Dual fees charged by estate agents – here’s what you need to know

It was recently revealed that new guidance has been issued by the Property Ombudsman (TPO) over what it labels ‘a growing issue’ – namely that of dual fees.

But what are the main problems at play? Below, we take a closer look...

What are dual fees?

According to TPO, dual fees are when two agents have been instructed by a seller and both claim a fee for the property’s eventual sale.

And it appears to be a growing issue, too, with a recent statement from the redress scheme revealing that in 2017 there were 32 cases relating to dual commission fees, rising to 72 in 2018. Already, little over two months into 2019, there have been a further 25 cases.

The guidance covers two scenarios which TPO says are the foundation of most of the cases it sees.

The first most common scenario is when one agent is instructed on a sole agency/sole selling rights basis but is then dis-instructed and a second agent is instructed instead.

The second scenario is when both agents are operating on a multi-agency instruction.

TPO said, to provide clarity and certainty to both the industry and consumers, there needs to be a firm definition of what constitutes an effective introduction. Currently, the lack of clarity in this area – as well as a lack of definition when it comes to introduction – is at the root of most disputes.

The complaints service said it had taken on board feedback from agents who ‘consider that sharing a fee allows the second agent to ‘take a punt’ and, instead of referring a sale back, continue with the sale in the hope of receiving at least part of the fee’.

In the TPO’s view, though, in dual fee cases the agent who effectively introduced the buyer should be the agent who is entitled to the fee.

“An effective introduction must evidence that the agent carried out an act that initiated the buyer’s reaction to the property,” TPO said in its statement. “As such, there is a need for a defined transaction event to occur. It is TPO’s view that this can be most clearly evidenced by an agent carrying out a viewing.

“When considering if an agent has introduced the buyer, TPO expects to see evidence that the viewing has been booked, confirmed in writing to both seller and buyer and taken place. In this way, TPO will be in a position to state that, following the viewing, the agent that conducted the viewing introduced the buyer.”

A viewing more than six months before dis-instruction ‘without evidence of continuity of interest’ will not be deemed an effective introduction by the first agent to any subsequent sale post dis-instruction.

The TPO guidance also outlined an agent’s obligations upon dis-instruction. This includes disclosing to the seller a list of parties that they have introduced – in other words, a list of those who have viewed the property.

Meanwhile, the guidelines state that if the seller signed a sole selling rights agreement, the agent must advise the seller on dis-instruction, in writing, that a fee will be due if any party who was introduced during the sole selling rights period continues to exchange of contracts.

Responsibility to the consumer

As customer-facing businesses, agencies have a duty to look out for their clients in a responsible, ethical manner. TPO insists that agents have a specific obligation to make sure no customer is ever put at risk of paying two fees. With this in mind, it outlined the responsibilities of the second agent upon instruction.

“All agents should keep full written records of all communication with both the seller and interested parties and note the advice provided and provide that evidence to TPO should a dispute arise,” the guidance said.

If the above steps are adhered to, TPO said the seller will be fully advised and aware of the implications of instructing more than one agent.

TPO awards are limited to £25,000, but if the commission fee in dispute is more than that, TPO says the case can be referred to its associated mediation service if all parties agree to this.

Remaining compliant

Although the issue of dual fees has only affected a very small number of agents at present, it is a growing issue and something agents need to be aware of – particularly if you operate on multi-agency instructions.

Like all the rules and regulations agents need to abide by, compliance and good practice is vital. And this is made far easier if your business is running smoothly, with the right processes in place to ensure everything is working as it should be.

Good property software is crucial to achieving that perfect balance, with an all-in-one, cloud-based system enabling you to work smarter, with added flexibility and efficiency.

With the importance of keeping track of who has been introduced to who, and other matters pertaining to instruction and dis-instruction, a secure system and excellent communication throughout with sellers and buyers is absolutely crucial.

Here at Gnomen, we offer on-the-go and in-the-cloud property software with high levels of security.

Performance tracking, customisable workflows and an office diary which can be synced to iOS and Android devices all help to keep you on top of your team’s workload, while 24/7 customer portals enhance correspondence between you and your clients so the chances of disputes or issues are significantly lowered.

What’s more, electronic document signing allows you to create an easily trackable, secure online trail of what’s been signed and when.

To find out more about what we can do for you, please call 0208 123 9019 or book a free demo here.