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    • GDB2222
    • By GDB2222 11th Sep 17, 12:33 PM
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    GDB2222
    Estate agent's commission
    • #1
    • 11th Sep 17, 12:33 PM
    Estate agent's commission 11th Sep 17 at 12:33 PM
    Recently, my wife and BIL rented out a house through an estate agent. They signed a contract with the agent which (apart from the fees for the letting) included a 1.75% + VAT commission if the house were sold to the tenant. At the time, nobody thought the house would be sold, and they did not query that contract term. They have now received an offer from the tenant which they are inclined to accept, but they are up in arms about the size of the commission!

    I am aware of a case a few years ago - OFT v Foxtons. The court, was pretty damning about this practice and found against Foxtons. However, the Foxtons contract was lengthy, and the sales commission was slipped into the tiny print. In our case, the contract was fairly short. Does anyone here have any advice?

    We have tried negotiating with the agent, but they are adamant that they want their commission if the sale goes ahead.

    https://www.gov.uk/cma-cases/foxtons-hidden-fees-in-lettings-agreements-with-consumer-landlords
    No reliance should be placed on the above! Absolutely none, do you hear?
Page 1
    • bob bank spanker
    • By bob bank spanker 11th Sep 17, 12:43 PM
    • 486 Posts
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    bob bank spanker
    • #2
    • 11th Sep 17, 12:43 PM
    • #2
    • 11th Sep 17, 12:43 PM
    What have you offered them in your negotiations?
    • GDB2222
    • By GDB2222 11th Sep 17, 12:54 PM
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    GDB2222
    • #3
    • 11th Sep 17, 12:54 PM
    • #3
    • 11th Sep 17, 12:54 PM
    What have you offered them in your negotiations?
    Originally posted by bob bank spanker
    Around 30% of what they want.
    No reliance should be placed on the above! Absolutely none, do you hear?
    • bob bank spanker
    • By bob bank spanker 11th Sep 17, 1:05 PM
    • 486 Posts
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    bob bank spanker
    • #4
    • 11th Sep 17, 1:05 PM
    • #4
    • 11th Sep 17, 1:05 PM
    Well, your link makes it clear (to me at least!) that they shouldn't be getting anything. I would just go back and explain this, using the evidence you have gathered, and that it's either 30% or nothing.
    • ashe
    • By ashe 11th Sep 17, 1:23 PM
    • 187 Posts
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    ashe
    • #5
    • 11th Sep 17, 1:23 PM
    • #5
    • 11th Sep 17, 1:23 PM
    Well surely they aren't entitled to anything, the option should be nothing or nothing.
    • Moriath
    • By Moriath 11th Sep 17, 1:25 PM
    • 9 Posts
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    Moriath
    • #6
    • 11th Sep 17, 1:25 PM
    • #6
    • 11th Sep 17, 1:25 PM
    If its clear and in the contract unless you take them to court might have to suck it up
    • Slithery
    • By Slithery 11th Sep 17, 1:45 PM
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    Slithery
    • #7
    • 11th Sep 17, 1:45 PM
    • #7
    • 11th Sep 17, 1:45 PM
    The Foxton's case referred to hidden fees.

    You signed the contract knowing that the clause existed and went ahead anyway. In what way were these fees 'hidden'.
    • Doozergirl
    • By Doozergirl 11th Sep 17, 2:01 PM
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    Doozergirl
    • #8
    • 11th Sep 17, 2:01 PM
    • #8
    • 11th Sep 17, 2:01 PM
    I very clearly remember a regular poster here was a tenant who bought the house she was renting.

    In order to avoid the fee, she and her OH collaborated with the LL and actually went to the point of moving out, allowing a quick check-out to be taken by the managing agent and then moved straight back in as the new owner.

