The Jackson reforms signalled the end of the unwelcome prospect of facing grossly disproportionate costs for professionals facing allegations of negligence. CFA funded litigation, frequently supported by deferred premium After the Event insurance policies, often resulted in costs exceeding the damages claimed.
Partly as a consequence of these reforms and partly due to the rise in defect claims as market activity improves, consumers wishing to pursue claims are turning in greater numbers to the ombudsman as a means of seeking cost-free redress.
All property professionals have been obliged, since October 2014, to sign up to one of the three compulsory redress schemes on offer. Failure to do so creates the risk of a local authority fine of up to £5,000 and ultimately closure of the business.
All three schemes provide free and independent dispute resolution for consumers outside the normal claims arena, once internal complaints processes have been exhausted. They are designed to better control and facilitate the resolution of conflicts between property professionals and consumers, be they buyers, sellers, landlords or tenants. Each one operates on a similar basis, with the power to make financial awards of up to £25,000, in addition to non-pecuniary remedies such as for the professional to apologise or provide an explanation. The main differences between each are operational, in the processes and timescales.
The Property Ombudsman ("TPO"): A referral to the TPO can be made within 12 months of the professional's Final Viewpoint Response. The TPO will request the file and a written response to the allegations within 28 days, and it can then take around six months to issue a decision.
If an award is to be made, the professional will be given advance notice, including two weeks within which to accept the decision or make representations. The decision is then sent to the complainant, to choose whether to accept or to pursue the complaint by alternative means. The average award is said to be just a few hundred pounds.
Ombudsman Services: Property ("OSP"): Referral to the OSP must be made within 12 months of first raising a complaint, having given the professional eight weeks to investigate and reply. The OSP will gather evidence from both sides and reach a factual conclusion based upon the information available. The decision process can take up to two months.
The consumer will have the opportunity to accept or reject the OPS decision. A review can be requested, but only where there have been significant factual errors or new evidence has emerged. If accepted, the professional has 28 days to comply with the remedy. If rejected, the case is closed, but the consumer can pursue other methods of recourse.
The Property Redress Scheme ("PRS"): A referral to the PRS must usually be made within six months of the professional's final response, and must have (i) followed a written complaint within 12 months of the original incident, and (ii) allowed the professional at least eight weeks to investigate and reply.
The professional will firstly be given two weeks to conclude the matter directly. If unsuccessful, the PRS will produce a Resolution Plan, detailing extra evidence required and steps which could be taken towards resolution, with a timeframe of around four weeks. Should this still prove impossible, the file will be passed to the Ombudsman or for mediation, to resolve or produce a final decision within a further four weeks.
The consumer has 15 working days to accept or reject the PRS decision. If accepted, it becomes binding and the professional must adhere to the terms. If rejected, the consumer can pursue the complaint elsewhere, but the PRS file is closed.
All are predicated on the basis that member firms will have a compliant internal complaints procedure which has been invoked and exhausted. As part of that process the complainant will have been informed of his or her rights to refer matters to one of the ombudsman services. Most frequently, it is the complainant's dissatisfaction at the rejection of their claim or complaint that gives rise to an ombudsman referral.
The ombudsman will inevitably seek access to the inter-party exchanges during the internal complaints process. For that reason, ensuring that a clear and concise response has been provided in accordance with prescribed time limits, which illustrates that the complaint has been properly investigated and considered, is of paramount importance. Some clients will remain unhappy no matter what, but adhering to the complaints process and taking the opportunity to coherently set out the position, with supporting evidence where available, should make the ombudsman's decision much easier.
The ombudsman is not bound by strict legal concepts and professionals who are able to demonstrate that the customer has been treated entirely fairly throughout the preceding period will undoubtedly enter the process in the best shape. Conversely, a refusal to engage with the complaint will be counter-productive.
Another important factor is the property professional's ability to demonstrate that the original service was undertaken competently with the necessary level of skill, care and diligence. In this regard the quality of retained contemporaneous records cannot be overstated. In this regard we stress the value from a practical risk management perspective, of using and maintaining:
- Details of the retainer and what service the professional was agreeing to provide (noting any subsequent agreed revisions) so as to ensure that there is no ambiguity about what the professional was and, often more importantly, was not obliged to do.
- If third party service providers are to be used, evidence of the client's approval of such engagement (ideally with appropriate protection in place should the third party provider fail to deliver the level of service expected).
- Records of all steps taken as regards a property, such as full and complete inspection/inventory notes and, where professional judgment is exercised, a concise record of how the professional reached the conclusions it did.
Miscommunication is one of the greatest causes of complaint; a swift, concise, to the point and realistic response to any complaint or claim can often take the heat out of any dispute rather than aggravating the situation. Even if that is not the case, it will undoubtedly be an influencing factor should the matter come before an ombudsman.
We have invested time liaising with the ombudsman to share our experiences of the process and to learn how we and our clients can improve the quality of their representations. The clear message is that the ombudsman services are not intended to be consumer champions, nor designed simply to punish the professionals.
Instead, the overriding message is about helping and supporting the property industry, by raising standards and the awareness of best practice, reducing the number of complaints that are made in the first place, and identifying and sanctioning the rogue agents. By following the guidance set out above, property professionals can contribute significantly to those aims, whilst controlling their own financial and reputational exposure to both complaints and formal claims.
Finally, do not forget the Small Claims court. We are seeing growing number of claimants issuing their own proceedings and being prepared to run cases to final hearing, safe in the knowledge that the cost risk is minimal as the usual rules obliging a losing party to meet the successful parties costs do not apply. As awareness of this process develops, many are becoming alive to the fact that the costs a professional will incur which are not recoverable can act as a real incentive to resolution.