Estate agent fees terms

MarkyB2020

Afternoon all. First time poster, 3 month lurker (as we try too sell and buy in this god-awful UK housing system!)

Looking for some advice please

To cut a long story short, we are buying from a new build developer and selling with a full chain of 4. Issues in the chain are causing headaches and the developer has now offered a good part exchange so we can buy before Christmas.

It leaves us with a quandry on how the estate agents fees on our sale are paid.

The terms state:

"You will be liable to pay our fee... if at any time contracts for the sale of the property are exchanged with a purchaser introduced to you by us during our agency period, or if sole agency is selected (which is ticked on our contract) with a purchaser introduced by any other agent or person."

We are now able to terminate our contract with 14 days written notice. If we part exchange with the developer after this 14 days am I right that no estate agent fees are payable to our estate agent?

Can never be too sure with legal text, so any thoughts would be appreciated.

Thanks

MarkyB2020

Just want to add that we didn't want to go this route, but we have been given the run around by the chain since day 1 and now need to think about ourselves.

Hopefully our developer will be able to sell to our original buyer and the rest of the chain will all complete, just by a slightly different route!

eddddy

MarkyB2020 said:

The terms state:

"You will be liable to pay our fee... if at any time contracts for the sale of the property are exchanged with a purchaser introduced to you by us during our agency period, or if sole agency is selected (which is ticked on our contract) with a purchaser introduced by any other agent or person."

As an aside, that's a dodgy 'sole agency' contract - they've added the words "or person" on the end of the sentence. The words "or person" shouldn't be on a sole agency contract!


I suspect the reality is that you're going to have a big argument with the estate agent - and it's a matter of seeing who backs down first. 

The estate agent will probably argue that a fee is due on 2 counts :

• they have already introduced a "ready, willing and able buyer" (the one you're 'dumping'). Is there a "ready, willing and able buyer" clause in the estate agents contract?
• the developer was 'introduced' as a buyer during the estate agent's sole agency period

(On the second point, I guess you could try arguing that the developer is neither an agent or a person. And/or that the developer was introduced before the sole agency period started.)


Maybe start off by telling the estate agent that you don't think they are due a fee - and see how things go. You might want to try to negotiate a reduced fee, or refuse to pay and complain to the Property Ombudsman etc.

Thrugelmir

Would the developer leave the marketing of the property with the EA? That way the EA still collects their commission once the transaction completes. 

TheJP

As edddy says i think you will find it hard to argue with them on those two specific points.

Also the developer will relist the house with likely an additional £20k price tag, i bought a developer part ex house and it was marketed £40k more than what they exchanged it for. Thankfully i got half of this off and it was valued at what we paid.

MarkyB2020

Thanks for the comments. I had feared something like this may open a can of worms!

There is no "ready, willing and able buyer" clause in the estate agents contract. As they are a legal entity the developer can be treated as a legal person.

Unfortunately, the developer has said that they wouldn't market the property with the EA.

Thrugelmir

TheJP said:

Also the developer will relist the house with likely an additional £20k price tag,

As far as the developer is concerned the property amounts to tied up working capital and will wish to shift it ASAP.  The price it's marketed at will reflect the huge margin they've made on the new build. 

canaldumidi

I agree wih the above. Another way to look at this is that you must have originally budgetted for and expected EA fees, and the EA did spend time and money marketing the property for you.

You could also I suppose try arguing that "by any other agent or person" the developer is neither an agent, nor a person...!!!

eddddy

MarkyB2020 said:

There is no "ready, willing and able buyer" clause in the estate agents contract. 

So that's a good start.

Regarding 'sole agency' - is your estate agent a member of The Property Ombudsman Scheme? If so you, you might have a strong argument against paying the fee.


The Property Ombudsman mandatory code of practice for members says:

5i Your Terms of Business should be written in plain and intelligible language. In particular you must use in your Terms of Business the specific definitions in the Estate Agents (Provision of Information) Regulations 1991. You must take particular care for example in defining and distinguishing between ‘sole agency’ and ‘sole selling rights’; and in describing a ‘ready, willing and able’ contract. You must use the relevant definitions in full, display them prominently and clearly explain the implications of the terms to your client, especially where multiple definitions are used.

Link: https://www.tpos.co.uk/images/Codes_2019_a5/TPOE27-8_Code_of_Practice_for_Residential_Estate_Agents_A5_-_Effective_1_June_2019.pdf

The definition of "sole agency" in the Estate Agents (Provision of Information) Regulations 1991 is:

SOLE AGENCY

You will be liable to pay remuneration to us, in addition to any other costs or charges agreed, if at any time [unconditional contracts for the sale of the property are exchanged]—

-  with a purchaser introduced by us during the period of our sole agency or with whom we had negotiations about the property during that period; or

-  with a purchaser introduced by another agent during that period.

Link: https://www.legislation.gov.uk/uksi/1991/859/made

So your estate agent has breached the Ombudsman's mandatory code of practice by failing to use the statutory definition of 'sole agency'.

Had your estate agent used the statutory definition of 'sole agency' - you wouldn't be liable for a fee....

... because your purchaser (the developer) wasn't introduced by an agent.

canaldumidi

I've not looked but the Property Redress Scheme  code might be different if the agent is a member of their scheme instead.

MarkyB2020

Thanks again. Regarding " Property Ombudsman" they are a member, so this could be a possibility. Good to have in our back pocket if required.

The developer has now told us that "
Basically all we will do is take over your agreement for sole agency." So that may seem that are agreeing to pay the EA when they sell on again? 

They have indeed marketed the property so indeed, we would have expected to have paid their fee to begin with. However, their service is questionable in terms of chasing the chain and asking the right questions. 

As we are having to use some of our savings to pay the difference between the original offer and the part exchange offer, if we can avoid the EA fees, that means we won't have to amend our mortgage offer.