    Impressively MSE. Needs to be financial incentive for the buyer though!
    Everything that is supposed to be in heaven is already here on earth.
    • david1951
    • By david1951 11th Sep 17, 2:35 PM
    • 359 Posts
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    david1951
    • #9
    • 11th Sep 17, 2:35 PM
    • #9
    • 11th Sep 17, 2:35 PM
    How much are we talking here, roughly?

    There is nothing stopping them taking you to court whatever happens. The strongest defence would be a new agreement, signed by the estate agent that also waives the previous one. Sounds like this is unlikely though. Perhaps you should have simply kept quiet about the whole thing and hoped they didn't notice.

    What is the exact wording (copy and paste) of the contract clause?
    • GDB2222
    • By GDB2222 11th Sep 17, 2:41 PM
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    GDB2222
    How much are we talking here, roughly?

    There is nothing stopping them taking you to court whatever happens. The strongest defence would be a new agreement, signed by the estate agent that also waives the previous one. Sounds like this is unlikely though. Perhaps you should have simply kept quiet about the whole thing and hoped they didn't notice.

    What is the exact wording (copy and paste) of the contract clause?
    Originally posted by david1951
    The contract wording is:

    "If at any time the tenant or any previous introduced individual or entity introduced at any time by us purchases the property, or any interest in it, you will be liable for our firm's fees
    at the rate of 1.75% plus VAT of the agreed sale price, payable on or before completion of the purchase."
    Last edited by GDB2222; 11-09-2017 at 2:43 PM.
    No reliance should be placed on the above! Absolutely none, do you hear?
    • david1951
    • By david1951 11th Sep 17, 3:38 PM
    • 359 Posts
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    david1951
    https://assets.publishing.service.gov.uk/media/555de499e5274a7084000144/mann-judgment.pdf

    Paragraphs 104 and 105 (right at the end) deal with whether it is an unfair term. Based on a brief read, the judge's opinion is pretty clear-cut. For example:

    In Lord Millett’s terms, I think that the typical consumer would not merely be surprised by it if it were pointed out before he signed up; he would be astonished. It is so far from what he would expect in a document whose opening words thank him “for instructing Foxtons to act on your behalf in marketing your property for rental”, and which thereafter is solely concerned with the consequences and effect of rental, that he would think it had nothing to do with the transaction at all. If invoked against him he would, entirely understandably, think he had been ambushed. It is plainly unfair for the purposes of the Regulations.

    So basically, the judge is saying that the typical consumer would actually think the term was probably an error, given the contract relates to services for providing and managing a tenant.

    There is a discussion at paragraph 105 of whether or not the clause was sufficiently flagged (i.e., were they 'hidden fees'). The judge does not think so, even though it was under a title "Sales commission". It is not clear whether the clause would have been considered valid if it was sufficiently flagged. The final sentence would appear to suggest otherwise:

    in any event a potentially draconian provision like this would normally require more focus to begin to make it fair.

    So, you have some arguments at least. Probably worth mentioning that I'm not a lawyer and you should get professional advice. Are you using a conveyancing solicitor? They might be able to quote for looking into this in more detail.
    • cjdavies
    • By cjdavies 11th Sep 17, 4:06 PM
    • 2,582 Posts
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    cjdavies
    If its clear and in the contract unless you take them to court might have to suck it up
    Originally posted by Moriath
    And seems it was, a tricky one.

    They signed a contract with the agent which (apart from the fees for the letting) included a 1.75% + VAT commission if the house were sold to the tenant. At the time, nobody thought the house would be sold, and they did not query that contract term.
    Originally posted by GDB2222
    • G_M
    • By G_M 11th Sep 17, 5:10 PM
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    G_M
    Are you prepared to fight this through the courts if the agent puts in his claim for commission? Given that the law is ambiguous.......

    The suggestion for the tenant to move out, check out, and later buy, is risky. You've alredy alerted the agent to the facts that a) you wish to sell and b) the tenant wishes to buy.

    Agents are not daft and value their commission. They only have to watch the Land Registry to see when you sell, and the name of the new owner.......

