Some Agents Have Breached Property Ombudsman Regulations
RTA are one of a few Business Transfer Agents – others are National Business Sales, Vendor Direct, Preferred Commercial, Advent, Meridian, Knightsbridge, Turner Butler, Sovereign, Hilton Smythe, Intelligent Business Transfer, Ernest Wilson (not an exhaustive list) – who either call themselves ‘Estate Agents’ or carry out transactions concerning Real Estate. The latter sometimes call themselves ‘Business Brokers’ where no building or land is involved. Some of these Agents have been known to breach the regulations of the redress scheme to which they belong eg The Property Ombudsman (TPOS).
Some Agents Have Breached Regulations On Money Laundering
Some Agents did not Register on the OFT’s Money Laundering Register by the due date so some transactions with their customers have been judged ‘illegal by statute’. Using HMRC’s Supervised Business Register that you can check for yourself via the Internet – https://customs.hmrc.gov.uk/msbregister/checkTerms.do
HMRC’S Guidance states that Estate Agents and business brokers need to Register on HMRC’s Supervised Business Register because HMRC is the Supervisory Authority.
If the name of the Agent or business broker is not on the Register, or if you signed a contract before the agent/broker joined the Register, your contract is potentially illegal.
You may benefit by checking at the date you signed, because the current entry shows RTA’s date of Registration as 24th July 2018. However, you need also to check R T A (with spaces) and R.T.A. without and with spaces! If you signed in a period when RTA were unregistered, the whole of your documentation will be deemed ‘Illegal by Statute’ as judged in the case RTA v Bracewell EWHC 2015
Every separate business that a group such as Ernest Wilson, Knightsbridge etc own, and have Registered as a name and Company Number at Companies House, needs its own separate Supervised Business Register Registration Number and hence its own Certificate. Check your contract and double-check with the latter-named companies themselves; check further with HMRC – there are contact details on HM Gov pages. The search results, by name and postcode, currently reveal that Meridian did not Register until 5th April 2013; Ernest Wilson (West Yorkshire) Limited did not Register until 14th May 2015; Knightsbridge did not Register until 11th March 2016, Intelligent Business Transfer 24th January 2017, National Business Sales did not Register until 9th October 2018.
You may find references to a High Court case – RTA v Bracewell – successfully defended by Mr Bracewell. See http://www.bailii.org/ew/cases/EWHC/QB/2015/630.html
That case rested on RTA’s failure to Register and only applies to RTA documents signed before 2nd November 2012. OFT was replaced by HMRC as the Supervisory Authority starting on 1st April 2014.The Daily Mirror have reported on the situation – see http://www.mirror.co.uk/news/uk-news/hope-small-businesses-being-hounded-5359451
Result of Appeal by RTA against “Ms Defendant”, on 27th March 2018 at Luton County Court. The transcript is available. RTA had applied for Permission to Appeal under Money Laundering Regulation 9 (3) (a). Final outcome: The case of ‘Ms Defendant’ was referred back to the lower Court, where the contract, and the lack of the customer’s previous sight of the ‘Sole Selling Rights’ Terms, were Judged to be in breach of the Estate Agents (Provision of Information) Regulations 1991.
MONEY LAUNDERING REGULATIONS 2007 S9 below:
9. – (2) Subject to paragraphs (3) to (5) and regulation 10, a relevant person must verify the identity of the customer (and any beneficial owner) before the establishment of a business relationship or the carrying out of an occasional transaction.
(3) Such verification may be completed during the establishment of a business relationship if—
(a) this is necessary not to interrupt the normal conduct of business; and
(b) there is little risk of money laundering or terrorist financing occurring,
provided that the verification is completed as soon as practicable after contact is first established.
The Guidance states:
4.10 The customers’ identity and where applicable the identity of beneficial owners, must be verified before entering into a business relationship or occasional transaction. You can make an exception to when customer due diligence is carried out on any party to a sale only if both the following apply:
● it is necessary not to interrupt the normal conduct of business
● there is little risk of money laundering or terrorist financing However, this exception is very limited as the verification must still be completed by the time the business relationship is entered into. Nor does this exception mean that you can use it where it is hard to verify a customer’s or beneficial owner’s identity.
Up to now, the Money Laundering Regulations 2007 breach by RTA (failure to check a customer’s identity and failure to take a copy of the Customer’s original identity documents BEFORE starting the business relationship) has been a major influencing factor in RTA’s Court cases against their customers being Dismissed at Court Hearings throughout England and Wales. The Money Laundering Regulations 2007 are now superseded by Money Laundering Regulations 2017 for documents signed after June 2017.
Breaches of The Money Laundering Regulations (2007 or 2017), together with breaches of the Estate Agents Act 1979 and The Estate Agents (Provision of Information) Regulations 1991, verbal and written misrepresentations by RTA staff and via RTA’s paperwork, mean that, taken together, Defendants’ chances of successfully fighting a high-value Claim are actually quite good – especially if there are two different monetary amounts claimed and the higher figure is disproportionately higher than the lower figure. The high figure is often deemed a penalty, an unconscionable amount, and/or unjustified enrichment. RTA allege that the Business Relationship starts as soon as the ‘agreement’ is signed. Surely then, the original identity documents should be available for checking beforehand.
