Compliance advice – how you can (and should) reduce sellers’ risk of being charged dual fees

A few months ago the Property Ombudsman issued guidance on what constituted an ‘effective introduction’.

In basic terms you will be able to show an effective introduction if you can prove that:

  • You booked an appointment for the buyer to view the property;
  • You confirmed the appointment, in writing, with the buyer and the seller;
  • The viewing took place.

To confuse matters a little, the guidance does also talk about the agent ‘having conducted the viewing’, which is somewhat different than confirming the appointment and the viewing taking place, because many clients conduct the viewing in the absence of the agent.

This has now been followed by the new 2019 Code requiring you to take additional steps to keep sellers’ risks of dual fees to an absolute minimum.

You will still need a clause in your agency agreement advising clients of the risk of dual fees. You also need the six-month / two-year time limit for fee liability clause.

Both having been in the Code for some time.

The 2019 Code states that you must, at the point of instruction, ask the seller if they have previously instructed another agent in respect of the property.

Given that you will need to be able to prove you did ask the question should things get to that point, it seems logical that the question is in writing and forms part of, or is linked to, your agency agreement.

If they advise you they have previously instructed another agent, then your work will start to ensure they do not risk paying two fees.

Firstly, you must ask to see a copy of the previous agency agreement.

You then need to review your competitor’s agreement, because the Code states that you must ‘ensure that by instructing you, the seller will not be in breach of that contract’.

It might sound a simple task, but trust me, my experience of reviewing agency agreements tells me it’s not simple at all.

You will need to consider quite a few aspects; date of instruction; minimum period of the agreement; notice period – did they provide the required written notice? Did the agent confirm the date of termination?

Once you have done that you must establish who viewed the property through the other agent. It seems like a simple question, but whilst sellers might know they had three separate viewings through the other agent, they might have no idea who those people were.

Even if the other agent confirmed the names on termination, the seller is likely to have discarded the letter.

Assuming you manage to complete those tasks successfully, you will then need to take care not to take an offer from any of those previous viewers, because the Code requires you to ‘disclose this information and refer the sale back to that agent, as they will be deemed to have introduced the buyer’ and so would be entitled to their commission.

This means that in most cases, no matter what work you put into marketing the property, you will not be entitled to any sales commission.

If the seller can’t or won’t give you the information about previous instructions or doesn’t give you a copy of the competitors agency agreement, you must provide written confirmation that you will be unable to advise them as to whether they may be in breach of their previous agreement and ‘specifically’ advise them of the possible liability to pay more than one agent’s fee.

When you are the dis-instructed agent you also have a range of things to do at the time of termination:

  • Confirm the specific date of termination, which may be a few weeks hence if you require a written notice period;
  • Confirm the six-month / two-year liability for fees;
  • Provide the client with a complete list of people you can confirm viewed the property through you.

‘Buyer beware’ is a phrase that has been completely extinguished from the legal dictionary over recent years and I suspect that if you fail to do any of this the Ombudsman’s decision will go against you in any consumer complaint about fees.

* David Beaumont is the managing director of Compliance-Matters. He provides a free advice line to EYE subscribers. Simply ring 0161 727 8191.

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3 Comments

  1. JonnyBanana43

    Unfortunately this is guidance only – it wouldn’t stand up in court.

    You have to look at case law – the Foxtons v Bicknell case is the key here – the judge stated you have to introduce a buyer to a purchase – i.e. put it into solicitors hands, to be able to claim a fee. The judge clearly said you cannot simply send somebody a brochure or arrange a viewing and claim a fee. That’s not good enough.

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    1. Not Surprised

      I have challenged this very point with TPOS. Originally she said it did not fly in the face of the case law to which I disagreed. However what is clear is that TPOS are fed up with bickering agents. She did say she would still review cases on an individual basis and this matter should be raised at their Forum. She wasn’t against change in the future if there was compelling evidence.

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  2. JonnyBanana43

    Interesting.  Thankfully I’m not a member of TPOS. It makes you wonder, what happens if a client isn’t happy and goes to TPOS – They haven’t really got your back?

    Case law is what it will boil down to if it went to court.

    TPOS  need to acknowledge this and sharpen their pencil in my view.

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