As occupier-only commercial property advisors, we have been campaigning since 2003 for the industry to recognise that many businesses may not be getting a fair deal on their office leases.
In 2015, we commissioned The University of Leeds to conduct an independent research study, hoping that it would bring this issue to light and provide the industry with the necessary evidence to create change. Researchers at the university found that tenants dealing with dual property agencies (those who act for both the tenant and the landlord) could end up getting a raw deal, usually in the form of higher prices and less favourable leasing terms. This was caused by the agencies not keeping enough separation between departments.
The study revealed that there is lack of awareness across the business community about the potential financial impact. Consequently, it is the small- to medium-sized businesses that are hit the hardest as they do not have the necessary resources to allow for wide-ranging financial checks.
It was the first comprehensive examination of conflicts of interest in property and raised serious doubts over the industry’s ability to effectively self-regulate dual agency.
Adam Baker, a lecturer in property law at the University of Leeds and a co-author of the report, comments ‘We can’t just take it at face value that these information walls are trustworthy. There are clear issues with them. We want to get past the situation where a firm says: “Well, we have our information wall and that’s fine.” We feel that’s totally insufficient.’
The study also featured in The Telegraph, Property Week and CoStar.
KEY FINDINGS OF THE REPORT
Market forces have limited effectiveness in mitigating conflicts of interest in property.
Conflicts of interest that undermine clients in subtle ways may well go unnoticed and unpunished. Many clients will not have the time, expertise or information to adequately assess whether an unmanaged conflict has led to them receiving a poorer service than they would otherwise have received.
The law offers some helpful rules for the protection of clients, but they are lacking in some key respects. The time and cost of litigation may also deter clients from making a claim.
There are clear risks in relying on the self-management of conflicts by property agents.