A case that The Property Ombudsman was asked to review came from a seller who was facing commission fee claims from two agents.
This was a dual fee dispute, with the seller having paid a commission fee to the second Agent (Agent 2) for the sale of the property and later being pursued for a commission fee by the first Agent (Agent 1) which had not been paid.
The Ombudsman’s role, as defined by the TPO Terms of Reference, is to review complaints with a view to promoting a settlement of the dispute. It is not to make a legal determination on points of law. That is the role of the courts. The decision in this dispute reflected what was considered to be a fair and reasonable outcome, that is whether payment of a commission fee was fair and reasonable in the circumstances particular to the case in question and taking into account the impact of any shortcomings in service identified during the review.
In particular, it was considered whether the agent has done what was expected of them in order to protect the consumer, their client as seller, from the risk of a dual fee claim for one sale.
The expectations and requirements of an agent’s service under the following aspects of the TPO Code of Practice applied:
1e – to provide a service consistent with fairness, integrity and best practice.
5r – at the point of accepting instructions, to point out and clearly explain in the written Terms of Business:
- That they may be entitled to a commission fee if the seller terminates the instruction and a memorandum of sale is issued by another agent to a buyer they have introduced within 6 months of the date the instruction ended and where a subsequent exchange of contracts takes place.
- And the seller may be liable to pay for more than one fee if that seller instructs another agent during or after after their agency period.
5s – at the time of termination of the instruction, to explain clearly in writing any continuing liability the client may have to pay a commission fee and any circumstances in which the client may have to pay more than one commission fee.
8 – when it is known that the property has been marketed by another agent, to establish if the buyer has previously viewed the property through that or another agent.
Agent 1 was initially instructed on a sole agency basis and their agreement met the requirements of 5r of the Code. Shortly after Agent 1 was instructed, they arranged a viewing with the buyers. The buyers’ feedback from the viewing was that they really liked the property and were considering an offer of the asking price and would decide after seeing a mortgage advisor.
A week later, a sale of the property was agreed to another party. Two months later the sale to that party fell through and on the same day Agent 1 contacted previously interested parties, including the buyers. Knowing the buyers previous interest Agent 1 contacted them again a week later about the property’s availability. In the meantime, the sellers had instructed Agent 2 on a multi-agency basis. Agent 1 confirmed the change to their contract.
Shortly after receiving Agent 1’s second email, the buyers knocked on the door of the property and the sellers conducted a viewing with them. The buyers made an offer for the property the following day though Agent 2. The sale progressed through Agent 2.
Agent 2 stated that after a break from any involvement with Agent 1, the buyers chose to re-establish their interest in the property through Agent 2. Agent 2 said, that had contact been maintained with the buyers by Agent 1, it was reasonable to assume the buyers would have directed their attention to Agent 1. Agent 2 believed that they were the effective cause of the sale of the property, in receiving the offer, processing and progressing the sale.
In considering this case, the Ombudsman was satisfied that the buyers’ interest that led to their purchase of the property was generated through Agent 1 and had not waned. The buyers had contacted Agent 1 to arrange their first viewing. The feedback had been very positive. The sale being agreed to another party naturally took the buyers out of the equation until that sale fell through. Agent 1 then immediately followed up the buyers’ interest and the buyers’ direct approach to the sellers was understandable given the buyers at that time lived nearby.
Agent 2 failed to act in accordance with best practice when failing to act as expected under Paragraph 8d of the Code. On receipt of an offer from the buyers, they should have taken steps to establish if the buyers had viewed the property previously. In failing to do so, Agent 2 failed to protect the sellers from the risks of a dual fee claim, risks that were borne out by subsequent events. The circumstances of that offer should have flagged to Agent 2 the vital importance of asking the questions needed to meet the requirements of 8d of the Code. Agent 2’s own file notes record that the viewing was not accompanied by them and the note for the viewing was added to allow for the record of the offer that followed.
It could not be established why the buyers contacted Agent 2 having viewed the property directly. It is possible that they saw Agent 2’s For Sale board but this did not influence the decision nor the reasoning behind it. It was not disputed that Agent 2 handled the buyers’ offer and saw the sale through. However, it was only a little over two months between the buyers indicating a desire to make an asking price offer for the property through Agent 1 and then the property coming back onto the market after the previous sale fell through.
In failing to ask the buyers if they had viewed the property through another agent (and given their keen interest when they had, there was no reason to believe the buyers would have answered in the negative), Agent 2 allowed the dual fee situation to develop and avoidably exposed the sellers to the potential of paying two commission fees for one sale.
Agent 1 were the agent who first introduced the buyers to the property and it was Agent 1 who generated the buyers’ interest that led to the sale.
The fair and reasonable outcome was that the sellers paid one commission fee. The Ombudsman found that Agent 1 was fairly due payment of their commission fee. Agent 2 was instructed to refund to the sellers the commission fee received for the sale of the property to buyers introduced by another agent.
In transactional terms, 8d of the Code is vital when an agent knows a property has been marketed previously by another agent. As a matter of best practice, when that has been established, the second agent should contact the first to discuss events and the best way forward. Had Agent 2 done so, the Ombudsman was satisfied that they would have realised the sequence of events and that they should have referred the buyers back to Agent 1.