Wording of Estate Agent's Agreement

reheat

Reading the small print in a mainstream estate agent's agreement for selling our house, I just want to check something. It says that their fee becomes liable upon exchange of contracts, but that they will not normally demand payment until completion. The exception to this being if completion still has not occurred 3 months after exchange.

This sounds OK to me, being as:-

• everyone is legally committed after exchange
• completion should not take anything like 3 months
• so long as completion is withing 3 months, the fees won't need paying up front before the money is available

Is this a normal contract wording? Any pitfalls I need to be aware of?

Doozergirl

The wording here is to protect the Estate Agent in the event that you attempt to pull out of the deal between exchange and completion. They have done their work and are as entitled to their fee at that point as your buyer is to own the property; they are therefore legally binding you to that fee at that point. It is fair.

Is there any kind of reason why you'd want to leave three months between exchange and completion? Not many people do that but if there were a genuine reason then the EA would probably be open to that, and you could get something in writing from them before exchange agreeing to the timescale, otherwise you'd just delay exchange until there was less than 3 months between exchange and completion.

I am sure on the flipside that if your buyer were to try and pull out between exchange and completion then your EA would be understanding of why you mightn't be able to pay the fee until you had recovered costs from the buyer.

I've done a lot of explaining, but it isn't a clause in a contract that I would personally feel compelled to alter.

reheat

Thanks DG. I guessed that was probably the case, but I'd sort of assumed it was all going to be based on completion, and just wanted to be sure.

Doc_N

The biggest risk would be that your buyer could pull out after exchange of contracts, but before completion. Ordinarily that would enable you to keep the deposit, or even to sue for more, and that should cover your EA fees. There could be other costs you'd need to cover, though, out of the deposit.

I certainly wouldn't rely on an EA being 'understanding' if this clause remains in the contract - whatever the situation. If the clause is there, you can rely on them to take formal recovery action from you if they need to.

Ask them to remove the clause, and tell them that your using them (or not) depends on that. Most agents will remove clauses like this to keep your business unless they feel that you are likely to exploit the situation - hardly likely here.

DVardysShadow

Doc_N wrote: »

... Ask them to remove the clause, and tell them that your using them (or not) depends on that. Most agents will remove clauses like this to keep your business unless they feel that you are likely to exploit the situation - hardly likely here.

Actually, the clause is quite reasonable and fairly central to the contract in that it defines the point at which service is agreed to have been delivered. Without that clause, you could open yourself to receive demands for payment at any stage from first viewing onwards. So you are better off with it than without it.

If you do find an agent which will remove it, they will be clueless about their own best interests, so I would doubt their ability to look after their client. Of course, that comment does not apply if you tweak the clause to meet a situation which you anticipate.

reheat

Doc_N wrote: »

The biggest risk would be that your buyer could pull out after exchange of contracts, but before completion. Ordinarily that would enable you to keep the deposit, or even to sue for more, and that should cover your EA fees. There could be other costs you'd need to cover, though, out of the deposit.

I certainly wouldn't rely on an EA being 'understanding' if this clause remains in the contract - whatever the situation. If the clause is there, you can rely on them to take formal recovery action from you if they need to.

Ask them to remove the clause, and tell them that your using them (or not) depends on that. Most agents will remove clauses like this to keep your business unless they feel that you are likely to exploit the situation - hardly likely here.

I guess if our buyer pulled out after Ex of C, we would have much bigger problems than just the EA fees. We'd suddenly be committed to buying a house we had no money to pay for it with ... which could of course be what happened to our buyer. I suppose it must happen sometimes, but hopefully not very often.

reheat

DVardysShadow wrote: »

Actually, the clause is quite reasonable and fairly central to the contract in that it defines the point at which service is agreed to have been delivered. Without that clause, you could open yourself to receive demands for payment at any stage from first viewing onwards. So you are better off with it than without it.

If you do find an agent which will remove it, they will be clueless about their own best interests, so I would doubt their ability to look after their client. Of course, that comment does not apply if you tweak the clause to meet a situation which you anticipate.

This sounds right to me ... at Ex of C the EA has indeed done their work, and in a sense it seems a decent concession they defer payment till the point where some cash has been released as part of completion, so doesn't have to be forked out up front.

And it is vital for any contract to include clear indication of when payment is deemed due.

Doc_N

Doc_N wrote: »

The biggest risk would be that your buyer could pull out after exchange of contracts, but before completion. Ordinarily that would enable you to keep the deposit, or even to sue for more, and that should cover your EA fees. There could be other costs you'd need to cover, though, out of the deposit.

I certainly wouldn't rely on an EA being 'understanding' if this clause remains in the contract - whatever the situation. If the clause is there, you can rely on them to take formal recovery action from you if they need to.

Ask them to remove the clause, and tell them that your using them (or not) depends on that. Most agents will remove clauses like this to keep your business unless they feel that you are likely to exploit the situation - hardly likely here.

DVardysShadow wrote: »

Actually, the clause is quite reasonable and fairly central to the contract in that it defines the point at which service is agreed to have been delivered. Without that clause, you could open yourself to receive demands for payment at any stage from first viewing onwards. So you are better off with it than without it.

If you do find an agent which will remove it, they will be clueless about their own best interests, so I would doubt their ability to look after their client. Of course, that comment does not apply if you tweak the clause to meet a situation which you anticipate.

I can't agree with you. Reference to financial completion will define the point at which payment is due every bit as well - to the benefit of the client rather than the EA, and at no risk to the client.

This is a very rare situation, and a sensible agent wanting to keep business will be prepared to take the very, very small risk involved, rather than just pass it to his client. This is not a matter of being clueless - just a matter of commercial reality.

DVardysShadow

Doc_N wrote: »

I can't agree with you. Reference to financial completion will define the point at which payment is due every bit as well - to the benefit of the client rather than the EA, and at no risk to the client.

This is a very rare situation, and a sensible agent wanting to keep business will be prepared to take the very, very small risk involved, rather than just pass it to his client. This is not a matter of being clueless - just a matter of commercial reality.

You were suggesting removal of the clause. Now you are suggesting tweaking it to redefine the point of fulfilment as completion. My answer specifically addressed removal of the clause and excluded tweaking.

Doc_N

DVardysShadow wrote: »

You were suggesting removal of the clause. Now you are suggesting tweaking it to redefine the point of fulfilment as completion. My answer specifically addressed removal of the clause and excluded tweaking.

What I actually suggested was the removal of the clause entitling the agent to claim payment at exchange if completion did not take place.

reheat

Doc_N wrote: »

What I actually suggested was the removal of the clause entitling the agent to claim payment at exchange if completion did not take place.

That is the nub of it, and is a very good point.