The Property Ombudsman has issued new guidance over what it calls “a growing issue” - that is, disputes over dual fees.
TPO defines this issue as when two agents have been instructed by a vendor and both claim a fee for its eventual sale.
A statement from the Ombudsman over the weekend says that in 2017 there were 32 cases relating to dual commission fees; this rose to 72 in 2018; but already, little over two months into 2019, there have been 25 cases this year.
The key points of the guidance cover two scenarios which it says are the basis of most of the cases.
The first is when one agent is instructed on a Sole agency/Sole Selling Rights basis but is then dis-instructed and a second agent instructed.
The second scenario is when both agents are operating on a multi-agency instruction.
A summary of the guidance from TPO says: “To provide clarity and certainty to both industry and consumers, there is a need to define what will constitute an effective introduction; the current lack of clarity in this area and lack of definition of introduction is at the root of the disputes. The disputes reflect poorly on the industry and lead to consumer distress.
“TPO has taken on board feedback from agents who consider that sharing a fee allows the second agent to ‘take a punt’ and, instead of referring a sale back, continue with the sale in the hope of receiving at least part of the fee. TPO’s view is that in dual fee cases the agent who effectively introduced the buyer should be the agent who is entitled to the fee.
“An effective introduction must evidence that the agent carried out an act that initiated the buyer’s reaction to the property. As such, there is a need for a defined transaction event to occur. It is TPO’s view that this can be most clearly evidenced by an agent carrying out a viewing.
“When considering if an agent has introduced the buyer, TPO expects to see evidence that the viewing has been booked, confirmed in writing to both seller and buyer and taken place. In this way, TPO will be in a position to state that, following the viewing, the agent that conducted the viewing introduced the buyer.
“A viewing more than six months prior to dis-instruction without evidence of continuity of interest will not be deemed an effective introduction by the first agent to any subsequent sale post dis-instruction.”
The guidance issued by TPO outlines agent obligations upon dis-instruction, including disclosing to the seller a list of parties that they have introduced - that is, a list of those who have viewed the property.
And the Ombudsman’s guidelines says that if the seller signed a sole selling rights agreement, the agent must advise the seller on dis-instruction, in writing, that a fee will be due if any party who was introduced during the sole selling rights period proceeds to exchange of contracts.
TPO says agents have a specific responsibility to ensure no consumer is put at risk of paying two fees, so has therefore outlined the obligations of the second agent upon instruction.
The guidance on this point states that: “All agents should keep full written records of all communications with both the seller and interested parties and note the advice provided and provide that evidence to TPO should a dispute arise.”
The Ombudsman’s office says that if these steps are followed, the seller will be fully advised and aware of the implications.
Katrine Sporle, Property Ombudsman, comments: “If a dual fee complaint is referred to TPO, we will be looking to address any consumer detriment. Our stance is that no consumer should unknowingly be placed in a position of paying more than one commission fee.”
She continues: “TPO will reach a conclusion against the requirements of the Code of Practice and associated TPO Guidance, having taken into account the contractual entitlement of the agent under the terms of the agreement signed by the consumer. To establish an effective introduction, there must be a viewing of the property.”
TPO awards are limited to £25,000; if the commission fee in dispute is greater than that, TPO says the case may - with the agreement of all parties - be referred to its associated mediation service.