Most agents are aware that they cannot include unfair terms in their agency agreements.
Contract terms must comply with Part 2 of the Consumer Rights Act 2015, which sets out the general rules about fairness in contracts and notices.
On top of these obligations, there are two further pieces of legislation that are extremely relevant to this issue – namely the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and the longstanding Estate Agent (Provision of Information) Regulations 1991 (EARs).
The TPO Sales Code of Practice (Section 5) sets out all the relevant obligations derived from that legislation and explains, in practical terms, what constitutes best practice when drafting, negotiating and presenting agency agreements to consumers.
These are the standards TPO agents are measured against when complaints arise.
The TPO Code requires that particular care must be taken in defining and distinguishing between ‘sole agency’, ‘sole selling rights’ and ‘ready, willing and able’ clauses in sales contracts.
The definitions set out in the EARs (schedule 5(c)) must be used in full and the implications of each term clearly explained and actively flagged to consumers.
Furthermore, the CPRs require that this material information is provided to consumers in a clear and unambiguous way before they make a transactional decision.
In practice, this means that any fee and the circumstances where it will become due, must be explained to the consumer before they have signed the contract.
Where there is more than one set of circumstances that allow for a commission fee to be claimed, all of the circumstances should be explained to the consumer and presented together in simple clear language in the contract.
It is not acceptable, for example, to present a contract which appears to be a ‘sole agency’ agreement, but includes a ‘sole selling rights’ or ‘ready, willing and able’ term elsewhere in the document.
Most consumers will assume it is a ‘sole agency’ contract and will be unlikely to look elsewhere in the paperwork for other circumstances where a fee could be charged.
Potentially this could be considered a misleading practice under the CPRs and is certainly not best practice or in accordance with the TPO Code’s requirement for clarity in contracts.
Whilst it is legally acceptable to use ‘ready, willing and able’ clauses within agency agreements, they are often the source of dispute especially where a seller has not sold a property but the fee is claimed by the agent.
In these circumstances it falls to the agent to prove that the buyer fulfilled the definition and criteria of the ‘ready, willing and able’ clause within the contract.
Proving that a buyer is ‘able’ to complete a purchase should be relatively straightforward if a financial evaluation has been carried out and ongoing monitoring of the buyer’s financial position has been recorded.
A buyer would be ‘ready’ once all of their finances are available to send to the seller’s solicitor, subject to an acceptable survey.
However, determining whether a buyer is ‘willing’ (or ‘prepared’ as seen in some contracts) to complete the purchase is problematic. Indeed, the term has received different interpretations ranging from the view that a buyer can only be considered willing if they enter into a binding contract (i.e. exchange) to the view that a buyer’s offer sufficiently demonstrates ‘willingness’.
No two cases are the same as, invariably, the circumstances of the transaction are always different.
The problems with differing interpretations of ‘ready, willing and able’ clauses mean they are not conducive to ensuring that consumers are fully aware of the precise circumstances in which they will become liable to pay a commission fee.
Moreover, to put the matter in simple terms, consumers rarely expect to pay a commission fee for selling their property when that property has not been sold.
Given that agents trade on their reputation and the potential for repeat business, I am surprised that such a term is still in use.
* Deputy Ombudsman Jane Erskine will be discussing ‘ready, willing and able’ clauses in more detail during her webinar on Wednesday.
The webinar is free and will be hosted by Rightmove – further details here: https://hub.rightmove.co.uk/webinars
‘Moreover, to put the matter in simple terms, consumers rarely expect to pay a commission fee for selling their property when that property has not been sold.
Given that agents trade on their reputation and the potential for repeat business, I am surprised that such a term is still in use.’
I agree how about ‘Conmisery.’
How many 1000s of users are now paying a fee for failure or paying two agency fees compared to pre-online only days?
After 30 years of no sale, no fee do all these users truly understand that they pay anyway?
This is exactly the reason why all on-line pre-paid/loan users must be offered a choice of no sale. no fee so that they are more able to understand that they pay anyway with some contracts?
No sale, no fee is surely so much more transparent?
Time the regulators backed those 1000s of consumers who may have been caught out on this less transparent marketing?
Why isn’t the largest on-line agent made to prominently display pay anyway on their website and marketing?
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If I am asked to find a buyer and I find a buyer I expect to be paid. just because the vendor changes their mind doesn’t mean I haven’t done what was asked of me.
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I think there has been some confusion here by the writer:
“The TPO Code requires that particular care must be taken in defining and distinguishing between ‘sole agency’, ‘sole selling rights’ and ‘ready, willing and able’ clauses in sales contracts.”
Distinguishing between “Sole Agency”, “Sole Selling Rights” and “Ready Willing and Able contracts”. These are two types of contract ie “Sole Agency” and “Sole Selling Rights” – “Ready Willing and Able” is a contract term that can be included in either contract.
I think once again estate agents are being given bad press here for a perceived unfair term. Firstly, estate agents are offering a service whereby they only get paid when a buyer is found, not like the PB model whereby they get paid immediately in cash or by the loan company financing the contract.
During the property recession in the North we were probably only selling around 33% of instructions, so we got paid only only 33% of listings. This has risen now to perhaps 60-75% however PB are getting paid for every listing irrespective of whether they sell. We could all charge less if we got paid for every listing….simple!!
We recently found a buyer for a property and then the vendor went on radio silence, he hasn’t paid us any fee but we found this buyer in good faith. Have we done something wrong here? The vendor is on radio silence obviously not wanting to sell now. PB would have been paid upfront in this instance so they win and the vendor doesn’t care because he can do what he wants as he has already paid.
Who is the villain now? The agent wanting to claim a fee for the service they provided or the vendor who has paid absolutely nothing for a professional service? Incidentally the fee in this instance is 1% of £80,000 or £800 +VAT whereas PB are charging £704 +VAT.
No doubt when we issue legal proceedings to recover the fee, the vendor will cry “I didn’t even sell my house and the agent is wanting a fee” – The public will perceive this as another bad “rip off” agent and the PB PR machine will kick in don’t pay commissary use PB!!!
The public are that stupid to fall for that PB rubbish as demonstrated in this example!!
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Wow. This is quite worrying.
At first I thought this had been written by Ros, so basic errors relating to the nature of contracts and the “ready, willing and able” clause were to be excused (not her area of expertise after all).
Then I read it again and realised it’s been written by the Ombudsman herself.
God help us!
Clearly this organisation a) doesn’t really know what it’s doing and b) is not fit for purpose.
No wonder they found nothing wrong with the PB deferred payment scheme.
FYI – “TheAgent48” I hear where you’re coming from BUT I hope you can prove your buyer is willing to exchange UNCONDITIONAL contracts, otherwise, if your vendor tools up with a barrister after you’ve threaten them with legal action, you may end up with egg on your face.
However, it’s unlikely to get that far give what Katrine has written. Looks like the TPO would correctly rule against you (albeit for the wrong reasons)
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