A Clamber for Commission
The Property Ombudsman was asked to review a dispute from sellers involving the commission fees charged by two sets of agents following the sale of a property.
The sellers raised a dispute against Agent 2, who maintained they had an entitlement to payment of sales commission as they believed they were the effective cause of the sale, not Agent 1 with whom the buyers first viewed the property with.
The expectations and requirements of Agent 2’s service applied under 1e, 5t and 8d of the Code of Practice (the Code). TPO’s Dual Fee Guidance, issued in March 2019 to run alongside the June 2019 edition of the Code, echoes the above.
INVESTIGATION
The buyers viewed the property through Agent 1, giving positive feedback following this viewing. The Ombudsman was satisfied that the buyers made the transactional decision in the month prior to the sellers dis-instructing Agent 1. Agent 2 was not instructed until two months after this.
The asking price of the property was then set at £1,695,000 (after being marketed for £1,750,000 through Agent 1). Agent 2 was aware that the property had previously been marketed, as was communicated via the sellers in an email. With this knowledge, Agent 2 should have been alert to the risks of a dual fee situation developing; however, they did not ask to see the sellers’ contract with Agent 1, nor did they proactively seek a list of previously introduced parties. Instead of warning the sellers and looking to protect them from dual fee liability, it was the Ombudsman’s view that they ignored the risks.
The same buyers then viewed the property through Agent 2, some 3-4 weeks after they were instructed. They went on to offer through Agent 2. From Agent 2’s comments in correspondence with the sellers, the Ombudsman was satisfied that they did not ask the buyers if they had viewed the property previously, as expected under Code and Guidance.
Prior to submitting an offer, the buyers explicitly indicated their interest in the property, suggesting it was likely generated through another agent. In an email to Agent 2 about making an offer, the buyers stated, “I understand that the property was on the market with Agent 1 before for some time, and the sellers have put the property on the market with you now.” If Agent 2 hadn't considered it earlier, the buyers' email should have prompted them to inquire about the buyers' previous viewings through another agent.
Upon learning of the buyers' offer through Agent 2, Agent 1 emailed the sellers. Agent 1 said that, as they had introduced the buyers earlier in the year, the sale should be referred back to them. To support their claim, Agent 1 attached a dis-instruction letter, explicitly mentioning the buyers' name within a list of parties introduced by them.
The sellers forwarded Agent 1's email to Agent 2 on the same day. In response, Agent 2 confirmed that the applicant had indeed viewed the property with Agent 1 but emphasised that the subsequent viewing occurred with them. Agent 2 expressed frustration, noting that the buyers showed no signs of having viewed the property before. They assured the sellers that they would discuss the matter with their manager and provide further updates shortly.
The Ombudsman was satisfied from the wording used that Agent 2 had not asked the buyers if they had viewed the property before, as expected as a matter of best practice and specifically paragraphs 5t and 8d of the Code. Furthermore, at the time of instruction, Agent 2 failed to ask for a list of previous viewers of the property. Given the buyers had subsequently offered this information, it is reasonable to conclude that the sellers would have provided information to Agent 2 about previous viewers.
The Ombudsman was critical that Agent 2 failed to obtain key information about previous prospective buyers at the beginning of their relationship with the sellers, exposing them to the risk of paying two commission fees.
Despite Agent 1's effective introduction of the buyers, Agent 2 claimed they were the effective cause based on a previous court case covering a similar issue and due to the significant price reduction during their marketing period. However, Agent 1’s positive feedback and the buyers' ongoing interest indicated an uninterrupted connection.
Agent 2's service fell short of the requirements of the Code by not taking appropriate steps to protect the sellers and attempting to claim an undeserved commission fee. They should have checked if the buyers had previously viewed the property through another agent, especially since it occurred within the 6-month period specified in the contracts. According to the Code, the sale should have been referred back to Agent 2, and Agent 2 should not receive any commission. In accordance with fairness and best practice, the Ombudsman concluded the Agent 2 should cease any further pursuit of a commission fee or any other fee from the sellers as this would have represented a financial loss and be unfair.
OUTCOME
The Ombudsman supported the complaint concluding that Agent 2 did not meet the relevant requirements of the Code at the crucial times in this case. In their failure to do so, they failed to protect the sellers from the risk of dual fee claims for their sale.
The Ombudsman directed that Agent 2 cease any pursuit of payment of sales commission from the sellers as doing so would have represented a financial loss to the sellers. The decision put the sellers back in the position they would have been in had Agent 2 met the requirements set out in the Code of Practice.