There are other reasons that you may avoid Court action, or a Judgment against you by RTA, Ernest Wilson, Turner Butler, Blacks, IBT or any of the other Business ‘sales’ agents (who only advertise, they cannot actually sell a business that belongs to YOU). These agents interpret the contract you have signed as “a contract for the sale of property” or “a contract for the sale of a business”. It is, in fact, only a contract for Advertising and Marketing your property or business, only YOU as business owner, can effect the sale (take it to Exchange and Completion) and you will need a solicitor to draw up the contract/conveyance.
The agents who do not carry out the full checks as to who are the Beneficial Owners of the business or property, plus personal identity checks (e.g. a passport or driving licence) on the same-said owners BEFORE commencing the business relationship, i.e. before the contract is signed are in breach of the NEW Money Laundering Regulations dated 26 June 2017 (provided their document was signed after that date) because of a lack of “Customer Due Diligence” and many judges have ruled the contract unenforceable because of this – after all, it would be in the Agent’s interests to check that they are dealing with an authorised signatory to the document they call an ‘agreement’. See: The Money Laundering Regulations 2017.
You Need To Be Aware About Leases
Please remember that if you are told that you can ‘pass on’ a lease for your Business premises (or the premises of your Limited Company) you will need the written permission on your Landlord. A recent Judgment points out that this is not a seamless process – the Landlord may require references and a document called an “Assured Guarantor Agreement” that effectively ties you to paying the Landlord’s rent if the new Tenant does not. So you will have the responsibility to pay the outgoings, but will lose the authority to control the new tenant – not a desirable situation!
The Case: E.ON UK Plc v Gilesports Limited EWHC [31 July 2012] considers important issues relating to the obtaining of landlord’s consent to the assignment of a lease.
A key lesson drawn from the E.On case was that where an assignment takes place without landlord’s consent, the previous tenant can be held to have continuing liability for the terms of the business lease. Essentially, if the buyer stops paying rent, the landlord can pursue the previous tenant for the rent arrears; unfortunate for the seller who believed that he had washed his hands of the business.
Those business owners who are oblivious to the legal implications of selling a business using a “DIY” method clearly put themselves at risk. The costs they seek to save in legal fees may eventually land back on their doorstep, albeit in another, larger form.
Not only will the potential risks leave a bigger hole in your pocket, you are likely to be faced with a legal battle against your landlord for your failure to obtain landlord’s consent. The correct approach is to get the right legal advice at the right time. If you are seeking to sell your business and its lease, contact an expert who can guide you through the process and ensure that you are advised on the legal procedures. One such expert is Afsana Rahim of Commercial Property Solicitor Saracens Solicitors.
Are You A Consumer Or A Business Under The Unfair Contract Terms Act?
Since April 2016 RTA have claimed in correspondence to their customers that the Unfair Contract Terms Act 1977 (UCTA) does not apply, ‘because [you] are not a consumer’. RTA have sent the complete RTA v Bracewell case to ‘prove’ their point. In fact the case ‘proves’ that RTA lost the case because of it being illegal by Statute because of RTA’s failure to Register. In actuality, UCTA and The Supply of Goods and Services Act 1982 are the main Acts that RTA and the other Agents breach.
Both these Acts apply to Businesses even if you are deemed a non-consumer. Check with Trading Standards. A limited company is an entity so cannot be a consumer but in certain circumstances you, as a natural person, can – especially if the contract/terms fail to make clear who the two parties are i.e. the Business Agent is one party, the Limited Company should be named as the other party for a true B2B contract. If it names only persons it cannot truly be B2B unless there is no Ltd Company i.e you are a sole trader.
Other Things To Note
If the Agent alleges it is a business-to-business contract, and has no cooling-off period, does it display that information prominently at the beginning of the document? Or at all? Who are the named parties? How many pages are there, is there writing on the reverse and is the print very small?
A true Business-to-business contract is normally preceded by Heads of terms. These are also known as letters of intent, memoranda of understanding, notice of sale and term sheets. A document which sets out the heads of terms (whatever it is referred to as) generally sets out all of the terms of a commercial transaction that are agreed in principle between all of the parties.
Otherwise, as a small business, you have a ‘one off’ transaction where you are disadvantaged by an inequality of bargaining power. You could Defend with The Unfair Contract Terms Act 1977 – which applies to all those deemed ‘a business’ – where a contract written on the stronger party’s written standard terms must pass the test of reasonableness.
Even sole selling rights should have a cut-off date and not continue ‘until terminated/cancelled’ . Consider whether the document you signed breaches The Estate Agents (Provision of Information) Regulations 1991. Consider appointing a solicitor well-versed in contract law.
If any Agents attempt to charge you VAT for a breach of their Agreement, please read the case of Vehicle Control Services Limited’s where the Court of Appeal ruled that the penalty fees charged did not relate to any supply of goods or services, but constituted damages for breach of contract, which did not attract VAT. See www.peninsulagrouplimited.com/blog/supply-and-consideration-or-not.
AND HMRC’s site: https://www.gov.uk/hmrc-internal-manuals/vat-supply-and-consideration/vatsc30000
If you would like some help with your case then please see this page.