This case study concerns a dispute referred to The Property Ombudsman (TPO) from a potential buyer. The complaint arose when the instructed buying agent charged the buyer an excessive abortive fee when they withdrew an offer for a property. This happened on the same day the offer had been made and accepted by the vendor. The agent maintained their entitlement to charge the fee, given that it was detailed in the Terms and Conditions of their agreement.

INVESTIGATION

The buyer explained to the TPO Office that she had made an offer in the morning and was notified that afternoon by her agent that it had been accepted by the vendor. However, she went on to explain that she then had second thoughts due to the location of the property and its desirability as a buy-to-let investment. With this in mind she withdrew her offer at approximately 5.30pm the same day.

In the view of the Ombudsman, the reduced abortive fee well exceeded any actual costs incurred.

The agent subsequently issued an invoice for an abortive fee of £2,625 (plus VAT) which she considered to be excessive given the timescale of her withdrawal. She also pointed out here that it was in fact her who had provided the details of the property to the agent originally.

It was noted by the Ombudsman that the agent later agreed to reduce that fee and a payment of £2,000 (incl. VAT) was made by the buyer (however this was made on a without prejudice basis in an attempt to avoid court action). The role of the Ombudsman was to determine whether a fee was payable or not taking into account what is fair and reasonable in the circumstances of this case.

THE OMBUDSMAN IDENTIFIED THE FOLLOWING:

The buyer had expressed an interest in the property having found it through her own research and had indeed withdrawn her offer on the same day it was made and accepted.

The work carried out by the agent on that day was minimal. A solicitor and surveyor had been contacted by the agent, but this was without instruction from the buyer as she already had her own.

The Terms of Business referred to the abortive fee being payable upon a ‘failed exchange.’ This indicated that an abortive fee entitlement would only arise when a proposed purchase was well progressed but had failed to proceed to exchange of contracts due to the withdrawal of the proposed buyer.

OUTCOME

It was considered that an abortive fee would apply only when a proposed purchase was well progressed. In this instance, it had not progressed at all when the buyer withdrew her offer; only three or four hours had elapsed since the offer was accepted by the vendor. In addition, it would also largely depend on whether or not a notable degree of work had been done in preparation for the proposed transaction. This had not occurred in this case and it was therefore considered unfair and unreasonable for such a fee to be charged.

It was the view of the Ombudsman that the reduced abortive fee well exceeded any actual costs incurred. This complaint was therefore upheld and the agent was directed to refund the buyer the sum of £2,000 (incl. VAT). No further award was made in compensation.

LEARNING

The TPO Code of Practice for Buying Agents (Paragraph 3I) requires termination (or abortive) fees to be stated clearly and their purpose explained. Using ambiguous terms such as ‘failed exchange’ will cause consumer confusion as to precisely when a fee is likely to become due. Such terms should be set out clearly to ensure the consumer is fully aware of their liabilities.

ADDITIONAL INFORMATION

The TPO Code of Practice for Buying Agents launched on 1st January 2014 following recognition that buying agents were a growing market sector in their own right. It was designed to create a uniform set of standards for buying agents based in the UK to protect the interests of consumers and to promote best practice in the industry.

The TPO Code of Practice for Buying Agents is to be applied by all TPO members offering property buying services. You can view our Codes of Practice on the TPO website: www.tpos.co.uk.