The Foxtons' case & the implications for terms & conditions

by Jonathan Smithers

Foxtons' recent fee case defeat raised serious questions about agents' T&Cs. Attention to detail is crucial as is client understanding explains solicitor Jonathan Smithers.

The raison d’etre of agents’ Terms and Conditions is debatable. A solicitor might suggest that they regulate the contractual position between a number of parties while an agent might give a more practical analysis, that they are to ensure sellers pay their fees and to generally help avoid litigious situations if something in the house selling process goes wrong.

The correct answer is somewhere in the middle. T&Cs should try be fair for both clients and their agents; if the contract is blatantly unfair it will be much harder to enforce. A judge is much less likely to take a balanced view if the agreement is biased towards one party.

It should go without saying that the wording of T&Cs must be precise and unambiguous.

You should expect to lose your case if it goes to court and the provisions in your T&Cs are unclear – clients should not have to guess or interpret them.

Standardisation

Your T&Cs should have some standard clauses, such as a definition of sole, joint or multiple agency. But do not fall into the standard contract trap - each instruction will be different. Properties are staying on the market longer, so buyers might be looking at the same house weeks or even months after the first viewing while sellers may have switched.

Do you have authority to negotiate your own T&Cs? If not, why?

The inflexibility of standard documents may result in you not being paid. As the executor of estates for my firm, I regularly instruct agents to sell. You may be surprised to know that I look at the T&Cs, which usually contain inappropriate clauses. Until, that is, I remove them.

You are good at negotiating for your clients, so why not on your own behalf? This is the document that should guarantee that you get paid. Have you read it? Do you know what it means?

Attention to detail

The the seller paying you thousands of pounds to sell their property obviously deserves a minute or two of your time spent making sure that they, and you, know the circumstances in which they will have to pay your commission.

If you agree on a variation from the standard text you must put it in writing. If there is any disagreement between you and your client, you can guarantee that the sellers’ recollections will be different from yours.

When is the commission due? Different T&Cs give different answers - some say on exchange of contracts, others on completion. In over 20 years and many thousands of residential conveyancing transactions, I have never seen an account that would have been paid if completion had not taken place – including where the seller died between exchange and completion. This is a prime example of why your T&Cs must be clear.

Do your conditions give authority for the conveyancer to pay the account? Many standard ones do – but not all.

Once again, do not rely on this. If the seller tells the solicitor not to pay, then he cannot do so - the money belongs to the seller, not the solicitor.

Property Misdescriptions Act

The letters alone make your heart beat a little faster. Many standard T&Cs try to shift all responsibility onto the seller but remember that sellers don’t know all the answers to their property. And if they have a power of attorney, the person signing may not know.

Also, consider when you order a Home Information Pack (HIP) whether the title information is right – it may contradict information you already have. It’s quite possible for a seller to have separated from a partner, who remains on the title register. Once again, standard T&Cs may not protect you in this instance.

Also consider who owns the HIP and who pays for it. Most T&Cs were drafted years ago. Those amended for the introduction of the beloved HIPs legislation will probably not have been adapted to ref lect changing market conditions. Sellers need to understand whose responsibility it is to produce the pack and if payment is deferred, the terms on which this has been arranged.

Is the agreement between the seller and you or a third party supplier? If the HIP is yours, will the seller be required to pay a separate fee or is this combined in your standard commission? Is the documentation in the pack up to date? If not, you may be disinstructed. Remember, HIPs are relatively new but some properties have been on the market for a very long time, so attention to T&C detail in this area is crucial.

I’ve only scratched the surface of the many problems that arise with standard T&Cs but the message is simple: Rely on them at your peril.

My advice is to always prioritise your clients - empathise with them.

Any misunderstanding on either your part or the client’s at the outset of a transaction is bound to create problems.

• About Us
• Subscribe to the magazine
• Advertising
• Contact Us
• Terms and conditions
• Privacy Statement