Disputes over Dual Fees, where two estate agents have been instructed and both are claiming a fee for selling a property, have always been a regular cause of complaint to The Property Ombudsman (TPO). In 2017, TPO received 32 cases relating to dual commission fees, in 2018 there were 72 cases and so far in 2019, TPO has already received 25 cases, highlighting this as a growing issue. Other industry representatives have also shared similar concerns. Following TPO’s latest Industry and Consumer Forum meetings on 27th February 2019, TPO has issued clear guidance to agents. Updated Codes of Practice, underpinning the guidance, will follow in due course.
Key Points – The definition of effective introduction
There are two scenarios that are generally presented:
- One agent is instructed on a Sole agency/Sole Selling Rights basis, dis-instructed and a second agent instructed.
- Both agents are instructed on a multi-agency instruction.
To provide clarity and certainty to both industry and consumers, there is a need to define what will constitute an effective introduction; the current lack of clarity in this area and lack of definition of introduction is at the root of the disputes. The disputes reflect poorly on the industry and lead to consumer distress.
TPO has taken on board feedback from agents who consider that sharing a fee allows the second agent to ‘take a punt’ and, instead of referring a sale back, continue with the sale in the hope of receiving at least part of the fee. TPO’s view is that in dual fee cases the agent who effectively introduced the buyer should be the agent who is entitled to the fee.
An effective introduction must evidence that the agent carried out an act that initiated the buyer’s reaction to the property. As such, there is a need for a defined transaction event to occur. It is TPO’s view that this can be most clearly evidenced by an agent carrying out a viewing.
When considering if an agent has introduced the buyer, TPO expects to see:
- Evidence that the viewing has been booked, confirmed in writing to both seller and buyer and taken place. In this way, TPO will be in a position to state that, following the viewing, the agent that conducted the viewing introduced the buyer.
A viewing more than 6 months prior to dis-instruction without evidence of continuity of interest will not be deemed an effective introduction by the first agent to any subsequent sale post dis-instruction.
The guidance issued by TPO outlines agent obligations upon dis-instruction, including disclosing to the seller a list of parties that they have introduced i.e. a list of those who have viewed the property. If the seller signed a sole selling rights agreement, the agent must advise the seller on dis-instruction, in writing, that a fee will be due if any party who was introduced during the sole selling rights period proceeds to exchange of contracts.
TPO considers all agents have a specific responsibility NOT to put a consumer at risk of paying two fees and have therefore also outlined the obligations of the second agent upon instruction. The guidance clearly states that:
“All agents should keep full written records of all communications with both the seller and interested parties and note the advice provided and provide that evidence to TPO should a dispute arise.”
If these steps are followed, the seller will be fully advised and aware of the implications.
Katrine Sporle, Property Ombudsman, comments:
“If a dual fee complaint is referred to TPO, we will be looking to address any consumer detriment. Our stance is that no consumer should unknowingly be placed in a position of paying more than one commission fee.
TPO will reach a conclusion against the requirements of the Code of Practice and associated TPO Guidance, having taken into account the contractual entitlement of the agent under the terms of the agreement signed by the consumer. To establish an effective introduction, there must be a viewing of the property.”
TPO awards are limited, under the Terms of Reference, to £25,000. If the commission fee in dispute is greater than £25,000 the matter will be outside Terms of Reference. In such cases, the matter may, with the agreement of all parties, be referred to TPO’s associated mediation service, the Mediator Network, http://www.mediatornetwork.org/tpo-services
Michael Stoop, Chair of TPO Industry Forum, says:
“Disputes over Dual Fees have become an increasing cause for concern, prompting the issue to be raised at the Industry and Consumer Fora. It is clear that in many cases consumers are not aware of the risk. TPO’s guidance and revised Codes of Practice outline the key issue of what constitutes ‘effective instruction’. It also defines the responsibility of the first agent to provide the seller with the list of viewers, and the second agent to advise the seller of the risk of a dual fee. Through the Industry Forum, the guidance has full backing and is considered best practice.”
Mark McLaren, Chair of TPO Consumer Forum, added:
“Consumers are often the losers in dual fee disputes so it is very welcome news to see new guidance and changes to the TPO Codes of Practice that should help avoid disputes that unfairly affect consumers.”
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NOTES TO THE EDITOR
Any issues regarding this document should be addressed to the process owner.
Notes to the editor:
What is The Property Ombudsman?
The Property Ombudsman (TPO) scheme offers an independent and impartial dispute resolution service to consumers who have been unable to resolve their disputes with a registered agent. The scheme was established in 1990. The Ombudsman can provide redress to place the consumer back in the position they were before the complaint arose, achieving a full and final settlement of the dispute and all claims made by either party. Where appropriate, the Ombudsman can make compensatory awards in individual cases up to a maximum of £25,000 for actual and quantifiable loss and/or for aggravation, distress and/or inconvenience caused by the actions of a registered agent.
TPO is funded through membership subscriptions and case fees and is free to all consumers.
At 31 December 2018 over 15,818 sales offices and 14,746 letting offices were registered with TPO.
Whilst TPO charges registered agents an annual subscription, the Ombudsman is accountable to the TPO Board which is chaired by a member of the House of Lords and with the majority of its members being independent from the industry.
The Ombudsman is not a regulator and does not have the authority to take regulatory or legal action against a registered agent. However, registered agents can be referred to the TPO Compliance Committee, which has the power to expel agents from the scheme and/or report them to the appropriate authorities, with the power to ban agents from carrying out estate agency business.
The Ombudsman's Terms of Reference, Codes of Practice, Consumer Guides and other documents about the operation of the scheme are available on our website (www.tpos.co.uk), together with previous annual and interim reports, case summaries, further explanation of governance arrangements and a full list of registered agents.
For more information about TPO, please visit our website at www.tpos.co.uk