When it came to selling the home they had lived in for 30 years, Colin and Ann Erskine felt they’d made the right choice in trusting a local estate agent in Burnham-on-Sea.
The service seemed pricey — they’d have to hand over 1.5 per cent of the £179,950 sale price for their three-bed semi, or around £2,700 — but the smooth-talking agent from Saxons assured them they were getting a great deal.
As promised, the sale in May 2014 went through smoothly, and the Erskines now live in a smaller house in the town. What the agent didn’t tell them, though, was that his fees had been artificially inflated.
Last week it emerged that six estate agencies in Burnham-on-Sea, on the Somerset coast, had that year struck a secret deal to rip off local home-sellers.
Property swindle: Six estate agencies in Burnham-on-Sea, on the Somerset coast struck a secret deal to rip off local home-sellers
In a series of clandestine meetings in 2014, senior employees at supposedly rival firms in the area conspired to set up an illegal cartel.
Each agreed to keep their commissions at a minimum of 1.5 per cent — above the more common level of 1 per cent.
This kind of arrangement is against the law because it makes it impossible for people to shop around for the best deal. But unless an agent slips up, the scam can be almost impossible for house sellers to detect.
Colin, 67, found out that he had been a victim only when he was approached by Money Mail last week.
‘I feel betrayed,’ the car MOT inspector says. ‘The agent pocketed my hard-earned money and ripped us off. How was I to know that there was this seedy deal going on behind the scenes?
‘It’s the last thing you would think of happening in a small place like Burnham-on-Sea.’
So how on earth did this quiet seaside town get embroiled in a price-fixing scandal that has hit the newspaper headlines?
And could it be that unscrupulous estate agents in other parts of the country are up to the same tricks?
Apology: Charles Clark with his Tory MP wife Rebecca Pow
When Money Mail visited Burnham-on-Sea’s blustery promenade last week, it became clear just how easy it would have been for the cartel to operate.
Just a few yards from the seafront is a narrow one-way road where all six estate agent offices were based when they colluded in 2014: Abbott And Frost, Annagram Estates, Gary Berryman, Greenslade Taylor Hunt, Saxons PS Ltd and West Coast Property Services. Some are still just doors from each other on the High Street.
Documents published by watchdogs last week revealed that representatives from each company had met on nine occasions in a 13-month period.
Often these meetings were held in the offices of Greenslade Taylor Hunt, which is also a respected auction house. The firm’s chairman this week told Money Mail that the meetings had been arranged by his partner without his knowledge.
There, the conspirators drew up a monthly rota so that each company took it in turns to make sure the others stuck to the agreement. This role was even given the name of the cartel ‘policeman’.
According to local shopkeepers, many of the company directors socialised together and were members of the Burnham-on-Sea local Lions club, the community volunteering society.
Ordinarily, estate agents should compete with rivals on their charges — and they should be negotiable.
After valuing a property, agents should explain to the vendor what they charge for arranging the sale. It can be anywhere between 0.75 per cent and 3 per cent of the sale price.
But HomeOwners Alliance, the property lobby group, recommends that sellers haggle and accept no more than a 1 per cent fee.
Emails between the estate agents involved in the plot show that savvy sellers in Burnham-on-Sea were routinely forcing them to accept lower fees than they wanted. In one exchange, an agent with Gary Berryman said that by agreeing to keep their prices high, all would be ‘better off than we are now, scrabbling around at 1 per cent and 1.25 per cent.’
Many of the meetings were held in the offices of Greenslade Taylor Hunt where Charles Hunt, husband of local Tory MP Rebecca Pow, is chairman
The email continued: ‘I think that with a bit of trust, a bit of co-operation and some goodwill, we will all improve our businesses, enjoy our working day that bit more and start to actually make some money!’
It was vital that all firms were in agreement. ‘Unless we get everyone on board, we will only expose ourselves,’ said a representative of Greenslade Taylor Hunt in another email.
The employees went on to exchange dozens of emails congratulating each other on their ingenuity and bragging about the illegal enterprise.
A senior worker at Saxons thanked his counterpart at Gary Berryman for arranging the meetings, saying: ‘Let us hope that by year end, our balance sheets are showing a very healthy increase in income!’
The conspirators called it a ‘gentleman’s agreement’. And at first it worked wonders for the agencies, as Colin can testify. When he tried to haggle over the commission fee, the agent replied sternly: ‘This is not negotiable. We can go no lower than 1.5 per cent.’
The father-of-one, who still works to support his wife, Ann, 67, says: ‘Maybe I was a bit naïve because I took the agent at face value. I thought he was a nice chap and I chose to trust him.’
The cartel was successful for 13 months until one of the agents, C.J. Hole (a trading name for Annagram Estates Ltd) decided to blow the whistle.
In 2015, one of its representatives approached the Competition and Markets Authority, the consumer watchdog, and the scam quickly began to unravel.
An illegal cartel is classified as ‘when two or more businesses agree not to compete with each other’, the markets regulator says.
