Tuesday, 12 March 2019

Estate Agents' Commission Slashed by One-Third. It could be you!

In a poll I conducted in a dream as to who the public would least like to be trapped in a lift with, an estate agent came top. This is a shame because some estate agents are almost human and help old ladies across the road without asking for any commission at all. 

In a second poll I conducted in a dream the following evening, I asked whether the public would avoid paying an estate agent commission for negotiating the sale of their property if they possibly could, and 123% answered in the affirmative. Which takes me to the Estate Agents Act 1979. What the Act says along with regulations made under it - the Estate Agents (Provision of Information) Regulations 1991 (SI 1991/859) - is that if you go to an agent with a view to possibly instructing them to offer your property for sale then they must provide you with various prescribed information in writing  which includes the amount of their commission  and when you would become liable to pay it. The information must be given at the time when you and the estate agent commence communication or as soon as reasonably practicable afterwards. But, in any event, the information must be given before you sign up with the agent and become committed to any liability to them.

If the agent fails to give you the necessary written information at all or gives it late then   they cannot recover one new pence of commission from you unless the court gives them permission to do so. The court must dismiss their application for this permission if it considers this is just taking into account the prejudice caused to you by their breach and the degree of culpability for their failure. Even if the court gives the agent permission to sue you it can reduce  the commission or say no commission at all, so as to compensate you for any prejudice you have suffered. If, for example, the agent was acting dishonestly, the delay in giving you the written information was considerable or you reasonably thought the commission rate was less than it turned out to be, then there would be a chance that the agent would end up with no commission or a cut in their commission.

In  a case just before the Supreme Court - Wells v Devani [2019] UKSC 4 - the client and estate agent had agreed over the phone that the client's seven flats should be marketed by the agent and just one week later the agent secured an offer of £2.1 m. The sale went ahead. But it was not until the offer had been accepted that the agent sent the client the necessary information so one week late. The Supreme Court upheld rulings that because of the failure to comply with the law, the agent's commission should be reduced by one-third (£32,900 inclusive of VAT) having regard to the prejudice suffered by the client. The Supreme Court made it clear that there could be cases where the degree of the agent's culpability was so great that the agent would get nothing even if the client had suffered no prejudice. The importance of the 1979 Act should not be under-rated.

Time for some more dreaming by me. I'm off to bed with my copy of Breaking Law. Got yours?