In the vast majority of property sales only one agent is instructed and their contractual right to a commission fee is not disputed.
However, disputes where two agents have been instructed and both are claiming a fee for selling the property have always been a regular cause of complaint to TPO.
Dual fee situations generally arise when a seller instructs two agents, either on a multi-agency basis or as a result of a sole agency contract being terminated and a second agent instructed, and a buyer who may have viewed through the first agent coming back to view or offer on the property through the second agent.
The TPO Code of Practice is intended to ensure that no seller is unwittingly put in a position where they are liable for two fees for the sale of a property.
TPO often sees situations where one agent will claim a fee based on being the effective introducer and the second agent on having held negotiations, but one or both of them is unwilling to negotiate a share of a single fee.
Such instances are likely to arise out of general confusion on behalf of the seller client, many of whom have no comprehension that such a situation could happen, not realising that an agent’s fee liability may extend after the end of the contract period and which can be further exacerbated by the buyer’s, albeit innocent, action.
Agents need to ensure that they fully explain to their seller clients the events that may lead to a potential liability to pay two fees and protect their clients’ interest, particularly where one agent is dis-instructed and another instructed.
From the outset, agents need to be clear and transparent in their dealings and their agency agreements should clearly set out that a seller may be liable to pay more than one fee if they have previously instructed another agent to sell the property or they go on to instruct another agent during or after the agency period.
Three paragraphs of the TPO Code are relevant here.
“Agency agreements should point out that a fee may be due if a seller terminates their first instruction and a memorandum of sale is issued by another agent to a buyer that the first agent introduced, and that the following timescales apply (Paragraph 5r of the TPO Codes of Practice):
- within six months of the date the instruction ended and where a subsequent exchange of contracts takes place
- if it is a private sale and no other agent is involved this time limit extends to two years
“If a seller terminates an agreement, the agent must explain in writing to the seller any continuation liability to pay a fee and the circumstances that a seller might have to pay more than one fee (Paragraph 5s of the TPO Codes of Practice). It would also be advisable for agents to provide the seller with a list of all potential buyers that they introduced, which can then be handed to the second agent.
“If an agent knows that the property has been marketed by another agent, they should establish if the buyer has previously viewed the property through that or any other agent (paragraph 8d of the TPO Code of Practice).”
TPO continues to receive comment on the ‘Foxtons case’ concerning an agent’s entitlement to a commission fee.
The cases that are brought to TPO reflect ongoing confusion, among both sellers and agents, as to what an agent is required to show to justify their commission fee entitlement.
If an agent is basing their contractual entitlement to the fee on the fact that they introduced the buyer, the Ombudsman will expect to see documentary evidence that the agent was indeed the ‘effective’ cause of introduction.
Merely handing property particulars to a prospective buyer or conducting a viewing where the viewer expressed no interest in the property and did not, at that time, make an offer, is unlikely to be considered by the Ombudsman sufficient to establish that the agent’s actions resulted in the sale of the property.
However, if the agent can provide detailed progress notes showing that the potential buyer was interested in the property and wanted to go ahead but was unable at the time, and the agent kept in contact during their period of instruction trying to establish the sale, then it is likely that the Ombudsman may conclude that the agent was the effective introducer.
The best approach for agents to take is to ask the right questions at the right time.
If the second agent becomes aware of a dual fee situation at an early stage, they should hand the sale back to the first introducing agent.
If the situation is not known immediately, both agents should be willing to discuss a sensible fee sharing arrangement, so the seller only pays one fee.
TPO will decide each case on its own merits, applying the Code of Practice and common sense with a view to determining the fair and reasonable outcome.
TPO’s view is that no ‘innocent’ consumer should have to pay two fees for one transaction.
* The author, Katrine Sporle, is ombudsman at The Property Ombudsman. A recent TPO ruling rejected a seller’s complaint about being chased for payment by their first estate agent. However, a subsequent county court hearing decided that the first agent had no claim to a commission because it had not introduced the eventual buyers to the transaction.