NEWS FLASH: Barrister raises questions about duties owed by online agents to sellers

A leading barrister has raised several questions about the duties owed by online estate agents to their customers.

In the Opinion, prepared for the UK PropTech Association (UKPA), Ian Rees Phillips of 6 Pump Court explores how the nature of up-front payment for estate agency services may create a conflict of interest between the online estate agent and property vendors.

The opinion concludes that the online agents owe a fiduciary duty to home seller clients and that there is a “significant danger that breach of fiduciary duty is baked into the online estate agent model”.

Those online agencies who operate with self-employed agents in the field are in even more “danger” of their clients “bringing a claim” against them.

Eddie Holmes, chairman of the UKPA, said: “It is extremely important that founders operating new business models, enabled by technology, bear in mind the legislative environment in which they operate. The world of PropTech is no different to any other in this regard.

“This Opinion by Mr Rees Phillips serves to highlight some fundamental questions about the online agency business model.

“We urge those businesses operating in this space to consider these questions as a matter of priority and communicate what steps they take to protect their customers – something which should, ultimately, help those businesses create competitive advantage for themselves.”

Online agent Russell Quirk, of eMoov, said: “It should be noted that not all online and hybrid agents are the same.”

He said that eMoov employs all its staff full-time, “whereas a number of our rivals rely upon using self-employed contractors that may perhaps be, say, driving a taxi one day, then listing homes the next.

“We are grateful to the UKPA for highlighting issues which go to the core of our own belief in providing the best service we possibly can to our customers.”

 

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15 Comments

  1. Trevor Mealham

    Im failing to see how service pitched as –   1/ You pay a low fee on the basis we simply stick your home on ‘whatever portals’ and quite poss you may not get a sale, is any harder for consumers to understand than  2/  We act on a no sale, no fee basis.

    Its hardly a balance to put budget, FSBO, or cheap models out of the game.

    As for legislation, budget online agents have the same obligations to more traditional models. The break comes from when a model is classed as a ‘Passive Intermediary’ offering no ancillary services such as EPC’s, mortgages, photography services etc etc etc

    Legislation and regulation affects All agents regardless of their model type.

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    1. Bless You

      I blame Rightmove..If the onliners upfront model doesnt  fall under being  an ‘agent’ then  rightmove should stop them listing..
      Imagine a sports agent who took his money off his player BEFORE he won anything…..people are simply being tricked. 
        
       

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      1. Bless You

        it also shows how bad we are as an industry. Its taken a tech industry who needs estate agents to sell to,,, to raise this point in a clever way…..where are the agents??  
         

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        1. PeeBee

          “it also shows how bad we are as an industry. Its taken a tech industry who needs estate agents to sell to,,, to raise this point in a clever way…..where are the agents??”

          Might not be a bad idea to wonder where these tech people got the idea in the first place…

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  2. Robert May

    The Radio 4 program last Autumn was supposed to make this exact point, the duties of a contracted agent aren’t affected by the charging model. Unfortunately a  researcher at the BBC  wasn’t able to grasp the concept of duty of care and skill and the other duties of a contracted agency.

    About £25,000,000 each  is paid by unsuccessful vendors  to  passive intermediary listing firms who  claim to act as agents and have their listing fees compared with commissions charged by agents.   Once it is realised that  case law says that if the lister is negligent, and the property remains unsold  because of the negligence or failure ‘agent’s’ to act there is a real case for the listing fee to be refunded.

    £25,000,000 per annum with 6 year limitations period?  That is a nasty contingency  many of the shouty entrepreneurs won’t have made provision for.

     

     

     

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  3. Mark Walker

    I still wonder how online agents can accurately meet legislation with serious criminal penalties, such as Right to Rent, in the event that they never meet the viewers and get to a sale or let agreed point.

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    1. Bless You

      its called having a useless govt. who has no understanding of the new business model .  > Launch, hope, reep, get out…with millions. 
      Our country is now only policed by the papers exposing individual companies…its the ones who dont get exposed i worry about. 

