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This means that only one estate agent has
been instructed to handle the sale of the property. To avoid future problems,
a sole agency agreement should be agreed for a specific period of time. Once instructed
on this basis without immediate competition an estate agent is able to give more
time and attention to the marketing operation confident that he will arrange the
sale and get paid for his efforts.
A sole agency could of course be extended
by mutual agreement, or, if necessary, cancelled early by a reasonable period
of written notice given to the agency. Commission
becomes payable if the estate agent arranges the sale, but not if the seller arranges
this himself.
Having said that, we pride ourselves in putting a great deal
of time and effort into handling all sole agency instructions, and hence this
service is offered on the clear understanding that the seller is not actively
trying to sell the property in open competition with us. If the property is not
sold, or later withdrawn from the market, no commission is payable – only
any specific expenses which would have been agreed at the outset.
Do not confuse ‘sole agency’ with a ‘sole selling rights’
agreement. This is a more restrictive form of agency which is sometimes appropriate
for commercial transactions, or auction sales but is less common and not generally
a recommended form of agency for ordinary residential purposes. Sole selling rights
mean the estate agent would be entitled to the agreed commission
payments for any sale arranged during the period of the agency however this comes
about. We would advise you to think very carefully before entering such an agreement
for you might end up with a liability to pay a commission
when you have sold the property yourself. When Home Information Packs come into
use in due course, the estate agent may well be doing a great deal more preparatory
work than the present system. That will lead to restructuring the remuneration.
Some clients will be prepared to fund the initial costs but where the estate agent
is expected to pay for them, a greater commitment will be required and this may
well involve an assignment of sole selling rights. Time will tell.
When
any estate agent is appointed a sole agent you
should stick to the agreed terms. If you were to involve another agent within
the specified period and this second agency arranged a sale the first agency would
also be entitled to be paid.
In order to ensure an estate agent’s
clients are aware of any restrictive terms in their agency agreement, and this
potential for two commission claims, there are statutory regulations which specify
the form of words for a warning message which has to be include in the written
terms of business given to every prospective client prior to the agreement coming
into force.
Where one or more estate agents
are instructed on what we call a multiple agency basis, there are no statutory
obligations over the specific wording to be used in the terms of business. That
means the client remains free to instruct an additional agent whenever he wishes
safe in the knowledge he will only have to pay the one who arranges the sale.
However,
when the estate agent is appointed as the ‘sole agent’, or has ‘sole
selling rights’, then specific forms of wording must be used.
In the
past confusion over the exact meaning of ‘sole selling rights’ has
led to the courts construing a ‘sole selling agency’ as merely a ‘sole
agency’ – therefore, when the seller had arranged his own sale, he
did not have to pay the estate agency any commission.
The
wording of these two individual notices is intended to eliminate any confusion
of this kind.
The Regulations say the warning notices must be reproduced
without any material alterations and shown prominently in similar style wording
to all the other items of information in the agency agreement.
For an agency
agreement which is, or purports to be, a ‘sole agency’ agreement,
the following style warning notice should be included:
SOLE AGENCY
You will be liable to pay remuneration to us, in addition to any other costs
or charges agreed, if at any time unconditional contracts for the sale of the
property are exchanged:
- with a purchaser introduced by us during the
period of our sole agency or with whom we had negotiations about the property
during that period; or
- with a purchaser introduced by another agent during
that period.
In the case of an agency agreement based on Sole Selling Rights
this form of warning notice should be included
SOLE SELLING RIGHTS
You will be liable to pay remuneration to us, in addition to any other costs
or charges agreed, in each of the following circumstances:
- if unconditional
contracts for the sale of the property are exchanged in the period during which
we have sole selling rights, even if the purchaser was not found by us but by
another agent or by any other person, including yourself; or
- if unconditional
contracts for the sale of the property are exchanged after the expiry of the period
during which we have sole selling rights but to a purchaser who was introduced
to you during that period or with whom we had negotiations about the property
during that period.
Finally the Order talks about a definition for the expression
‘ready, willing and able’. This aspect has given trouble in the past
and led to disputes going to Court. This statutory warning notice is precise and
to the point as the draftsman wanted to ensure prospective clients understood
the message. Certainly the use of this very specific form of warning should remove
any possible confusion. It will normally be used in addition to any ‘sole
agency’ or ‘sole selling rights’ notice as it addresses a different
point.
It is only fair that where an estate agency has carried out the
work he was asked to do – finding a potential buyer and then negotiating
an acceptable sale – he should be paid even though, for whatever reasons,
the owner has had a late change of mind. For the record, here is the required
warning notice:
READY WILLING AND ABLE PURCHASER
A purchaser is a ‘ready, willing and able’ purchaser if he is prepared
and is able to exchange unconditional contracts for the purchase of your property.
You
will be liable to pay remuneration to us, in addition to any other costs or charges
agreed, if such a purchaser is introduced by us in accordance with your instructions
and this must be paid even if you subsequently withdraw and unconditional contracts
for sale are not exchanged, irrespective of your reasons.
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