Letters of Engagement & being paid for your time

Letters of Engagement & being paid for your time

Letters of Engagement & being paid for your time

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Edward Carey FSCSI FRICS

Owner at Edward Carey Property

At a recent panel discussion, the question of whether or not fees can be charged for aborted sales was debated. Edward Carey gives his thoughts;

I remember many years ago, having just ‘sale agreed’ a local property and instructed the vendor’s solicitor to issue contracts, the vendors called to the office to inform me they were not proceeding with the sale. The usual round of phone calls commenced – to the very disappointed (non) purchasers, the solicitor to stop all work, the sign contractor to take in the board, and so on. Then when it came to my fee, the discussion was short enough; our fees only fall due on completion of the sale. No sale, no fee. It transpired after the event that the vendors were essentially testing the market, and had no intention of ever selling. Leaving aside the sour taste, I learned at that stage that I needed to be paid for my time.

We list properties, provide vendors with very valuable information, are experts on planning, building regulation compliance, contracts, and so on. Even before the property goes on the market, we have provided the vendor with expert time & advice, and our ‘fees clock’ should start ticking from the time of first engagement. We essentially bank the time & expertise in the hope (and that’s all it is) that the sale will complete & we can collect at the end.

We have 2 aspects to our cost – the outlay & professional service. The outlay is incurred in getting the property to the market – web, photography, signage, floor plans, video, etc. For this most agents will charge an ‘up-front’ marketing fee of some hundred euro. This presents no issues insofar as the Regulator is concerned. It’s a straight forward ‘invoice out & money in’.

The issue of when the sale fee falls due, when it is paid, and what happens in the event of a fall through can be looked at in detail. My view is that there is sufficient flexibility in the LoE to provide for most scenarios. Schedule 2 of the Property Services (Regulation) Act 2011 sets out the minimum that must be included in the Property Services Agreement (the LoE). Specifically, for example, Paragraph 1(e) of the Act states that the Agreement should set out “the amount or the rate, as the case may be, of any commission or other fee payable by the client under the agreement and  circumstances under which the commission or fee, as the case may be, becomes payable.” It does not say what the fee should be, or how it becomes payable.

As we know, the PSRA have issued a Specified Form of the Property Services Agreement (LoE) that most of us use verbatim. There are helpful notes attached to the LoE.

To look at the fees question in detail;

The quantum of fees and when they fall due are dealt with in Paragraph 9. Paragraph 9.1 provides for a fee structure, typically a percentage of the sale price, and concludes with the sentence “…. The fee shall become payable to the Agent on the date the contract for the sale of the property is concluded…” Paragraph 10 deals with the Termination of the Agreement. Paragraph 10.3 deals with the consequences of the Termination. Paragraph 10.3.1 (c) states, “…. [the Client shall…] pay any agreed expenses and outlays incurred by the Agent up to the date of termination…”

Finally, to address the Notes. In summary, we are instructed that the headings in the Specified Form which are bold, underlined and marked with an asterisk must be addressed in the Agreement. No issue there – these are the minimum terms that need to be included in the LoE.

We are then informed “…. that the terms of agreement in the Specified Form are suggested provisions only…..”. Later, “…. the Client and the Agent (Licensee) may make amendments to these terms of agreement and/or agree different terms in respect of the said headings…”

It is up to the Agents to ensure that any changes are compliant and unambiguous.

I am therefore of the opinion that, should I chose to do so, I can have a provision in my LoE that, for example, my fees fall due at the point contracts are signed by the purchaser (I’ve done my work – the buyer has signed). Furthermore I can have a provision dealing with the withdrawal by the vendor from the sale. Perhaps I can consider that, if I produce a ready, willing and able customer and the vendor withdraws from the sale that a fee becomes payable. Why can’t I be clear to the vendor and state that if I produce a buyer and you change your mind I need to be paid? You can rest assured that all other professionals in a failed transaction get paid – valuers, surveyors, solicitors. It beggars belief that agents should walk away empty handed.

These are my personal opinions and do not constitute any form of legal or professional advice. 

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