirm that the penalties are not punitive but rather serve to correct behavior and ensure compliance, thereby protecting the economic interests of consumers in the property market.