Conditional selling remains one of the most persistent and contentious issues facing the UK housing and mortgage markets with brokers continuing to report pressure tactics despite long-standing bans under consumer and competition law.

Concerns have resurfaced following renewed scrutiny of estate agency practices with independent mortgage brokers warning that some buyers are still being steered towards in-house services – or told offers may not be progressed unless they use a preferred adviser or conveyancer.

While the practice is illegal, industry figures argue that the real problem is not a lack of regulation but a lack of enforcement, allowing poor behaviour to persist in pockets of the market and distorting competition for mortgage intermediaries.

At the same time the debate has reignited wider questions about referral fees, transparency and where the line sits between legitimate commercial competition and unlawful conditionality.

Michael Day (pictured), a long-standing property industry figure and former senior executive at Connells, says conditional selling should unequivocally be stopped and already breaches multiple pieces of legislation.

“Conditional selling is illegal,” he told Mortgage Soup. “It has been illegal for years under more than one piece of legislation. The issue is not regulation – it’s enforcement.”

Day pointed to historic reliance on Trading Standards, followed by the replacement of the Consumer Protection from Unfair Trading Regulations with the Digital Markets, Competition and Consumers Act, now overseen by the Competition and Markets Authority (CMA).

“The CMA doesn’t have to prosecute to impose fines,” he said. “It can simply turn up and levy penalties of up to £1m and it can also make awards to consumers. That is a fundamental shift and once the CMA has its feet under the table we may see a very different approach.”

He stressed that referral fees themselves are not the problem, drawing parallels with mortgage brokers receiving procuration fees from lenders.

“There is nothing inherently wrong with referral fees, whether in mortgages, conveyancing or insurance, provided everything is transparent and the customer understands what’s going on,” he said.

Problems arise, he argued, when referral fees become excessive or when customers are coerced rather than offered genuine choice.

Independent brokers often complain that buyers they have advised for years are suddenly presented with alternative mortgage advisers late in the process, or worse, told their offer may not be put forward without an internal financial services appointment.

“That’s where the line gets crossed,” Day said. “Offering an alternative is competition. Refusing to put an offer forward unless someone uses a particular broker is illegal, full stop.”

However, he rejected the idea that such behaviour is typically driven by board-level instruction at large corporate agencies.

“There isn’t a single director sitting in head office telling staff to conditionally sell,” he said. “What does happen is pressure at local level such as targets and incentives and sometimes people overstep the mark. That’s where management controls need to be stronger.”

For independent mortgage brokers the imbalance can be frustrating.

Estate agents are usually the first point of contact for buyers and sellers, giving them a natural commercial advantage and one that Day believes should be used properly, not abusively.

“Agents are first to market. That’s a powerful position and they should absolutely use it but not by arm-twisting customers,” he said. “I have no time for that whatsoever.”

Day added that many independent brokers and agents already work successfully together through introducer relationships, desk-rental models or long-standing referral partnerships.

“In the vast majority of cases, brokers and agents collaborate perfectly well,” he said. “Whether brokers are losing business to better service or earlier engagement, that’s competition. Where they’re losing business to illegal practices, that’s a different matter entirely.”

He warned that with the CMA now holding direct fining powers, firms that fail to tighten controls could face serious consequences.

“Get your house in order,” he said. “Because the regulator may not always look the other way.”

Read more about Michael Day HERE.