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Case study: when a sole agency agreement stood despite customer complaint

A client may terminate their sole agency agreement, but, if they accept an offer during that agreement, the sole agency agreement stands and the agency can charge commission says The Property Ombudsman.

Katrine Sporle

sole agency agreement

COMPLAINT

A case that The Property Ombudsman was asked to review came from a seller concerning the agent’s estate agency agreement.

The seller believed that the terms and conditions within the agreement, concerning their liability to pay the agent’s commission fee, lacked clarity and that the agent had not fully complied with their obligations under The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.

The seller wanted the agent to change their agency agreement in order for their fee liability to end and compensate them for the aggravation and inconvenience caused by the agent’s actions.

INVESTIGATION

When investigating this complaint, the Ombudsman took paragraphs 5m and 5n of the Codes of Practice into account.

Katrine Sporle image

Katrine Sporle

Paragraph 5m explains that an agent’s Terms of Business must clearly state the minimum duration of their instruction and how instruction can be terminated by either party. When a contract is signed by a client (the seller) during a visit by the agent to their home, at their work place, away from the agent’s premises or online, then they must be given a right to cancel that contract within 14 calendar days of signing. The client should be given a ‘Notice of Right to Cancel’.

The agent’s Terms of Business clearly explained how the agreement could be cancelled and set out the implications cancelling the agreement would have on the seller’s liability towards the commission fee.

Paragraph 5n of the Codes states that if an agent intends to charge the client a fee or recover costs for terminating the instruction, they must make this clear in the Terms of Business and specify the amount of the fee and additional costs and their purpose.

The seller wanted the agent to change their agency agreement in order for their fee liability to end.

The agent’s terms and conditions within the Terms of Business explained that the seller was liable to pay remuneration at the final contracted price irrespective of whether the buyer was introduced by the agent, the seller, or another agent, providing that they were introduced during the sole selling rights period.

The agreement further stated that the sole selling rights period would commence from signing, or the start date, and that this would continue until written notice (21 days written notice) was given.

The seller served their 21 days’ notice on 16th May 2017 and the agent confirmed that the sole selling rights period would end on 6th June. However, on 23rd May the seller told the agent that they had accepted an offer through another estate agent. The agent subsequently sent the seller an invoice for their fee.

The Ombudsman viewed that the Terms of Business clearly explained that the sole selling rights period was for a term of 20 weeks and that the commission fee was a fixed fee of £2,000 plus VAT.

A consumer has a responsibility to ensure that they have read and understood the terms they are entering into. The Ombudsman was satisfied that the terms and conditions were clearly set out within the main body of the agent’s Terms of Business. If the seller was unaware of the meaning of certain terms and conditions, then they had the opportunity to clarify this with the agent before signing the agreement. If, after signing the Terms of Business, the seller felt they no longer wished to be bound by the terms and conditions, they had 14 days in which to cancel the agreement.

OUTCOME

As the seller did not raise any questions with the agent and did not cancel the agreement within the cooling off period, it was the Ombudsman’s view that it was fair and reasonable for the agent to consider that the seller had understood the terms and was happy to proceed to instruct them.

The agent’s Terms of Business clearly stated that they can charge their commission fee if a buyer was introduced during the sole selling rights period.

The Ombudsman believed that the agent was entitled to claim recovery of their fee and therefore did not support this complaint.

No compensatory award was made.

May 18, 2018

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