Ombudsman's advice on fees – IMPORTANT UPDATE

The Ombudsman for Estate Agents has advised agents that they do not need to change their Terms and Conditions, but should follow certain guidelines.

His advice follows a recent case whereby Hunters estate agents introduced a buyer to a property but were told by the Ombudsman that they are not entitled to their fee.

In his ruling, the Ombudsman, Christopher Hamer, cited the Foxtons case earlier this year, where the courts ruled that the agents were not entitled to commission.

Although Foxtons made the initial introduction, that introduction was unsuccessful and it was another agent, Hamptons, which went on to make the successful introduction and handle the negotiations.

It is understood that the National Association of Estate Agents subsequently took legal advice as to whether this meant that all agents should change their Terms and Conditions, but Counsel’s Opinion was that the Foxtons case was unique.

However, the Ombudsman mentioned the case in the new Hunters ruling, on a transaction that pre-dated the Foxtons’ court case.

The Ombudsman also says in his ruling that it was not enough for Hunters, based in Yorkshire, to have introduced the buyer to the property. They needed to have introduced the buyer to the purchase.

In the Hunters case, according to finance director Ed Jones, an applicant registered on September 1 last year. On September 3, a viewing was booked for September15. But on September 10, Hunters were disinstructed.

The buyer apparently knocked on the door of the property, asked if it was still for sale, and went on to buy it privately.

The agents were acting as sole agents for the property, which did not have a For Sale board outside but was advertised online.

When Hunters went after their £14,000 fee, the vendor reported them to the OEA, which ruled in his favour.

Jones says the case raises important issues, including whether agents needed to change their Terms and Conditions.

But today Ombudsman Christopher Hamer said that agents did not need to make any changes, as long as they followed procedures involving detailed record keeping.

He said: “The Foxtons case has moved things on because as case law it sets the precedent and this case has redefined what it is for an agent to make an introduction. It is no longer sufficient for an agent to introduce a buyer to a property: the agents must now be able to prove, through records, that they introduced the buyer to the sale.

“In the Foxtons case, the eventual buyers were shown the property through Foxtons. The wife disliked the property so much that she declined to view the property. Later, after the vendors disinstructed Foxtons and moved to Hamptons, for whatever reason, the original applicants went back to view the house, decided they liked it and bought it.

“At the Court of Appeal, the judge ruled that it was the second agents who had made the successful introduction – in fact, a reintroduction – and Foxtons were not entitled to their fee.”

Hamer advised that agents should protect themselves as follows:

•    Keep records of all applicant interest in a property.
•    Keep records of all feedback from viewings.
•    Maintain contact with applicants who had said they liked a particular property but were not in a position to proceed.
•    Warn vendors disinstructing them that they could remain liable to a fee if someone originally introduced by them went on to purchase the property, whether privately or through another agent, and give the vendor a list of the names of those introduced.

Hamer emphasised: “If agents do all that, I am likely to find in their favour. But if someone walks into an agency and expresses interest in 14 Acacia Avenue, picks up the particulars and is taken on a viewing, and the agent does no more than that, and the applicant subsequently goes on to purchase after a reintroduction from another agent, I am not likely to be sympathetic to the first agent’s claim for a fee.

“After the Foxtons case, it is vital that agents show they have introduced the buyer to the sale.”

However, Hamer said there were issues surrounding reintroduction: “This is a key event and we are currently reviewing this area.”