Charged for a referral fee, is this right?

ThisIsWeird

Good - well done.
You say you asked her about what was included in this £10k quote, as you considered it a bit high, and she confirmed it included "xyz". She neglected to mention the 10% commission she was effectively receiving from you. Wow.
Now, I don't know if this is 'illegal', but it certainly is in similar situations such as an EA receiving a commission for recommending a conveyancing solicitor and not declaring it.
I would at least consider this highly unethical. 
I would expect the builder to hand over any such commission from their profits, and not by adding this to your bill. The last time an EA recommended a solicitor to us (a good few years ago) - who we were happy to go with - I was surprised at two things; the first was the amount the EA received for this - around £400 or so, as I recall - and the other was how little the solicitor was charging us - only a few hundred more. It struck me as if the solicitor was prepared to do the work for effectively peanuts, but assumed they were 'happy' to do so as it meant steady work. In any case, the solicitor made it clear in their correspondence what was happening (and the EA - illegally, as we now know - failed to.)
I can only conclude that the builder messed up by including this on their invoice - what a stupid thing to do. 
Again, I don't know the legs of it all, but I suspect you have them over a humiliating barrel, and could be looking at, at least, virtually the full 'drain' sum to be refunded.
Please keep us updated. You are using your Leg Prot? That will be interesting. 

NibblyPig

Thanks for your reply, yes that does seem like it. Neither of them are interested in discussion and all kinds of excuses and 'we went the extra mile so you should just pay it' type guilt trips are flying. Since we're at an impasse I have no choice but to seek some kind of dispute resolution.

Unfortunately I have the worst insurance company in the world, who I had to take the ombudsman before and pursue aggressively over trying to make a claim on my emergency cover (I won, eventually, and they said they will not renew my policy in nicer more fluffy words). Now I have to try to use their legal cover, which I expect to be a similar nightmare. They didn't answer the phone yesterday despite calling several times, eventually the on hold music says sorry nobody is available try again later and hangs up. The only way to open the claim was by e-mail - it's supposed to be handled in the app, but the app said send us an e-mail for some reason. Couldn't even find the number for the legal insurance I had to phone the emergency helpline and ask them.

Exactly what I don't need right now

silvercar

NibblyPig said:

Thanks for your reply, yes that does seem like it. Neither of them are interested in discussion and all kinds of excuses and 'we went the extra mile so you should just pay it' type guilt trips are flying. Since we're at an impasse I have no choice but to seek some kind of dispute resolution.

Unfortunately I have the worst insurance company in the world, who I had to take the ombudsman before and pursue aggressively over trying to make a claim on my emergency cover (I won, eventually, and they said they will not renew my policy in nicer more fluffy words). Now I have to try to use their legal cover, which I expect to be a similar nightmare. They didn't answer the phone yesterday despite calling several times, eventually the on hold music says sorry nobody is available try again later and hangs up. The only way to open the claim was by e-mail - it's supposed to be handled in the app, but the app said send us an e-mail for some reason. Couldn't even find the number for the legal insurance I had to phone the emergency helpline and ask them.

Exactly what I don't need right now

legal insurance is often a separate service provided by a different company. Once you are in contact with the legal team it will probably be a different company and your contact with the main insurer will not be required.

NibblyPig

silvercar said:

legal insurance is often a separate service provided by a different company. Once you are in contact with the legal team it will probably be a different company and your contact with the main insurer will not be required.

Fingers crossed, you'd think the same about the home emergency and maybe it was but my god they were awful, I hope that the legal folk are better, I just have to wait a random amount of time and hope they reply to my e-mail

ThisIsWeird

As silvercar says, LP is almost always (always?) provided by independent legal specialists. 
And it sounds as tho' the builder and PM are being unprofessional manner - the issue should be discussed actually and unemotively. Write down everything they say - it won't serve them well.

DullGreyGuy

ThisIsWeird said:

As silvercar says, LP is almost always (always?) provided by independent legal specialists. 

Almost, not always... the largest insurers have the critical mass to run their own operations. Most smaller providers bolt on a sub policy from one of the three main providers of LE cover. 

That said, Home Emergency is equally normally a separate policy but again largest providers may run/write it themselves.

The main issue is really that they have shown what their arrangement was on the invoice which was stupid of them... when you spend £50 on a new item of clothing no shop is going to break that £50 down as £10 for the wholesale price plus £X for sales commission etc etc else there would be endless arguments of why they are charging £50 for something they bought for £10 

If there was an explicit clause in the PM's contract to minimise costs then there is an issue

martindow

Have you paid all of the bills for this job?  If not, could the OP withhold £1500 as has been suggested earlier as a suitable figure to reflect the reduced amount of work needed on the drainage system.  

NibblyPig

I decided to cave after talking to the builder. They claim there was a reduction and they offset another invoice because of it. I think it's complete nonsense, but I can't really prove anything. They claim that the initial work was a lot more involved than it would appear. Maybe, I'll take a look when I'm on site, but I am doubtful.

The 1k fee though, once this wraps up I am going to see if this legal advice ever materialises (no reply to the e-mail yet) and maybe go small claims route.

Ganga

NibblyPig said:

I decided to cave after talking to the builder. They claim there was a reduction and they offset another invoice because of it. I think it's complete nonsense, but I can't really prove anything. They claim that the initial work was a lot more involved than it would appear. Maybe, I'll take a look when I'm on site, but I am doubtful.

The 1k fee though, once this wraps up I am going to see if this legal advice ever materialises (no reply to the e-mail yet) and maybe go small claims route.

Did you not ask the builder who had paid the fee? either he did out of his profit or you did by him including it in his quote .

Gavin83

NibblyPig said:

It seems pointless to speculate though, if I had gone direct perhaps they would have said 9k, since without having to pay 1k for the business referral they would make exactly the same amount of money.

Yes, had the arrangement been as you describe with your mortgage, that would still have been unethical (since it wasn't declared - your broker will have declared up-front their fee, as mine did also). But had your mortgage broker added their referral fee onto your mortgage without telling you, surely you see that would be fraudulent? And me saying that well if you didn't use the broker you would probably have paid the extra anyway, does not do anything to justify it.

But my mortgage broker didn’t add their referral fee onto the mortgage, regardless of whether they told me or not. It was the same end cost to me either way. It came out of the banks profits. They did mention it, although I don’t remember them telling me the amount but given it made no financial difference to me I didn’t particularly care anyway.

As for your first paragraph it is speculation. Maybe you would have got it for £9k. Maybe you’d have paid £11k if you’d gone direct. Builders seem to make up the amounts they charge and will take advantage of people if they can. If you’re going via a PM that refers work to them you might well get it cheaper. It’s impossible to say.

Theres a lot of examples of a referral fee of sorts and I can’t think of a single scenario that the customer directly pays it. If you go via a comparison site for your car insurance they’ll get a referral fee although you’ll generally pay the same as having gone direct. Same with cashback websites. I used to work in retail and I’d get commission, sometimes quite a decent amount. Despite this the prices were the same as other retailers who didn’t pay a commission.

I think the biggest mistake here was them including it on the invoice and it’s reasons like these that builders are often reluctant to provide a breakdown. Ultimately though you’re viewing this referral fee as coming out of your pocket and I expect it hasn’t. There’s probably little way to prove this though.

For the record if you go down the legal route I think you’ve a good chance of recovering the drainage money. I think you’ve got a poor chance of recovering the referral fee. Still, it’s a worth a go.