ECSH53025 - Introduction to estate agency businesses
What is an estate agency business?
An estate agency business (EAB) is defined in regulation 13(1) of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) as a firm or a sole practitioner, who, or whose employees, carry out estate agency work.
Regulation 13(2) of MLR 2017 states that this definition must be read in accordance with Section 1 of the Estate Agents Act 1979.
Estate Agents Act 1979
Section 1(1) of the Estate Agents Act 1979 (EAA) defines estate agency work as:
Things done by any person in the course of a business (including a business in which he is employed) pursuant to instructions received from another person who wishes to dispose of or acquire an interest in land
(a) for the purpose of, or with a view to, effecting the introduction to the client of a third person who wishes to acquire or, as the case may be, dispose of such an interest; and
(b) after such an introduction has been effected in the course of that business, for the purpose of securing the disposal or, as the case may be, the acquisition of that interest.
In simple terms, this means you are an EAB if you deal with a customer, who wishes to buy or sell their property, and introduce them to a buyer or seller. Activities in scope of estate agency work include offering advice and handling enquiries from buyers and sellers, property sourcing, sending out property details, and arranging viewings.
Businesses are considered within scope of MLR 2017 as an EAB if they carry out any of the following activity:
Deal with customers for the purposes of buying or selling freehold or leasehold properties and land in the UK, including commercial and agricultural properties.
Interact with prospective buyers by sending out property details and arranging buyers or sellers – this includes making recommendations about a property, e.g. for potential investment.
Act as an intermediary between buyers, sellers, and their agents where it receives enquiries from potential sellers or buyers, which it then passes on to its customers.
Give customers a For Sale board, or put one up outside their property, with their contact details.
Have a business that introduces buyers or investors to a “property deal”, also known as property sourcing, deal packaging or investment brokering.
Have a business that facilitates the purchase of property directly from the owner. This includes businesses that advertise buying the property to achieve a ‘quick' sale, offering it to a group of investors that purchase the property.
Property developers when using a separate company or legal entity (often a special purpose vehicle (SPV)) to sell properties that it owns – this includes where they purchase/part exchange the purchaser’s existing property.
Auctioneers that sell land or property.
Relocation agents who provide a property search and home finding service where they act on behalf of the buyer in the sale.
Competition companies, that sell tickets to win properties, that have been instructed by a seller to list their property as a prize.
A business is still acting as an EAB even if it:
Does not have a physical premises.
Runs its EAB entirely online.
Activity that isn’t in scope of the Estate Agents Act 1979
There are some activities that aren’t covered by the definition of estate agency work, but only when they are carried out stand alone, and independently of any other estate agency work. This includes:
Private sales that do not use a third party to enable the transaction – when the owner of property or land sells it directly themselves.
The publication of adverts or giving out information. For example, a newspaper publishing adverts. This does not include an EAB sending out property details.
Advertising and platform providers (see below for more detailed information).
Work done by solicitors or their employees in England, Wales and Northern Ireland as part of the conveyancing process.
Solicitors’ property centres in Scotland, as the work they do is excluded from Section 1 of the Estate Agents Act 1979 (Section 2(a) EAA 1979).
Property management e.g. upkeep and repairs to a building for a client.
Work connected to planning applications and matters covered by the Town and Country planning legislation (such as advising on planning permission).
Estate agency work carried out entirely outside of, with no connection to the UK.
Providing a means for parties to contact each other directly (such as displaying their email address or phone number on a sales platform).
The preparation of a home buyers report by a business in Scotland (under section 98, 99(1) or 101(2) of the Housing (Scotland) Act 2006) as this is excluded under Regulation 15(1)(g) MLR 2017.
The provision of Energy Performance Certificates (EPC).
Work done in the course of arranging mortgages.
Please note – some EABs may also offer mortgage brokering services, which is regulated by the FCA. Similarly, some EABs, outside of Scotland, also offer conveyancing services, which are supervised by the professional bodies. There is currently no agreement between the FCA or any of the professional bodies for them to be supervising EAB activity. Therefore, all EABs must be registered for supervision with HMRC. See ECSH42000 for more information on dual supervision.
Advertising providers
A business is considered an advertising provider if it:
Only passes on the seller's information to a prospective buyer.
Only provides a way for the seller and buyer to contact one another directly, for example online.
Does not offer any advice to a seller or a buyer, such as recommending or finding properties, preparing property details, providing photographs or providing an energy performance certificate.
Provides a branded For Sale board of an EAB to the seller.
Providing a platform (such as an internet property portal/sales platform for private sales) for private clients, or EABs, to advertise their properties and provides a means for buyers and sellers to contact and communicate with each other directly.
If the business’s role in property transactions is restricted to any of the above, it is not classified as an EAB under MLR 2017, unless it conducts any of the estate agency work in Section 1(1) of the EAA in addition to advertising.
For more information on activity/business models that may bring a business into scope of MLR 2017 as an EAB see ECSH53050.
Why EABs are supervised
Property purchases remain an attractive method to launder illicit funds due to the high value of transactions and the ability to integrate large sums into the legitimate economy while disguising the origin of the funds.
The UK property market continues to be a key channel for money laundering, with criminals exploiting both residential and commercial property transactions to convert criminal proceeds into apparently legitimate assets.
EABs are identified as important gatekeepers, as they are often the first instructed party in a property transaction.
Because of the risk of money laundering through property transactions, EABs are included within MLR 2017 and previous iterations since 2004. They have been supervised by HMRC since 2014.
For more information on EAB risks see ECSH53125.