Agent backhanders

MarkWatson

Hi,

I have just discovered that my letting agent (who manages my properties) is charging commission on the work that contractors (builders, plumbers etc) do on my properties. Thus if I get a plumber in to do a minor repair, the agent will charge the contractor a percentage of the cost of the work done.

I have only just discovered this as it was not made explicitly clear to me in the terms and conditions when I signed with this agent. When I asked them, I was referred to this in the small print:

"Commissions from Third Parties: It is possible that in the normal course of business we will be offered commissions by third parties to whom we might introduce you or your property. If we are offered commission or other form of remuneration and we are satisfied that the service provided is as good as and/ or no more expensive than other similar local services, and that your interests are no adversely affected, we may accept such a commission for our own benefit and will not account to you for these".

However it is my very strong belief that the agent has not done anything to ensure that the contractors have not simply charged me more for the work they do, in order to pass on to this extra commission to the agent.

I have asked the agent and they say they haven't done any checks to make sure this wasn't happening and have no system in place to prevent it.

Firstly - given that they are taking these backhanders, do you think the words in the small print are fair and explicit enough to explain what they have been doing? Also can I reasonably expect that they tell me what these payments are, who they are paid to and how they are levied (as a flat fee or a percentage of the work that I have asked to be done)? They are registered with the Property Ombudsman which has this requirement:

"14b You must tell your client in writing as soon as reasonably possible when you find out about circumstances that give rise to a conflict of interest. This would include where you or any connected person own, or have a financial interest in, a business or contractor engaged to provide services to a client".

Would it be fair to say that, if they are getting these payments from these contractors, that that constitutes a "financial interest" in those contractors?

I'd also love to know if anyone else has this situation with their managing agents!

Thanks v much.

princeofpounds

Hi.

I agree it's very shady, and it's a shame that it is allowed.

They have told you of the conflict however, that's precisely why it is in the small print.

If you can get it in writing (or other submissble evidence) that they have not performed any checks, and you have evidence that the job was likely overpriced, then you can probably make a good claim to the difference (or more likely get them to settle).

This is yet another reason why it's best not to trust lettings agents.

Bantex_2

They are not backhanders, they are what you agreed when you signed the contract.

dominoman

I am amazed that this is allowed. Totally totally unacceptable.

If I found my letting agent was doing this I would run a mile.

The agent has no incentive whatsoever to choose a supplier that offers the best service or price. They will be incentivised by the size of the commission.

Terrible

ACG

This does not answer your question as such but assuming the rental income is declared and you are taxed on it, this could be offset against any tax you pay anyway, so whether you pay the market rate or £50 eventually it will balance itself out wont it?

AndyT678

MarkWatson wrote: »

Would it be fair to say that, if they are getting these payments from these contractors, that that constitutes a "financial interest" in those contractors?

Yes!

MarkWatson wrote: »

Firstly - given that they are taking these backhanders, do you think the words in the small print are fair and explicit enough to explain what they have been doing?

Yes. Up to you to read and understand the contract before you sign it.

MarkWatson wrote: »

Also can I reasonably expect that they tell me what these payments are, who they are paid to and how they are levied (as a flat fee or a percentage of the work that I have asked to be done)?

Nope. They've already said up front that they won't and you agreed to those terms.

MarkWatson wrote: »

it is my very strong belief that the agent has not done anything to ensure that the contractors have not simply charged me more for the work they do, in order to pass on to this extra commission to the agent.

If you can prove that the work was sub standard or more expensive you could sue them for the amount of your "loss".

I don't know if any of this is standard but it looks to me like you have 3 options:

1. Live with it
2. Ditch the agent and get a new one
3. Manage the property yourself

googler

MarkWatson wrote: »

I have only just discovered this as it was not made explicitly clear to me in the terms and conditions when I signed with this agent. When I asked them, I was referred to this in the small print:

So ...

It was in the contract all along.
You didn't read all of the contract.

Now that you have read the contract, you feel wronged because it 'wasn't made explicitly clear to you' when you signed....?

How much of the contract should be explicitly explained to you when you sign it?

MarkWatson

To those who said I didn't read the contract, let me be clear:


My view is that


a) The words of that contract are not explicit enough to fulfil the criteria of being "fair and transparent". And yes googler, I would expect that particular part of the contract to be explicit enough that it says that contractors may get these payments. That seem entirely reasonable.


In terms of whether it balances out ACG, if I'm being charged more, I have to pay more. It may be a little less because of tax relief but I am still paying more!


b) I have no issue if they want to take money from contractors when these contractors do work for me BUT as the agent has said that this will not result in any extra charge to me then I believe it is my right to be sure that that is the case. And if the agent is doing nothing to ensure that these charges are not being passed on to me, then they may well be and it is negligent of them (at the least) not to make efforts to ensure that they are not and be able to provide evidence of how they have assured themselves.

phill99

I run a property maintenanve company and have worked for s couple of estate agents in the past. One wanted commission and i simply added the commission to my bill. So for a £120 bill, the landlord was charged £138. I only did 2 jobs for them as i thought they were at the !!!!! end of the 'shady' spectrum. Also i didn't have much work on at the time.

Not everyone will be happy to pay agents a commission so because of that, the market is automatically skewed and the price you pay as a landlord is over inflated.

You may have agreed to this by signing a contract but there is no way the agent can guarantee impartiality, so its execution has to be questioned.