Estate agents exploit unregulated situation

I received the following message sent to our Website, www.muscatinglott.net, whereupon I contacted Ms Desira, who agreed to feature it in our column:

First of all, well done for the informative Website.

I would like to put a general query regarding estate agents' commission charges in Malta.

In my opinion, housing in Malta is definitely at 'saturation point'. Speculators are rendering it even worse. It is much cheaper to buy a ranch in America than a flat in Malta! I encountered some such interesting property Websites on the Internet.

I must stress that the 5% commission charge on the selling price is much too high. I also searched the Internet about similar commission in other countries and I have found that only few charge in that region. In fact in Britain estate agents' commission charges start from 1%. In my opinion, a 5% commission charge is greatly contributing to the already much inflated prices of property in Malta.

Another point is that when or if one asks certain estate agents for their evaluation of any particular property, they tend to give a much higher valuation price than professional architects do. Is it a question of almost everyone in Malta tries to become rich overnight?

What is the opinion of the Consumer Protection Office about this subject? What is being done about it?

I thank you for your service and attention. (Katheryne Desira)

On February 9 we featured a letter from Ivan Grech asking some pertinent questions which was followed by a letter from Dr David Fabri from which I must quote the following:

1. There is no specific legislation which regulates the activities of estate agents in Malta. This also means there is no public authority overseeing their activities. I have repeatedly pointed this out as a serious failing in our regulatory framework in public seminars and elsewhere.

2. If the estate agent himself is the buyer, it would seem illegitimate for him to charge the commission. It is not as if he has found you a buyer. I would contest any such attempt.

3. Estate agents who pose as private customers may be in breach of the Trade Descriptions Act and the misleading advertising rules in the Consumer Affairs Act 1994. It depends on the nature of the deceptive information, the style, etc. In any event, it would certainly be unethical for an estate agent to try to deceive potential customers who might not wish - for their own reasons - to have dealings with estate agents.

4. Grievances by clients against estate agents may be brought to the attention of the Consumer and Competition Division because estate agents qualify as traders under the Act.

In 1993 we had a case in which the owners, who resided in the UK, commissioned an estate agent to sell their property. They trusted the estate agent to the extent that they were prepared to give him power of attorney. The property was duly advertised and in May 1992 a prospective buyer on behalf of a company showed such a keen interest that the experienced estate agent identified her as a "definite" buyer.

Indeed an offer of Lm23,000 was made. However the estate agent told the prospective buyer that he was not authorised to accept any conditions on the preliminary agreement and added that they had to be prepared to sign a preliminary agreement without the "subject to bank loan" clause, thus running the risk of losing the deposit should the loan not materialise.

He also informed her that he had another buyer who was prepared to do this. Therefore, to make such a commitment, she had to consult her partners and, before she was able to come back with a decision, it transpired that arrangements had already been made for a preliminary agreement with the "other" buyer.

On June 6, 1992, a preliminary agreement was signed between the estate agent (on behalf of the owners) on one side and his partner and co-director on the other for the transfer of the property in question for Lm23,000. On July 20, 1992, the transfer was finalised and a contract was signed.

Eventually in October 1992, the same company, who were as keen as they always had been on buying the property, possibly due to its location in relation to their business premises, bought the same property from the new owners for Lm33,000 - an extra Lm10,000.

Now for the benefit of interested parties who may wish to read the full relevant column (December 05, 1993) I have placed it in my website (www.muscatinglott.net)

The crux of the matter here is that in Malta, as a direct result of the fact that there is no specific legislation regulating estate agents, what happened in this case can and is happening today.

Finally, I invite local estate agents who charge rates similar to those in the UK to write to me with a view to adding another list to our competitive lists.