The new contract for firms joining or re-signing to OnTheMarket is reported to have a restriction on acquisitions.
It is said to specify that any agency member cannot be acquired or taken over by another agency in future unless the acquiring agency also has all of its branches signed up to OnTheMarket.
This would mean that a large company with hundreds of existing branches currently not with OTM, would have to pay for each of them to join the portal before being able to acquire even a small independent with a handful of offices or even fewer.
One small agency is believed to have attempted to sell to a larger chain, only for the issue to be noticed during the due diligence process; at that point, the acquiring agency withdrew from the deal, reportedly leaving the owner of the unsold company “in pieces”.
According to two agents who have contacted EAT, the effect of the clause in the new contract regarding the acquiring agency’s branches being members of OTM is not immediately obvious to the untrained eye.
EAT has been told that one acquisition deal which did not meet these criteria has nonetheless gone ahead because legal advice to both the acquirer and the acquired was that the clause could not be enforced; however, we have not been able to confirm this.
It is thought the clause in question has only been created since the court meetings of Agents’ Mutual members on September 6 and the formal sanctioning by the High Court of Justice Chancery Division of the decision to demutualise on September 11.
Since that time Agents’ Mutual has made announcements regarding three relatively large companies signing up to OnThe Market.
These are Arun Estates with over 100 branches trading under the Arun brand and under Ward & Partners, Cubitt & West, Douglas Allen and Pitts titles; more recently there was the Chancellors Group with over 50 branches using the Chancellors name and also Anscombe & Ringland and Russell Baldwin & Bright; at the end of last week franchise company Hunters signed its 200 or so branches to OTM as well.
All of these sign-ups were for five years and were dependent on the initial public offering going ahead; no details of the IPO timing or share price have yet been released.
An OnTheMarket spokeswoman told EAT this morning: "A clause ensuring that all members of an agent's group comply with the terms of the agent's contract has existed in substantially the same form since early 2014. We are not aware of it causing any difficulties over the last four years for member agents selling their businesses to larger groups."
There has already been one legal skirmish involving OnTheMarket since the September decision to go ahead with a stock market floatation.
ZPG announced that Henry Adams - an agency with 15 offices in West Sussex, Hampshire and Surrey - was to leave OnTheMarket and rejoin Zoopla and PrimeLocation.
However a statement from Agents’ Mutual then said: “The firm continues to list its properties at OTM in accordance with its current listing agreement and remains a valued member.”
ZPG later claimed: “It is an unfortunate state of affairs for OTM that the only way they can retain their customers is by threatening to sue them and preventing them from maximising their opportunities.”
Over the summer litigation between Agents’ Mutual and Connells’ brand Gascoigne Halman was resolved with a verdict backing the legality of OnTheMarket’s ‘one other portal’ rule.