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      1. Mark Walker

        Yes, having the party of small government in undisputed power does leave the public bodies that would enforce taxation / regulation cut off at the knees through their funding.

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  4. cyberduck46

    Some wild figures being thrown around as usual. More spin.

     

    So every unsuccessful vendor can claim their money back?

     

    Every local property expert is driving a taxi one minute and selling property the next?

     

    If every unsuccessful vendor can claim their money back then they could sue Estate Agents going back as far as the statute of limitations will allow. It’s not just about fees but damages due to the failure to sell due to the time on the market. Failing to sell after a year on the market in a rising market causes significant costs to somebody looking to upgrade from a 3 bed semi to a 4 bed detached.

     

    If you think that for every court case there are 2 Barristers you can see that at best Barristers are right just 50% of the time. Sometimes they’re both wrong 🙂

     

     

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    1. Mark Walker

      Cyberduck46, you sound a bit stressed.
      LPE gig not all you thought it was going to be?

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      1. cyberduck46

        Mark,
         
        Just amazed and amused at the ongoings in the Estate Agency World. I’m an investor and have been interested in PurpleBricks since January and I probably know more about them than the so called experts on here.
         
        Innuendo & Scaremongering every day.
         
        if any members of the public read any of this it’s just going to look like it is Estate Agents that are rattled. They’ll be asking themselves “why are Estate Agents so concerned about PurpleBricks?” “They must be doing something right”. Better advertising than those TV ads. 🙂

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    2. PeeBee

      “If you think that for every court case there are 2 Barristers you can see that at best Barristers are right just 50% of the time.”

      Not even maybe correct.

      A verdict does not prove a Barrister ‘right’ or ‘wrong’ – only successful or unsuccessful with their case.

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  5. Woodentop

    It is this very point why the OFT were reviewing upfront, non-refundable fee’s paid to agents. It opened the door to …… If I want to, I can turn a blind eye, I’ve been paid regardless and even more danger by using self employed LPE.

     

    No Sale = No fee you don’t get paid if you don’t succeed, you don’t get as much if you don’t get the higher price (your duty)

     

    cyberduck64, yes a vendor has always been able to sue an agent even if they don’t sell the property, if they can show negligence. It is common in many industries.

     

    “On-line only” fails to meet exposure to the market, as many don’t use the internet and have no local presence

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    1. cyberduck46

      >cyberduck64, yes a vendor has always been able to sue an agent even if they don’t sell the property, if they can show negligence. It is common in many industries.
       
      Thanks Woodentop. I thought as much. 
       
      So reading the Barrister’s points again it is just that he thinks the “no sale, no fee” model is more likely to produce fewer cases of negligence. You might call me biased but my own personal experience with PurpleBricks as a customer and with traditional Estate Agents over the years makes me disasgree with him. I think it’s far too simplistic to say that PurpleBricks LPE’s are thinking only of the short term. In fact they are shareholders with tie in clauses. Also, the “no sale, no fee” model in fact produces some conflicts of interest that don’t apply to the fixed fee. An agent might actually be far more interested in a sale at any price than the client for example.
       
      I don’t agree that there is as much of a risk as some people are trying to make out and I wonder whether with the franchise model that PurpleBricks uses then the risk is on the LPE rather than PurpleBricks if the LPE acts negligently. If so then provided they are operating through a limited liability company then you are very unlikely to see many claims.

       

      Also the fact that the fee is £849 puts it in the class of a “small claim” where legal fees are not recoverable. Another reason why the risk is unlikely to be as significant as some are saying.
       
      >“On-line only” fails to meet exposure to the market, as many don’t use the internet and have no local presence
       
      That’s an interesting point. Can you point me to the law on that? It could be another one of those laws that is open to interpretation and that interpretation evolves as society changes. One for the lawyers but without knowing the actual law I’m looking at the way the internet has become mandatory in certain other areas such as in relation to welfare benefit claims. I wonder if the fact that there is free access to the internet in places such as libraries could affect any ruling on that point. 
       
       
       
       
       
       

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      1. Woodentop

        Estate Agency Act 1979. TPO Code of Practice.

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