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Commission disputes

Christopher Hamer imageI have received a number of queries from agents, expressing doubt as to whether I can determine their contractual entitlement to a commission fee. My office will always explain to agents that if a consumer has referred such a dispute to me, I am entitled to, and will, consider it. I will not be deciding legal matters in connection with the contract so, for example, I will not determine if the contract contains unfair terms, unless the issues are those on which a court has already ruled. I will also take into account, and apply, the court’s ruling, as I did in a case brought by the OFT against an estate agent, in which the court held that a clause within a lettings agreement, enabling the agent to claim a commission fee if the landlord sells the property to the tenant was unfair; indeed this is now reflected within the TPO Code of Practice.

dispute imageWhat I will determine in a fee dispute complaint is whether the agent has carried out the fee earning event, which I expect to see clearly defined in the contract.

In most cases only one agent is instructed to sell a property and their contractual right to a commission fee is not disputed. However, there can be issues if a seller has entered into a sole agency agreement but is adamant that it was they, rather than the agent, who introduced the buyer. My case officer will carefully examine the contract to ensure that it is in fact a sole agency agreement; surprisingly, I have seen cases where the matter of the introduction has been debated for some months before the case was referred to me, but on consideration, it was readily identified that the contract signed was actually a sole selling rights agreement and hence the question of which party introduced was not the issue. While astounded that the agent had not been aware of the status of their agreement, I supported the contractual entitlement, having referred to the contract that had actually been signed, rather than what both parties had understood had been signed. That said, I made a compensatory award for the aggravation caused by the agent’s continued misunderstanding of the situation.

I’ll determine whether the agent has carried out the fee earning event.”

In any case where I am asked to consider an agent’s fee entitlement under a sole or multi agency contract, I will expect to see that the agent claiming the commission fee is able to show that they had carried out a positive fee earning event and so became the effective cause of the sale of the property to the buyer.

However disputes where two agents have claimed a fee for selling the same property have always been a regular cause of complaint.

TPO CODE OF PRACTICE

The TPO Code of Practice is intended to ensure that no seller is unwittingly put in a position where he is liable for two fees for the sale of a property. Some of the scenarios that come before me arise as a result of a seller paying the estate agent, who, they believe, effected the sale and then being pursued by another who claims that they are entitled to a fee. I often see situations where one agent will claim a fee based on being the effective introducer and the second agent on having held negotiations (a contractual position quite likely to occur), but one or other of them will be unwilling to negotiate a share of a single fee. Such claims may arise as a result of a sole agency contract being terminated and second agent instructed, then a buyer who viewed through the first agent comes back to view or offer on the property through the second agent. Or where a second agent is instructed prior to the expiry of the initial Sole Agency agreement and a buyer is introduced by the second agent during that period.

Every attempt should be made by the agents involved to resolve the matter between themselves.”

Such instances tend to arise out of general confusion on behalf of the seller client, many of whom have no comprehension that such a situation could arise and, which can be further exacerbated by the buyer’s, albeit innocent, action. Whilst dual fee liability clauses are often included in agency agreements, agents need to ensure that they fully explain to their seller client the events that may lead to that potential liability to pay two fees and protect their client’s interest, particularly where one agent is dis-instructed and another instructed in relation to the same property.

RESOLUTION

I should make clear that the ethos of the TPO and the desired outcome is that in general a seller should only pay one fee. As such, I expect both agents to get together to negotiate a fee split. If the case is referred to me I ascertain whether the agents involved have discussed sharing a fee. If not, I generally decide on the extent that I feel the complainant has been disadvantaged and any compensation takes into account any additional expense incurred as a result of the shortcomings on the part of one or both of the agents involved.

A recent case came before me where Agent A marketing the property undertook a viewing and the prospective buyers then placed their own property on the market with Agent B. The Seller complainants terminated their Agreement with Agent A, instructed Agent B and went on to sell the Property to the same buyers using Agent B. Neither Agent A on dis-instruction or Agent B on instruction advised the complainants that there was a potential for two fees to become due. Agent A did not provide a list of those individuals they could claim as potential purchasers through them and Agent B made no attempt to find out from the sellers or Agent A for which individuals that agent might claim a fee based on introduction. Agent A discovered the sale prior to exchange of contracts and informed the complainants of their contractual agreement and entitlement to a fee. I concluded that Agent A had been the effective cause of introduction but that Agent B’s contract was very clear in that they were entitled to a fee for negotiation.

However because the sellers had innocently been put in the position of now being liable for two fees, whilst I upheld the strict contractual position, I produced a resolution whereby each agent gained half the fee.

Of course, I can only propose such a resolution when the consumer has referred their dispute with both agents to me. It is often the case that I will only receive a complaint against the agent that the seller, incorrectly, thinks is not entitled to a fee, often the first agent who has introduced the buyer but for some reason, perhaps believing that they will stand more success if a second agent is instructed to act, the seller has instructed a second agent. No doubt based on the second agent’s assurances that no fee can be due to the first agent, the seller will only make a complaint to the first agent, perhaps being embarrassed at having to raise the matter with the second agent.

My continuing message, therefore, is that an agent must be able to show that they have complied with the terms of the agency agreement in order to claim a commission fee but should remember that, in cases where a seller is facing claims from two agents, I will seek to ensure that, in accordance with the ethos of the TPO scheme, only one fee is payable and that every attempt should be made by the agents involved to resolve the matter between themselves before my Office becomes involved.

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