What is conveyancing coming to? I received a memorandum of sale from an estate agent this week and saw something I had never seen before. I then had a second memorandum of sale from another branch of the same estate agency with the same condition in the agreement.
Bizarrely the agreement was not the sales agreement with the seller, but a separate agreement the buyer was asked to sign before an offer could be accepted.
It read:
[Name of estate agents ] charge a purchase fee of 1% plus VAT of the selling price (subject to a minimum fee of £2000 +VAT) which is payable by the purchaser on completion of the sale and is to be a condition of sale in the contract and the sellers lawyers are to collect this fee with the purchase price on completion.
The estate agents costs must be sent to the estate agents by FASTER PAYMENT or CHAPS payment by the sellers solicitors prior to keys being released.
Have you come across this?
The estate agents are dictating what goes into the contract and dictates what happens on completion!?
For what it’s worth here are my thoughts…
This could be considered a breach of CQS by the seller’s solicitor if they insert the clause in the contract. I would be within my rights to ask for such clause to be removed.
Is there a possible breach of the Code of Completion by Post?
I’m not sure I’ve even get my head around all of the various implications of this.
What if the seller did not like the service provided by the estate agents? I suppose they would argue it was not their issue as they were not paying the bill.
What are the stamp duty implications? (I have to be honest… I would need to look up that point.) Do I need to tell my lender?
One clause which an estate agent has thought is a good marketing ploy so that the seller does not need to pay an estate agents’ fee on completion.
I know the seller’s solicitor on both transactions. It has not been inserted into the contract. I am not sure if that is because they have not noted it on the memorandum of sale or just decided that it is unenforceable and should not be in the contract. That is a discussion I will be having with the seller’s solicitor on both matters.
In the meantime, I think it is a matter that should be reported to Trading Standards, but my clients really want the houses, are happy to pay this fee and do not want me to rock the boat.
Interested in people’s thoughts…
This column is written by a real high street conveyancer who wishes to remain anonymous. Read more in Today’s Conveyancer every week.
6 responses
This is genuinely intriguing and I’ve certainly not seen this.
The issue I see with this is that the agent has two clients now but it’s very curious that it is attempting to bind the seller’s lawyer to a buyer condition.
It’s been a long time since I did my law of contract module but something doesn’t work here…
Any different to buyer’ paying an inflated fee to auctioneers in a so-called ‘modern method of auction (MMA)’, where naïve sellers think they are selling for free because they are not sent a bill?
If I were acting for a buyer in that circumstance I would refuse to approve the contract and if they did not agree to strike out that clause, I would report the firm concerned. The contract is between the seller and the buyer, the estate agent is not a party to the same so the contract cannot dictate that a buyer pays a third party fees if that third party is not part of the agreement. Much like the ridiculous notice to complete fees that should not form part of the contract. Despite it being completely unethical, surely it cannot be enforced as a result?
Under modern method of auction, the reservation fee is not included in the agreement, that is a separate deal between the buyer and the agent. For me also completely unethical with seemingly little to no regulation.
About time Conveyancers were supported by their regulatory bodies, properly, against such practices.
If a reservation fee is separate to the agreement it seems unfair buyers are expected to pay SDLT on it.
Lets all be clear here……aside from all the other sensible and valid contractual comments…..All of which I agree with; What about the sheer greed on the part of the estate agents concerned? Two fees for one job? Are they not able to make a sufficient amount from their businesses already? After all they are glorified introducers and in vast majority of cases nothing more, and have been such for many many years now since the days came to an end where they prepared the plan, advised the Seller on other matters, (and hence whereby the vast majority were professionally qualified; RICS and similar).
1. If the agent hasn’t disclosed this arrangement to the seller, who is the agent’s primary customer, then the agent may be liable to account to the seller for it as a secret profit.
2. If the buyer can’t get the property without paying it, then it’s likely to be part of the consideration for SDLT purposes.