How often does one not hear of estate agents who claim a "monopoly" on a potential client and is this practice fair and in accordance with the CPA?
A recent incident experienced by an agent and a client of theirs resulted in me searching the CPA for guidance on the anomaly of agents claiming a buyer as theirs and that they are on their books.
This claiming seems to be more prevalent with the larger agencies and is extended beyond their exclusive own mandates and is being applied where they allow agents to introduce their buyers for a referral commission or have opened their mandates to mini and multi listing forums.
Irrespective of the established procedure of this claiming a buyer, for ever it seems, I was wondering what the CPA has to say about it. Not being in the legal profession, and not finding any help from the EAAB, I took to the library to see what I could find. There are many books on the subject so I chose two to work with - The Consumer Protection Act made easy by Adv N J Melville and Everyones Guide to the Consumer Protection Act by Clive Gibson and Geoff Hull.
Where does one start in looking for an indication on this? it feels wrong, but is it ethically, morally or legally wrong?
Working on the assumption, as the client put it, that being claimed and placed on their books was unsolicited and not requested, I went to Section 21 of the Act, where I found that an unsolicited service could be construed as any service performed for a consumer by a supplier (agent/agency) without the consumer having expressly or implicitly requested that delivery or performance.
One could argue that the buyer was on their books looking for a property and has as such implicitly agreed to a contractual agreement and the fact that they were still looking meant that that requested service had not been 'completed'. Surely the implicit fact is however that the moment a potential buyer goes to another agent it means that their 'contract' with the first agent had lapsed and therefore the first agent no longer has the right to have them on their books as their buyer, seems the most logical to me, especially in terms of the CPA.
Also the mere fact of having their name, telephone number or e-mail address cannot grant to you the sole right to 'own' them and to have an implied contract to find a property for them. The consumer has the full right to chose whomsoever he wishes to deliver any service to them, including the buying of a property.
This however may be easy to accept where the property has been listed with a listing agency or mini-listed with other agents. The moment you open up the sale of the property to other agents you definitely do so with out any right to claim a buyer as potentially your client. But what is the case with a sole or exclusive mandate?
A sole or exclusive mandate grants to the agent / agency the sole right to market / sell the property and also grants to them the right to claim remuneration / commission in the event of a sale to a party who was introduced by the agent to the property. This contract however exists between the agent and the seller it has nothing to do with the buyer or consumer.
The seller, when he decides to go to the market with the sale of his home probably gets the best service going the sole mandate route, provided the agent bears in mind that the purpose of granting the mandate is to ultimately sell the home through his marketing strategy. And it is here that the agent needs to focus. The granting of a sole mandate should be construed as the right to manage the marketing and sale of the property, utilising all avenues to the advantage of the seller. The moment, especially after an initial arbitrary sole period of say 14 days, that an agent holding a sole mandate does not allow other agents to introduce buyers, then they cannot be said to be acting in the best interests of the seller. At times during the initial period they may grant other agents the right to introduce a prospective buyer at an introduction fee of say 20%, which is not in anyway in dispute and is probably fair, especially in the initial period, but what is morally wrong is to make such introduction subject to the practice of testing if the buyer to be introduced is on your books or not that is ethically, morally and probably, in terms of the CPA also statutorily wrong.
Once you allow any agent in on your mandate you can only do so unconditionally insofar as the prospective buyer is concerned. The remuneration aspect remains as practised a 20% for an intro and a 50/50 split once the property is opened up to other agents, this is fair and reasonable.
Any debate along these lines is going to have proponents of a diversity of opinions, but what is clear is that the practice of 'collecting' buyers is one of those activities that gives agents the bad image they have in the Realty business and is probably also in contradiction to the general spirit of the CPA.
This article is the opinion only of the author and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.