Most agents are aware that they cannot include unfair terms in their agency agreements.
Contract terms must comply with Part 2 of the Consumer Rights Act 2015, which sets out the general rules about fairness in contracts and notices.
On top of these obligations, there are two further pieces of legislation that are extremely relevant to this issue – namely the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and the longstanding Estate Agent (Provision of Information) Regulations 1991 (EARs).
The TPO Sales Code of Practice (Section 5) sets out all the relevant obligations derived from that legislation and explains, in practical terms, what constitutes best practice when drafting, negotiating and presenting agency agreements to consumers.
These are the standards TPO agents are measured against when complaints arise.
The TPO Code requires that particular care must be taken in defining and distinguishing between ‘sole agency’, ‘sole selling rights’ and ‘ready, willing and able’ clauses in sales contracts.
The definitions set out in the EARs (schedule 5(c)) must be used in full and the implications of each term clearly explained and actively flagged to consumers.
Furthermore, the CPRs require that this material information is provided to consumers in a clear and unambiguous way before they make a transactional decision.
In practice, this means that any fee and the circumstances where it will become due, must be explained to the consumer before they have signed the contract.
Where there is more than one set of circumstances that allow for a commission fee to be claimed, all of the circumstances should be explained to the consumer and presented together in simple clear language in the contract.
It is not acceptable, for example, to present a contract which appears to be a ‘sole agency’ agreement, but includes a ‘sole selling rights’ or ‘ready, willing and able’ term elsewhere in the document.
Most consumers will assume it is a ‘sole agency’ contract and will be unlikely to look elsewhere in the paperwork for other circumstances where a fee could be charged.
Potentially this could be considered a misleading practice under the CPRs and is certainly not best practice or in accordance with the TPO Code’s requirement for clarity in contracts.
Whilst it is legally acceptable to use ‘ready, willing and able’ clauses within agency agreements, they are often the source of dispute especially where a seller has not sold a property but the fee is claimed by the agent.
In these circumstances it falls to the agent to prove that the buyer fulfilled the definition and criteria of the ‘ready, willing and able’ clause within the contract.
Proving that a buyer is ‘able’ to complete a purchase should be relatively straightforward if a financial evaluation has been carried out and ongoing monitoring of the buyer’s financial position has been recorded.
A buyer would be ‘ready’ once all of their finances are available to send to the seller’s solicitor, subject to an acceptable survey.
However, determining whether a buyer is ‘willing’ (or ‘prepared’ as seen in some contracts) to complete the purchase is problematic. Indeed, the term has received different interpretations ranging from the view that a buyer can only be considered willing if they enter into a binding contract (i.e. exchange) to the view that a buyer’s offer sufficiently demonstrates ‘willingness’.
No two cases are the same as, invariably, the circumstances of the transaction are always different.
The problems with differing interpretations of ‘ready, willing and able’ clauses mean they are not conducive to ensuring that consumers are fully aware of the precise circumstances in which they will become liable to pay a commission fee.
Moreover, to put the matter in simple terms, consumers rarely expect to pay a commission fee for selling their property when that property has not been sold.
Given that agents trade on their reputation and the potential for repeat business, I am surprised that such a term is still in use.
* Deputy Ombudsman Jane Erskine will be discussing ‘ready, willing and able’ clauses in more detail during her webinar on Wednesday.
The webinar is free and will be hosted by Rightmove – further details here: https://hub.rightmove.co.uk/webinars