Estate agents will have to join an industry-wide ombudsman scheme, the Department of Trade and Industry (DTI) has said.
Ombudsman "a welcome step" the Consumers' Association said
The move follows an Office of Fair Trading (OFT) report into the industry, which said homebuyers were unhappy with service levels.
Failure to join the scheme could lead to firms being banned, the DTI said - a move consumer groups have welcomed.
In addition, agents will be required to keep written records of all sales.
The requirement on estate agents to keep written records of all transactions is designed to allow consumers and the new ombudsman service to see what work has been done.
Existing legislation covering estate agency will be tightened up to give the OFT and trading standards officers stronger enforcement powers.
Consumer Minister Gerry Sutcliffe said that reform of the estate agency industry was key as some agents were failing customers.
"Under our proposals, the market will remain competitive, but those rogue agents who flout the law will find themselves out of a job," Mr Sutcliffe said.
Estate agency reform proposals
Tighten up existing legislation to give the OFT and trading standards more powers
Estate agents to keep clear and full written records of all sales transactions
Independent ombudsman scheme to be set up
Make estate agents contracts clearer and easier for consumers to understand
The DTI proposals will be put forward for consultation in the autumn. Some changes could be enacted by amending the Housing Bill, currently going through parliament.
But Mr Sutcliffe ruled out licensing of estate agents on the grounds that it could deter good estate agents from setting up business.
Under current rules the OFT can ban estate agents and there is a voluntary ombudsman scheme.
However, consumer groups have complained that the current ombudsman scheme barely covers four out of 10 estate agency firms.
The Consumers' Association said the proposal to establish an independent ombudsman service "will be welcome news to thousands of home movers", describing it as "back door licensing."
But the National Association of Estate Agents (NAEA) told the BBC that the DTI proposals did not go far enough and that a licensing system should be introduced.
In March the OFT reported on estate agents.
The OFT concluded that there was general dissatisfaction with the day-to-day performance of estate agents.
According to its survey, one in four recent sellers said they were dissatisfied with the service they received from their estate agent, citing poor value for money, delays in the sale and inadequate communication.
The OFT recommended that some changes to the 1979 Estate Agents Act.
Some of the OFT proposals such as clearer customer contracts and the keeping of written records have now been adopted by the DTI.
But the OFT stopped short of calling for an industry-wide compulsory code of conduct.
At the time, the Consumers' Association said the OFT report left the industry open to "rogue traders".