Many estate agents include a clause in their contract under which they can still charge commission if they ‘introduced’ the buyer.
Homeowners who switch estate agents while trying to sell their property could end up paying double fees.
Many agents have a clause in their contract that states vendors still have to pay them commission when their home is sold, even if they did not broker the sale.
But a couple recently won a legal battle over the issue, with a judge ruling that in order to charge commission, an estate agent must be involved in the sale and not just the introduction of the purchaser.
Paula Higgins, chief executive of the HomeOwners Alliance, said: “This ruling is vitally important because it starts the debate over what is meant by ‘introduced’ and the issues that can - and should - render the clause void.”
Why is this happening?
George and Hilary Wood were taken to the small claims court by estate agent Palmer Snell for £7,935 worth of fees.
The couple had originally marketed their home through Palmer Snell for £575,000, and it had caught the attention of a prospective buyer who later withdrew their interest as they were not able to meet the Woods’ timetable.
The Woods did not sell the property, and later changed estate agent, this time marketing their home for £525,000 with Fortnam Smith & Banwell.
The same buyer again expressed an interest, and as their circumstances had changed, went on to purchase the property for £529,000.
Palmer Snell claimed it should still get its fee as it originally introduced the buyer to the property.
But a judge dismissed the claim, saying an estate agent must prove it was the effective cause of the transaction and not just the introducer.
Above: one-bedroom flat for sale on Praed Street, London's Paddington (not part of the ruling)
Who does it affect?
The court ruling is significant for anyone who has changed estate agent while trying to sell their property, as it may mean they do not need to pay double fees.
But it also highlights the grey area of the extent to which introducing a buyer to a property is instrumental in the sale of the home.
To protect themselves, it is important homeowners understand the contracts they sign with estate agents, particularly if they consider changing agent further down the line.
Sounds interesting. What’s the background?
When people use an estate agent to sell their home they typical opt for just one agent, known as a sole agency. They pay fees to this agent of usually around 1.5% of their home’s value.
Alternatively, they can use more than one agent, known as multiple agency, but fees are higher at around 2.5% to 3.5%.
Some estate agents who were initially hired on a sole agency basis may still charge commission even if the property is sold long after the seller has changed agent if they feel they had some role in introducing the buyer to the property.
This role may be that they conducted a viewing with the buyer who did not proceed with the purchase at the time, or it could simply be that the buyer first saw the property details in the estate agent’s window.
Top 3 takeaways
- Homeowners who switch estate agents while trying to sell their property could end up paying double fees
- Many agents have a clause in their contracts that states vendors still have to pay them commission when their home is sold, even if they did not make the sale
- A judge recently ruled that in order to charge commission, an estate agent must be involved in the sale and not just the introduction of the purchaser