This case concerns a dispute referred to The Property Ombudsman (TPO) from potential sellers. The complaint was about the instructed agent’s performance fee. The sellers instructed the estate agent through their website to market the property by completing the online application form. They chose the ‘pay monthly’ option offered which included monthly payments of £69.95 (inc. VAT) for the first three months of marketing and £39.95 (inc. VAT) thereafter. Written terms and conditions were emailed to the sellers on the same day.

A few days later the agent visited the property to take photographs and measurements; marketing activity then commenced. A number of viewings took place, which led to a few different offers being made on the property. The sellers accepted an offer that was significantly higher than the asking price.

The sellers were surprised to then receive an invoice from the agent which included an additional ‘performance fee’ based on a percentage of the difference between the asking price and the accepted offer (10 per cent). Unaware of such a fee, the seller made an official complaint to the agent who responded by referring to the terms and conditions which explained the circumstances in which a performance fee would be charged.

INVESTIGATION

When looking at the agent’s website, it was observed by the Ombudsman that the sellers had instructed them to market the property by paying only a marketing fee on a monthly basis and that the agent’s terms and conditions were emailed to the sellers after the instruction was received through the website.

Shortly after the offer was accepted and a Memorandum of Sale issued, the agent emailed the seller to explain that whilst their terms entitled them to charge a performance fee (£2,000 in this case), they had never achieved such a significant offer over the asking price and were therefore willing to reduce that fee to £400.

The sellers responded by stating that they had never agreed to pay such a fee in the first instance. They informed the TPO Office that they had instructed the agent on the basis of the website’s claim of ‘no hidden charges, no commission, no minimum term.’

OUTCOME

Whilst it was acknowledged that the sellers had agreed to the agent’s terms of business (which included the performance fee), the Ombudsman believed that the website clearly stated that there were no hidden fees and made no mention of the performance fee anywhere on their website.

The agent was required to act in accordance with Paragraph 5h of the TPO Code of Practice for Residential Estate Agents to comply with the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). It was therefore concluded that because the performance fee was not prominently stated or mentioned on the website alongside the other fees, the ‘no hidden fees’ statement was misleading to consumers and a likely breach of the CPRs. In addition, the performance fee was not included in the ‘fees and charges’ section of the agent’s terms of business. It wasn’t mentioned until section 11 and even then it’s the penultimate section of the document. This is not in accordance with their obligation under the TPO Codes of Practice to clearly and unambiguously explain all of their fees in their terms of business.

The Ombudsman upheld this complaint but no compensatory award was made.

LEARNING

All fees and charges must be clearly and unambiguously presented to a client. Not only are ‘hidden’ or unexpected fees a breach of Paragraph 5h of the TPO Code of Practice, they are also likely to be considered a misleading omission under the CPRs.

Agents must be aware that it’s unlikely that the average consumer would read in detail the terms and conditions of an online application, therefore, the requirement for prominent fees is heightened in such cases. It’s common practice for an agent to read through their Agency Agreement with a potential seller in person before they sign the document, giving the seller the opportunity to question or request clarification on any part of the agreement.

ADDITIONAL INFORMATION

Awards in compensation are only made where there has been evidence of financial loss, aggravation, distress and/or inconvenience. In this instance, the sale did not proceed, the fee was no longer due and the agent was no longer requesting payment. It was considered that the sellers hadn’t incurred any financial expenditure and did not experience any undue aggravation, distress and/or inconvenience as a result of the agent’s shortcomings.