Do you know the difference between a sole agency & sole selling rights agreement? This case involves a family executing a sale on behalf of a deceased relative and the importance of understanding your agency agreement.
2015 Annual Report Case Summary: Sole Selling Rights
This case concerns a dispute referred to The Property Ombudsman (TPO) from executor sellers, querying the agent’s entitlement to charge a commission fee.
The complainants had, for some time after their mother’s death, been advertising the property privately in the hope of selling. Having had no success they instructed the agent. During the appraisal the complainants say they explained that they would continue marketing alongside the agent, who would have seen the complainants’ For Sale sign adjacent to which the agent later erected their own sign.
The agreement signed by the complainants was not a sole agency agreement under which the estate agent is only entitled to a fee if they or another estate agent introduce the buyer (or hold negotiations with the buyer). Rather it was a sole selling rights agreement, under which the agent was entitled to a fee if contracts were exchanged whilst the agency agreement was still in force, regardless of who found the buyer.
A sale was agreed and the complainants contacted the agent to advise that as the agent played no part in introducing the buyer they understood that no fee would be due. The complainants explained that the buyer had called them using the number on the private sale board after being told about the property by a friend. No viewings at all were conducted by the agent and they did not assist with the sale. The agent knew that the complainants were still marketing the property but later said that as they had emailed property particulars to the buyer, they had effected the introduction.
Paragraph 5g of the TPO Code of Practice requires agents to take particular care in defining and distinguishing between sole agency and sole selling rights agreements, and to clearly explain the implications to the client. In this case, the Ombudsman had serious concerns in this regard. The agency agreement was not clearly labelled as a sole selling rights agreement, but rather the fee entitlement was on the second page of the printed terms with nothing to even hint that there was a defined fee entitlement, let alone that it was a sole selling rights clause.
The agent was obliged to act in the complainants’ best interest and fully equip them with all necessary information. The agent would have seen the complainants’ For Sale sign before instruction and whatever was said or not said about the complainants retaining that sign after instructing the agent they should have warned the complainants (in writing) that if they kept the sign and found a buyer through it, they would still have to pay the agent.
The agent’s letter, when the sale was agreed, used the explanatory wording applicable to a sole agency instruction, not a sole selling rights situation, advising that a fee was only due for a buyer introduced by the agent. Subsequently the agent’s complaint response correspondence perpetuated this confusion, initially being predicated on the claim that the agent had introduced the buyer and only later claiming a right to a fee regardless of who introduced the buyer.
In this case the agreement signed by the complainants stated that the agent was entitled to a fee if the property was sold to anyone during the agency term, regardless of how their interest arose. It was not technically relevant, therefore, who introduced the buyer. The Ombudsman supported the agent’s contractual entitlement to the commission fee.
However, the Ombudsman also had regard to the TPO Code of Practice and the responsibility to propose a fair and reasonable outcome having regard to the agent’s responsibilities therein contained. The Ombudsman was not persuaded that, in the light of those concerns discussed, the complainants would (or should) have clearly understood before completing the sale, that by going ahead with the sale to the buyer, they would have to pay a fee to the agent. The complaint was supported to the extent that the agent had not complied with Paragraph 5g of the TPO Code of Practice. An award of £1,100, equating to approximately half the commission fee, was made for the significant aggravation caused to the complainants in this regard.
To download a copy of TPO's 2015 Annual Report and view more of the report's case summaries, please click here.