    Negotiate. Tell the agent that if they don't agree to reduce their comission by (half?), you will not sell to the tenants. Instead you will put the property on the market, with another agent, and they will therefore get nothing.
    • eddddy
    • By eddddy 11th Sep 17, 5:36 PM
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    eddddy
    The clause about a Sales Commission almost certainly isn't enforceable.

    If the Letting Agent won't back down, it could be settled by a redress scheme rather than a court. The Letting Agent must be a member of one of three redress schemes:

    - The Property Ombudsman
    - Ombudsman Services: Property
    - The Property Redress Scheme

    If it's The Property Ombudsman, they are clear that Sales Commission Terms are not allowed in standard Letting Agent Agreements.

    Here's an extract from their Code of Conduct:

    5j Your Terms of Business must:
    • Not require payment of a commission in circumstances where the tenant agrees to purchase the property unless this is subject to a separate sales agreement

    https://www.tpos.co.uk/images/documents/rules-codes-obligations/residential-letting-agents/Code_of_Practice_Residential_Letting_Agents_effect ive_1_October_2016.pdf
    Further details here:
    https://www.tpos.co.uk/images/documents/media-articles/property-drum-sept-12.pdf

    So a complaint to the ombudsman should close the matter.
    • phill99
    • By phill99 11th Sep 17, 6:29 PM
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    phill99
    So if that clause wasn't in the contract, and you had decided to sell the house and instructed an EA (this one or another) with the same commission structure, and the tenant subsequently put in an offer, you would still be liable for the commission to the EA. So what's the issue?
    Eat vegetables and fear no creditors, rather than eat duck and hide.
    • kinger101
    • By kinger101 11th Sep 17, 6:39 PM
    • 3,816 Posts
    • 5,210 Thanks
    kinger101
    So if that clause wasn't in the contract, and you had decided to sell the house and instructed an EA (this one or another) with the same commission structure, and the tenant subsequently put in an offer, you would still be liable for the commission to the EA. So what's the issue?
    Originally posted by phill99
    If OP sold direct to the tenant, he wouldn't need to instruct an EA.
    • GDB2222
    • By GDB2222 11th Sep 17, 6:54 PM
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    • 75,009 Thanks
    GDB2222
    The clause about a Sales Commission almost certainly isn't enforceable.

    If the Letting Agent won't back down, it could be settled by a redress scheme rather than a court. The Letting Agent must be a member of one of three redress schemes:

    - The Property Ombudsman
    - Ombudsman Services: Property
    - The Property Redress Scheme

    If it's The Property Ombudsman, they are clear that Sales Commission Terms are not allowed in standard Letting Agent Agreements.

    Here's an extract from their Code of Conduct:



    Further details here:
    https://www.tpos.co.uk/images/documents/media-articles/property-drum-sept-12.pdf

    So a complaint to the ombudsman should close the matter.
    Originally posted by eddddy
    I would thank that post 10 times if I could. This agent is a member of TPOS, as it happens.

    We certainly didn't fancy a trip to the courts.
    No reliance should be placed on the above! Absolutely none, do you hear?
    • G_M
    • By G_M 11th Sep 17, 6:57 PM
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    G_M
    I would thank that post 10 times if I could.
    Originally posted by GDB2222
    We'll see if we can bump up the thanks tally for edddy
    • GDB2222
    • By GDB2222 11th Sep 17, 7:51 PM
    • 13,965 Posts
    • 75,009 Thanks
    GDB2222
    So if that clause wasn't in the contract, and you had decided to sell the house and instructed an EA (this one or another) with the same commission structure, and the tenant subsequently put in an offer, you would still be liable for the commission to the EA. So what's the issue?
    Originally posted by phill99
    If I instruct an EA to sell a property, he has a load of work and expense. All done on the off-chance of a sale.

    This EA has simply passed on an offer from the tenant.
    No reliance should be placed on the above! Absolutely none, do you hear?
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