Annual Report: Dual Fee Dispute: Who Can Claim Commission?

Published on Thursday, 17 May 2018. Posted in Case Studies

The Ombudsman was asked to decide on a dual fee dispute, with two agents pursuing the seller for commission fees, both claiming introduction of the buyers.  The seller believed that the agents should have been able to decide this between them once it had come to light.

The seller of the property in this case was elderly, bereaved and lacked experience and knowledge of the sales process.  She had instructed Agent A on a sole basis, but terminated the instruction and switched to Agent B, again on a sole agency basis.  The property was sold through Agent B to buyers who had been introduced through Agent A prior to Agent A’s instruction being terminated by the seller.  The buyer had offered through Agent A but had not yet agreed a sale on their property so were not in a position to proceed at that time.  The buyers’ chain was complete a few weeks after having first made an offer and, as the property was then being marketed by Agent B, they re-submitted their offer to Agent B. A dual fee situation resulted, with the seller having paid Agent B’s fee and subsequently pursued, nearly a year later, for a fee by a firm acting on behalf of Agent A who had discovered the sale via Land Registry records. 

The seller clearly believed that the buyer was not introduced by Agent A as they were not in a position to proceed until they had viewed and offered through Agent B.  This demonstrated the seller’s lack of knowledge and is a fairly common misunderstanding – the belief that the agent that conducts the sale must be the only agent that can claim a fee.

The Outcome

Both Agents had a contractual claim to a commission fee – Agent A through introduction and Agent B through negotiation.

The Ombudsman explained that she was entitled to decide the matter in terms of what was fair and reasonable for the consumer, particularly as the consumer in this case was due special care because of her circumstances.  It was not deemed fair for the seller to face paying two fees for one sale.

Agent A had failed to confirm their disinstruction in writing and to warn of potential ongoing commission fee liability – had they done so, the seller would have been better equipped when making the decision to proceed with the sale through Agent B. Paragraph 5s of the TPO Code of Practice states that an agent must, when disinstructed, explain clearly in writing any continuing liability the seller may have to pay a commission fee and any circumstances in which they may otherwise have to pay more than one commission fee.

Agent B had failed to ask the buyers, when arranging their viewing or after, whether they had viewed the property previously through another agent.  Had they done so, Agent B should either have referred the buyers back to Agent A or have sought a negotiation to split the fee. Paragraph 8d of the TPO Code of Practice states that an agent, when aware that the property had been marketed previously by another agent, should ascertain if the potential buyer has viewed with that or any other agent.

In failing to do so, Agent B allowed the dual fee situation to develop.

Given the relatively short time between a viewing and an offer through Agent A and the negotiation by Agent B, the Ombudsman decided that the commission fee be split between the Agents, with Agent A having the slightly greater portion (60%). 

This reflected the respective impact of each Agent’s shortcomings under the TPO Code and meant that the seller was put back into the position she would have been had a split been negotiated during the sale.

It also meant the seller paid one fee for one sale, which was the suitable outcome where she was an innocent party.

Ombudsman’s comment

I see a considerable number of dual fee disputes referred to my office.  As above, many involve sellers who are inexperienced and so more reliant on their agent’s advice and assurances.  Worryingly, many agents tell their client that the other agent (usually one instructed previously) simply would have no claim, citing ‘effective cause’ or saying that the ‘Foxtons case’ (Foxtons vs Pelkey Bicknell) should dictate the outcome.

I decide each case on its own merits, applying the Code of Practice and common sense with a view to determining the fair and reasonable outcome, such as in the case above.

I do not make legal decisions about contract or the law, but I of course take these into account and my decision will generally be in terms of what payment is fair and reasonable to which agent.  Often, I see cases where a seller should be entitled to trust the agents to resolve the matter between them (or to refer it to TPO before a fee becomes due for me to decide), rather than simply pursuing full fees under contract or leaving the seller with the option to withdraw from the transaction and losing the sale or to pay double commission.

Learning for consumers and agents

Agents should take every step to ensure that the seller understands the risks when either disinstructing one or instructing another, and to adhere to the relevant parts of the TPO Code of Practice at such times.  This ensures the seller is properly equipped to make decisions when agreeing a sale.

When dual fee situations arise, sometimes through no fault of an agent, I expect the agents to act to negotiate a split so that no seller faces dual fee payment where that seller is ‘innocent’.

Sellers should ensure they understand the nature of the contract they are entering into and not sign until they do or have had the opportunity to carefully read and ask questions if needed.