Dual fee deception or dilemma

When Agent 1 began marketing the property it became apparent that the tenant would not permit access to allow viewings to take place. No viewings took place with Agent 1, yet they maintained that the eventual buyers requested a viewing and so argued it demonstrated that their marketing introduced the buyers to the property.

Agent 1 ceased their activities in respect of the property a month later, and the option period ended after a further three months. Following this date, the seller, having secured vacant possession from the tenant, instructed Agent 2 to market the property for sale. The buyers viewed the property with Agent 2 and a Memorandum of Sale was issued the following month.

On the day of completion, the seller’s solicitor discovered that Agent 1 had lodged a unilateral notice against the title of the property which prevented the seller from completing the sale without written consent from them (Agent1). Agent 1 advised that they believed that they had introduced the buyers and required payment of £12,999.60 in order to remove the unilateral notice. The seller instructed her solicitor to pay this to allow the sale to complete, but subsequently sought a full refund from agent 1 in settlement of her complaint.

INVESTIGATION

1. The contract

The seller stated that she was not provided with a copy of the contract, despite requesting it, and said she was assured verbally that there were no ‘tie-ins’ and that Agent 1’s involvement would cease with the expiry of the option period.

Agent 1 stated that their records showed that the seller signed a copy of their contract via docusign and that they found no record of the seller requesting a copy of the contract thereafter. Agent 1 maintained that their contract clearly set out the circumstances in which payment would be due to them.

From the copy of the contract supplied, it was clear that this was presented to and signed by the seller on the same date. The contract stated that it was subject to the ‘standard conditions of sale – fifth edition 2018’, but the Ombudsman was not provided with a copy of any such conditions, nor any evidence that the same was presented to the seller.

Clause 20 set out that Agent 1 was being instructed on a sole selling rights basis. However, this was not defined in the manner prescribed by the Estate Agents (Provision of Information) Regulations as required under paragraph 5i of the Code. Rather the remainder of the contract set out an arrangement under which Agent 1 had the option to purchase the property.

In respect of the sale occurring after the expiry of the option period, the contract stated that if a third party introduced by Agent 1 subsequently purchased the property within 12 months of the expiry of the option period, then a fee was payable equivalent to the difference between the option price and the purchase price (with a minimum amount of £7,000).

This did not align with the requirements of paragraph 5t of the Code, which sets out the limits of an agent’s ongoing fee entitlement.

Agent 1’s contract also failed to warn the seller of the potential for more than one fee to become payable in respect of the sale of the property. Therefore, whilst the Ombudsman was satisfied that the seller was presented with a copy of Agent 1’s contract, she was not satisfied that the terms, particularly those relating to Agent 1’s remuneration, met the requirements of the Code.

2. The introduction of the Buyers

Agent 1 maintained that they introduced the buyers by virtue of a viewing request. However, this did not take place since the tenants refused access.

TPO’s guidance and case law refers to the need for an effective introduction in establishing whether commission fees are due. This means that the agent should demonstrate that they made an introduction to the purchase and not merely to the property. The Ombudsman was satisfied that it was Agent 2 who secured the sale and introduced the buyers to the purchase of the property.

TPO’s dual fee guidance confirms that an effective introduction must evidence that the agent carried out an act that initiated the buyer’s reaction to the property.

The Ombudsman took into account that the buyers viewed the property more than three months after they requested a viewing with Agent 1, and that when the buyers viewed the property with Agent 2, it was with vacant possession. This was a material difference to the situation when Agent 1 was instructed at which point there was a sitting tenant which could have impacted the buyers’ decision.  

Whilst the fact that there was a sitting tenant was no fault of Agent 1, impacting their opportunity to conduct viewings, the Ombudsman was not satisfied that this was sufficient grounds for their later claim for a fee in the sum of £12,999.60.

Additionally, correspondence between the seller and Agent 1 demonstrated that the property had been withdrawn when the tenant refused access. At this point, Agent 1 did not clarify any ongoing fee entitlement nor did they provide details of any parties they considered that they had introduced to the property. This is contrary to the requirements of Paragraph 5u of the Code.

Regarding the unilateral notice, Agent 1’s contract stated that the seller consented to the registration of a unilateral notice against the title to the property at HM Land Registry. However, the contract was clear that the purpose of this was to protect the option, which had ended. In the Ombudsman’s view, any unilateral notice already lodged should have been withdrawn at that point.

OUTCOME

Having carefully considered the evidence the Ombudsman supported the complaint with an award of £13,999.60. £12,999.60 in respect of the financial loss incurred by the seller in paying the fee claimed by Agent 1, to which they had no contractual, nor fair or reasonable entitlement, and £1,000 in compensation for the avoidable aggravation, distress and inconvenience caused.