Conflict of Interest

Published on Tuesday, 13 March 2012. Posted in Case Studies

Mr B (the Potential Seller) asserted that the Agent had undervalued the property and had then failed to disclose their interest in a company that had made an offer which the Agent had advised him to accept. The Agent denied that they had a financial interest in the company which they had introduced to the purchase.


Contrary to the requirements of the Code of Practice, the Agent’s file did not include any details of comparable properties to support their valuation of the property. Furthermore, Mr B provided copies of Companies House records which showed that the director of the Agent company was also a partner of the limited liability partnership (LLP) company that had made the offer for the property. Mr B explained that, upon finding out this information, he
had withdrawn the property from the market and terminated his agreement with the Agent.


Not only did the Agent fail to substantiate their valuation of the property, but they failed to inform Mr B of the clear conflict of interest resulting from their connection with the proposed buyer company. The Code of Practice clearly specifies that any possible conflict of interest must be disclosed to the client and any relevant third party prior to the initial negotiations. In failing to do so, I considered the Agent to be in serious breach of their obligations to Mr B. I made an award of £750 and issued a ‘breach’ letter to the Agent, who subsequently acknowledged their serious failure and demonstrated that they had put procedures in place to stop any similar incidents from occurring again.


Section 21 of the Estate Agents Act 1979 specifies what ‘interests’ must be declared by the agent. Where such an interest exists, Paragraph 10c of the Code of Practice requires the agent to disclose this information, in writing, to all relevant parties at the earliest opportunity.