Confusion on mandates, fees and conditions will have to be remedied

Bill Rawson

Confusion on estate agent mandates, fees and conditions will have to be remedied now that the consumer protection act is in force.

Recent court cases, says Bill Rawson, Chairman of Rawson Properties, have shown that both estate agents and their clients often enter into agreements without clarifying their fee structures and the ethical questions that surround the paying of commissions for achieved sales.  Furthermore, says Rawson, seldom do any agreed rules or standards apply to mandates.

This situation, he says, will have to be remedied now that the Consumer Protection Act is in force because this act will lead to any vagueness, inconsistencies or lack of transparency becoming a culpable offence.

Commission difficulties, adds Rawson, tend to become even more complex when, as several recent court cases have shown, more than one agent is involved in the sale, especially if a second agent had been appointed after the first had ‘failed’ to achieve a sale.

Quite frequently, says Rawson, mandates will be agreed to verbally without any reference to the commission payable.  On the sale nearing completion, the seller may find to his dismay that he is expected to pay a commission higher than he anticipated (commissions can vary from 2,5% to 8%).  There have even been cases where the buyer and seller have agreed to work through a second lower fee agent after the expiry of the first agent’s mandate – but then they have found that they are still liable for the first agent’s fee as he remains ‘an effective cause’ of the sale on account of his having introduced the buyer to the seller.

With the Consumer Protection Act now in force, says Rawson, it will probably become essential for estate agents to inform clients at the outset of negotiations how their fees are scaled and, equally important, what they can expect from the agent in return for the fees that become payable if a sale is achieved.

“The industry cannot afford any more costly litigation,” says Rawson.  “Verbal agreements on mandates will have to give way to written contracts signed at the outset before any work is done – and full disclosure, with or without an indicator as to whether the fees are negotiable, will have to be made upfront.”