Solicitors have declared war on estate agents. They are calling for a licensing system to bring them under strict regulation and for greater transparency over what they call excessive fees.

Paul Marsh, president of the Law Society of England and Wales, which represents 100,000 solicitors, says that taken with stamp duty, estate agents’ fees account for the lion’s share of the costs of a house sale — dwarfing solicitors’ fees from the same transaction.

“I understand that they operate in a feast-or-famine business and have to set aside funds for the lean times,” he told The Times. “But after years of a bull run, their earnings have been quite disproportionate to the cost of everything else in society, whether a loaf of bread, cars or holiday.”

The society’s concerns will be put to the Office of Fair Trading, which is inquiring into estate agents as part of a wider review of the housebuying market. About 70 per cent of the UK’s 35,000 estate agents are signed up to schemes to enforce standards but these are voluntary and leave consumers without the protection of compulsory regulation.

Heather Clayton, senior director of consumer protection at the OFT, said: “With the economic downturn we need to ensure that consumers receive a good service when buying or selling a home from a market that is competitive, innovative and well functioning.”

The review is a long-awaited opportunity for solicitors to ensure that others in the housebuying market are subject to similar standards and regulation. “The way in which estate agents operate, from top to bottom, needs to be looked at,” Marsh said.

Some will say that his comments are a case of pots and kettles. But despite highly publicised cases of misconduct (the law firms who ripped off miners over compensation is the obvious one) solicitors are far more tightly controlled than estate agents and the Solicitors Regulation Authority has powers not enjoyed by an equivalent body.

Marsh says that, as a result, the public is unprotected and confused. “The seller is their client. You get buyers talking about ‘my estate agent’. But they have only a thin legal duty to the buyer. They are there to put together a deal, to get the best possible price for the seller and it is often not clear to consumers what that legal position is.”

Marsh is also critical of estate agents’ valuations. “What they are actually doing is trying to produce a price at which the property will sell. What is equally bad is the practice by some of quoting an inflated price to secure the business and then two months later saying that the market has gone off and the price will have to be lowered.”

Then there is the thorny issue of fees. Estate agents work on commission but, Marsh insists, there is little competition. The standard rate is 2 per cent for instructing an estate agent on a sole-agency basis, but for more than one agent between 2.5 and 3.5 per cent. “I find it an odd state of affairs that in what is supposed to be a very competitive market, all these agents charge the same commission rates.”

There is also little transparency as to fees they receive from mortgage brokers for arranging finance or from companies who produce home information pack (Hips) or solicitors to whom they referred work. “House buyers and sellers may not realise that they will pay for all these services — there is no such thing as a free lunch. It is about time that everyone involved in the property market stepped up to an appropriate level of regulation for the benefit of the consumers and for fair competition.”

Solicitors’ conveyancing fees have been forced down in the past 15 years, in part since the market was opened up to licensed conveyancers. Fixed conveyancing fees can be as low as £150 to £300 but many firms still charge a percentage of the sale price, usually 0.75 to 1 per cent.

Marsh has another hope from the review — the scrapping of Hips that “have produced no improvement to the market and been a huge cost to the consumer”. On this at least, he and estate agents are at one. From April 6, owners and agents cannot market a home without having a Hip ready and agents have warned of delays as it can take ten days for one to be drawn up.

Marsh said that many Hips contained out-of-date searches and solicitors had then to conduct their own searches, while energy performance certificates could be as uninformative as stating that a flat had two nightstorage heaters.

What do estate agents think of all this? Surprisingly, they endorse much of it. Peter Bolton King, chief executive of the National Association of Estate Agents and Association of Residential Letting Agents, said: “Like solicitors we welcome the review by the OFT: we have been calling for years for regulation or licensing of estate agents and are fed up waiting for ministers to do something.”

From May, his association is “leading the way” with its own licensing scheme and agents who sign up “will have to comply with the rules and codes of conduct”.

Bolton King, whose association represents 14,000 agents, accepts, too, the need for transparency on what estate agents do and on commission. But he disagrees that fees are too high. “The last time the OFT looked at our fees in 2004, it did not find either that the fees were too high or that there was insufficient competition. In the UK our commission rates are still far less than elsewhere, such as in the States, where they can be as much as 7 to 8 per cent.”

There was a “lot of competition” in the market between agents, he says, and he rejects the view that commission rates do not vary. “I can show you commission rates varying from a half per cent to 2.25 per cent.” Competition is about to become sharper with the arrival of more online estate agents without shop overheads.

Last year another review, this time under Sir Brian Carsberg, former director-general of the OFT, made similar points to those now being made by Marsh. Consumers must hope that this time they are heeded.

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