These rules are laid out in the Competition Act 1998, and the firms in Burnham-on-Sea clearly broke the regulations.
Five of the six estate agents were fined a total of £370,084 for their involvement and they have since issued public apologies.
Stung: Colin and Ann Erskine trusted a local estate agent in Burnham-on-Sea who asked for 1.5 per cent of the £179,950 sale price for their three-bed semi – around £2,700
Annagram Estates Limited (trading as C.J. Hole) was not fined because it was the first to confess.
Since then, some sellers have been reimbursed 0.5 per cent of their sale price by the individual agents.
Under these compensation arrangements, Colin and Ann Erskine would be entitled to £900. But like other customers of Saxons, they have been left out of pocket, because the firm closed all three of its offices at the start of the year.
Its director, Graham Thompson, told Money Mail that poor health had led him to close his business and he refused to speak about the customers who were charged 1.5 per cent when the cartel was in operation.
By contrast, Charles Clark, chairman of Greenslade Taylor Hunt — the firm most heavily penalised by the watchdog — gave us a grovelling apology.
Mr Clark is the husband of local Tory MP Rebecca Pow, who served as Parliamentary Private Secretary to the housing minister before the General Election earlier this year. The MP for Taunton Deane is now the Parliamentary Private Secretary in the Department for the Environment, Food and Rural Affairs.
Mr Clark said he was ‘horrified’ to discover that his business partner had been embroiled in the wrongdoing, but insisted that the man had operated alone.
‘I suspect how this happened is that towns are small, agents are often all grouped within a few buildings of each other, so you bump into your mate in the street and he says: ‘Blimey, we’re exhausting each other by constantly driving the prices down, shouldn’t we try to hold them?’
‘But we know you absolutely shouldn’t do that — businesses cannot gang up and deprive the customer of choice.’
Greenslade Taylor Hunt was fined £170,549, almost twice as much as any other agency involved. Mr Clark, a Cambridge-educated, seventh-generation auctioneer, says: ‘To think my company was involved is mortifying. The employee in question has been severely sanctioned and no longer works on residential sales, but he remains a partner in the business.
‘His motivation was so that his office didn’t lose money. But he knows he was absolutely wrong.’
Cartel: Five of the six estate agents were fined a total of £370,084. Annagram Estates Limited (trading as C.J. Hole) was not fined because it was the first to confess
There is no official compensation scheme for sellers affected.
Mr Clark has waited for customers to contact his offices and dealt with them on a case by case basis, reimbursing some by around 0.5 per cent of the agreed sale price.
Disturbingly, the scandal in Burnham-on-Sea could be the tip of an iceberg. In emails between the agents in the cartel, one alleged the practice was commonplace.
He had ‘attended many meetings for agents to agree on increasing fees’ throughout his career, he said.
Another said that he had had previous experience with price-fixing, but the arrangements were short-lived: ‘Inevitably, someone always breaks ranks, but I still believe it is worth it.’
This is not the first time estate agents conspiring for illegal profit have been caught in the act.
In 2015, the CMA (Competition & Markets Authority) watchdog found an association of estate agents in Hampshire had blocked members from advertising their discounted fees in the local newspaper. They were fined £775,000 for stifling competition.
At the time, the CMA said it had received complaints of similar conduct in other parts of the UK.
A spokesman for the CMA refused to say whether it was looking into other cases or following up the allegations of more widespread corruption made by the conspirators in Burnham-on-Sea.
However, in a statement it said it thought the estate agent industry ‘does not properly understand the seriousness of anti-competitive conduct and the consequences of breaking competition law’.
The scandal in Burnham-on-Sea could be the tip of an iceberg – in emails between the agents in the cartel, one alleged the practice was commonplace
Stephen Blake, senior director of cartel enforcement at the CMA says: ‘Cartels are a form of cheating. They are typically carried out in secret to make you think you are getting a fair deal, even though the businesses involved are conspiring to keep prices high.
‘We have taken action against estate agents before, and remain committed to tackling competition law issues in the sector.’
James Munro, head of the National Trading Standards Estate Agency Team, says: ‘It is crucial estate agents are aware of their competition law obligations.
‘As the industry regulator, we use cases like this as a trigger to assess the fitness of an individual or business to engage in estate agency work. This can lead to a formal warning or lifetime ban in engaging in this work.’
David Powell, operations director at Berryman estate agents, says the firm has pro-actively contacted clients affected by the cartel and paid a ‘substantial sum’ in compensation.
The other agencies implicated — Annagram (trading as C.J. Hole), Abbott And Frost and West Coast Property Services — refused to talk to Money Mail.
Annagram Estates no longer has a Burnham-on-Sea office, but operates in nearby Cheddar.
Mark Hayward, chief executive of the National Association of Estate Agents (NAEA), says: ‘The Competition & Markets Authority spoke to NAEA Propertymark members at our West Country conference last week about the importance of adhering to legislation and guidance.
As an organisation, we cannot condone the actions of the estate agents involved, and all our members are urged to adhere to current legislation and law to ensure best practice.’
s.smyth@dailymail.co.uk