Estate Agents: Be Timely with Your Terms

Property markets are fast moving and high pressure environments and it can be difficult, given the pace of business, to ensure all of the ‘housekeeping’ is completed at the correct time.

Part of this housekeeping includes providing your terms of business to your client and if they aren’t provided promptly, this can lead to some significant issues including rendering any clause for your remuneration, unenforceable. A recent case Supreme Court case considered this very point and the court ordered a reduction in the agent’s commission by a third.

One of the key points in the case was the requirement under section 18 of the Estate Agents Act 1979 for an agent to set out their remuneration (or at least the basis for its calculation) before the agent enters into a contract with a client.

In the most recent case lengthy (and costly) litigation took place, which went all the way to the Supreme Court. The agent had been referred to a client who was having difficulty selling a number of properties.

The agent telephoned the client and confirmed that he would be happy to assist and that his commission would be 2% of the purchase price. At trial, the client argued that estate agent had not mentioned his commission on their phone call. On completion of the sale, the estate agent emailed their client confirming the payment due to them and attached a summary of their terms of business (which the client contended was the first time they’d seen them).

Ultimately the agent was successful in demonstrating that a contract for commission did exist but he did not recover the full amount of that commission – it being reduced by one third for a failure to comply with the requirements of the Estate Agents Act. It was also 11 years and some considerably expensive litigation before the agent received his commission!

It is therefore crucial that whenever estate agents are engaged to complete work for clients they must provide both their terms of business before the contract is entered into and the contract itself should be a written agreement which clearly states when any remuneration is to be paid. Otherwise, expensive consequences may follow.

Should you have any questions or would like any assistance in preparing terms and conditions or written agreements for the provision of your services, please do not hesitate to contact us.