Appointing a sale agent: clauses to watch out for

SouthLondonUser

Further to my previous thread on one of these points, I’d like to summarise a few clauses which I think are important to avoid, or at least to have total clarity on, if you’re willing to accept them, when you appoint an agency to sell your property. These points assume you appoint one agency only – not multiple agencies at the same time. Maybe it can become a sticky?

1. Fee on exchange vs completion: most agencies try to provide that fees are payable on exchange. Should a buyer exchange but not complete, there is a risk, depending on the exact wording of the contract, the vendor might have to pay the fee on a sale price agreed but not received. This is what happened in Foxtons vs Thesleff [2005] – google it: it’s now case law. The fee should be due only on the funds actually received, but this needs to be made explicit in the contract.
   
2. Sole agency vs sole selling rights: with the latter, you end up paying a fee even if, say, a colleague / relative / mate buys your property after you told them it’s on sale.
   
3. Dual fees if the property was previously on the market with another agency: you should agree that agency 2 receives a list of people introduced by agency 1, and agrees not to show them your property, otherwise you may end up paying a fee to both agencies.
   
4. Providing a list of people introduced by the agency (connected to above): at the end of its mandate, the agent should provide a list of people it has introduced to the property. Ideally, the contract should clarify that the agency will be due a fee only if these people , and these people only, buy the property after the end of its mandate. Many agencies try to define ‘people introduced’ in a very broad and generic way. Ambiguity is never good!

Thoughts? Comments? Anything to add?

Note that I fully appreciate and agree that agents must be rewarded for their work, and that clauses to ensure they are not defrauded of their fees are fair. I simply want the scope of these clauses to be clear. If John sees your flat, doesn’t like it, but tells Mark about it, Mark looks it up on rightmove, and by that time the flat is with agency 2, which shows Mark the property… are both agents due a fee? According to some of the definitions that have been proposed by some agencies, technically yes!

I also appreciate that most people manage to live perfectly happy lives without being so pedantic, but, well, it doesn’t hurt to contemplate low-probability, high-impact events! What’s to lose, other than a little time? I’d guess Mr Thesleff would have never imagined he’d have to pay Foxtons its fee even if the buyer didn’t complete, yet that’s precisely what happened…

Surrey_EA

1. Fee on exchange vs completion: most agencies try to provide that fees are payable on exchange. Should a buyer exchange but not complete, there is a risk, depending on the exact wording of the contract, the vendor might have to pay the fee on a sale price agreed but not received. This is what happened in Foxtons vs Thesleff [2005] !!!8211; google it: it!!!8217;s now case law. The fee should be due only on the funds actually received, but this needs to be made explicit in the contract.

Devastatingly rare.

I realise your list may not be in order of importance, but this is pretty low down the list of things someone should be scrutinising when signing an EA contract. I note you acknowledge this in your final paragraph.

One thing I would add is do not sign up for a long period of exclusivity with one EA. 4 -6 weeks max.

SouthLondonUser

I agree it's very rare. Still, what's to lose by ensuring it's there? This incredibly rare but devastatingly catastrophic situation may easily be avoided by spending a couple of minutes reading the contract, and by adding a few lines only.

My lawyer friends always tell me that most of their time is spent worrying about incredibly rare stuff and their implications, and that every dispute is food for thought to further clarify something which, until then, no one had ever thought it could happen or be questioned!

eddddy

The two clauses which seem to catch many people out on this forum are:

• "Ready, Willing and Able Buyer" clauses. It's a vague concept, which can end up causing lots of arguments. In London and the south east, EAs generally agree to remove this type of clause, if challenged (but less so in some other areas).

• Withdrawal Fees. If these are stated in the contract, people don't seem to appreciate that they apply if you terminate the contract after the minimum period. (Termination is not possible during the minimum period. Except sometimes during a cooling off period.)

SouthLondonUser

@eddddy: good points, thanks. I must say I have never come across "Ready, Willing and Able Buyer" clauses until now; stipulating that fees are only payable on completion, on the actual funds received (i.e. on the deposit if a buyer exchanges but doesn't complete) would of course get rid of this issue, too.

eddddy

SouthLondonUser wrote: »

@eddddy: good points, thanks. I must say I have never come across "Ready, Willing and Able Buyer" clauses until now; stipulating that fees are only payable on completion, on the actual funds received (i.e. on the deposit if a buyer exchanges but doesn't complete) would of course get rid of this issue, too.

Yep - but it's slightly more complicated because of the way EAs contracts are often structured. There are often two completely separate clauses in the contract...

• One clause that refers to payment on exchange of contracts

• ... and a completely different clause that refers to "Ready, Willing and Able Buyers".

So just changing the clause about payment on exchange of contracts isn't enough - the Ready, Willing and Able clause also needs to be deleted.

Here's a random example of an EA contract that shows this:
https://www.cliveanthony.co.uk/wp-content/uploads/2016/02/Clive-Anthony-Sole-Agreement.pdf

SouthLondonUser

eddddy wrote: »

So just changing the clause about payment on exchange of contracts isn't enough - the Ready, Willing and Able clause also needs to be deleted.

Sure - that's what I meant.

In fairness, I can conceive it would be fair for an EA to use this kind of language to protect itself against the situation of a seller who is not in a chain and might decide at the last minute not to sell, after the agent has put in a lot of work and costs.

Equally, if you are in a chain, it is important to understand what happens if you are forced to reject an offer because your chain falls through.

I have had agencies coming up with the lame excuses of:

• it's our policy
• no one has ever complained before
• you won't find a single agency that agrees to this
• don't worry, this will never happen - we'd never do it (then put it in writing!)

I have of course told them to get lost! :T

SouthLondonUser

This law firm has summarised a few disputes here: http://www.nortonrosefulbright.com/knowledge/publications/98571/agents-battle-over-commission

Another point some acquaintances alerted me to, but which I have not yet encountered myself, is a clause that stops the clock for the minimum period if there is an offer, and that resets it if an offer fails.