How to Start an Estate Agency in England

If you have experience working in the property market, you might be interested in starting your own estate agency. This article will discuss general points all aspiring business owners might consider before they launch their enterprise. It will also address legal considerations particular to launching an estate agency. 

General Considerations             

Your Business Plan

Your business plan is a comprehensive document outlining the essential elements of your business, its goals, and the roadmap for the first few years of launch. While you can include more details about your business model, in particular, you should consider the scope of the services you intend to provide. 

Some questions to consider include:

• Will you work in the residential or commercial sectors?
• Will you operate across lettings and sales?
• Do you intend to provide any property management services?

Some other factors to consider include:

• how you will market your business; 
• which geographical areas you will serve;
• your IT and software systems; 
• your marketing and banding strategy; and
• whether you intend to hire employees. 

Financing Considerations 

You should also consider how you will finance the business’ startup costs. Unless you have adequate savings, you will likely need access to outside capital. Some possible sources of capital include:

• friends and family;
• business contacts prepared to go into business with you; and
• a bank loan. 

Adopting a Business Structure

Your business structure is the legal framework that you will trade through. Unless you take active steps otherwise, you will automatically become a sole trader. As a sole trader, your personal assets will not be separate from your business assets. This means that if your business cannot meet its liabilities, creditors can claim against your personal assets to settle any amount you owe. 

Given that property market transactions are usually high-value, if your business acts negligently, you could face substantial financial liabilities. Accordingly, you should consider incorporating your business into a limited company (or limited liability partnership). This will protect your business assets from your personal ones. 

Finally, your financing options will likely be more diverse if you trade through a limited company. 

Specific Considerations 

Certification and Qualifications

In England, there is no law that requires an estate agency or an individual estate agent to obtain qualifications or certifications. Nor is there any professional society you need to join. However, as a matter of commercial prudence, you stand to benefit from joining the National Association of Estate Agents (NAEA) Propertymark. This is the largest professional body of estate agents and associated professions. 

Having relevant qualifications gives your business an extra degree of legitimacy. Further, membership with NAEA will provide you with helpful resources. It can also be a great networking source. 

Regulatory Compliance 

The law imposes certain restrictions on your ability to deal on behalf of your client. For instance, you cannot:

• draft contracts for the purchase of land;
• enter into a contract on behalf of your client. An exception is where you are acting for the seller, and the seller has given clear instructions as to the price they would accept;
• provide certain factual statements that a third party may rely on in the course of purchasing a leasehold or freehold; or
• receive purchase money from the buyer on behalf of your client.

Wider Legal Considerations

Depending on the scope of your services, you will need to understand the various laws and regulations governing the property market. Notably, some laws may not be relevant to the market you operate in. For instance, the various laws protecting residential tenants are unlikely to apply if you solely work on commercial lettings.

In general, you should acquaint yourself with certain obligations related to:

• residential tenancy rights, including obligations on landlords and their estate agents not to charge unlawful fees;
• anti-money laundering and laws against terrorist funding due diligence; and 
• gas and electricity safety monitoring. 

This is a non-exhaustive list. Depending on the terms of your relationship with your customers, you could be held liable for giving improper advice because you were unaware of the relevant laws and regulations. 

That said, you are not a lawyer and cannot give legal advice. Likewise, you should not hold yourself out as having particular legal expertise or qualifications if you do not.

Contract Law & Fiduciary Duties 

The law of agency governs the relationship between your customers (called principals) and you (the agent). 

In some cases, you may owe a fiduciary duty to your customer. This special duty might arise because of an express term in the contract or may be implied from the nature of your relationship. If there is a fiduciary relationship, you must always act in the absolute best interests of your client. You must also never profit from your relationship. For example, you cannot purchase land directly from your client or use information obtained from the relationship in a private transaction with a third party to benefit yourself.

You should instruct a solicitor with experience advising estate agents on their contractual and legal duties. They can also help draft your standard business terms. 

Obtaining Insurance

As you will be assisting your customers in high-value transactions, if you are negligent and they lose money as a result, you could be held liable. 

You should therefore obtain a professional indemnity policy. Additionally, if you employ anyone, you will need to have an employer policy in place. Finally, if you operate an office open to the public, you should obtain insurance limiting your occupier’s liability. 

Choosing an Office 

Traditionally, estate agents draw prospective tenants and purchasers through ads displayed in their high-street offices. If you decide to have an office, you will need to negotiate a commercial lease. Common terms include:

• the rental price;
• any service charges; 
• insurance provisions you and the landlord will have in place, if any; 
• the party liable for keeping certain elements of the premise in good condition; and 
• the extent you can sublease the premises or sell the lease to a third party. 

Key Takeaways 

Before starting an estate agency, you should determine which markets you will operate in. You will also need to budget startup costs and determine how you will finance these. Likewise, consider how you will structure your estate agency. Incorporating your business gives you the benefit of limited liability and more prestige to prospective clients. This is because they typically expect to do business with an incorporated entity rather than a sole trader.

Additionally, the law surrounding land is varied and complex. Given your role in facilitating transactions, you can add value to your clients by holding relevant qualifications and being familiar with the various laws. Additionally, you could be held liable for any negligence arising from ignorance of the law. However, you are not a conveyancer or solicitor and therefore cannot give legal advice or execute transactions on behalf of your clients. To further limit your liability, you should obtain a professional indemnity policy. 

If you need help starting an estate agency in England, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Visit our membership page.

Frequently Asked Questions