The National Trade Standards has recommended for the introduction of legislation requiring agents to display referral fees.
It also called for a public awareness programme to warn consumers about hidden referral fees.
James Munro, National Trading Standards, estate & letting agency team senior manager, said: “We recognise that referral fees have a place in business if used ethically and transparently and with no pressure to use the referred service.
“It is important that customers are fully aware of the basis and value of a referral or recommendation, so they are able to take an informed transactional decision.
“Mandatory disclosure of referral fees would ensure there is full transparency around this practice, helping to build consumer confidence in the estate agency industry and demonstrating the duty of care agents should have to both parties in a property sale.”
Referring customers to a preferred service provider in exchange for a fee is regularly concealed.
Meanwhile many customers remain unaware of the existence of referral fees and in some situations, they may be pressurised to use a preferred provider
All estate agents were told they must now make sure they follow industry guidance, otherwise they could be banned.
Mark Hayward, chief executive of NAEA Propertymark, said: “New legislation which will require agents to display referral fees is a step forward, providing clarity to agents that they mustn’t fall foul of the law but importantly ensuring greater transparency for consumers to avoid any confusion about what agents are charging for.
“This is something we’ve been working closely with government and the National Trading Standards on, and given that agents were facing a complete ban of referral fees, we would strongly advise that anyone who isn’t currently displaying their fees should start now, regardless of when the new laws will come into force.”