Key Topics – Commission, Fee Transparancy
Mr Brown raised a complaint to the Property Redress Scheme about his Agent due to a number of issues he had experienced during the time the Agent had been managing the property.
Following investigation of the initial complaint, the PRS contacted the Agent for their rebuttal. During the 10 day period the Agent is allowed to put together their case, Mr Brown received the following correspondence from the Agent:
“Please find enclosed an invoice correcting commission rate on our management activity for the below property from June 2013 onwards. Being, an increase from 10% to 12.5% as agreed in our management agreement. We look forward to your remittance”
The Agent gave the reason that the 10% commission was an introductory rate and only applied to the first 12 month tenancy that ended in 2013. After this, the Landlord should have been charged the standard rate of 12.5% commission but the Agent had forgotten to charge the increased rate at the time.
Mr Brown was very distressed by this correspondence. He believed that the management agreement had only ever stated 10% commission to the Agent. He felt this was a clear attempt to offset any award that may be made to him through the PRS’ involvement with his complaint.
Mr Brown refuted the charge but the Agent continued to harass him to pay the invoice; including employing a debt collection agency to email, call and write to him demanding the money. Feeling bullied, he asked the PRS to investigate this issue alongside his original complaint.
Email correspondence, Tenancy Agreement, Bank statements, Management Agreement.
Case Assessors Plan
- The PRS looked into the Management Agreement signed by both parties and read the following clause: “Management commission equivalent to 10% of the rental received for the first 12 months from the commencement of the tenancy or for the duration of the current tenancy (whichever is the longer) will be charged.”
- There was nothing in the agreement to suggest that the commission would be charged at 10% for 12 months and 12.5% thereafter, as claimed by the Agent. The Case Assessor queried this with the Agent and they said that instead, this had been agreed to in an email by Mr Brown. Upon requesting evidence to support this, the Agent confirmed that it had not been possible to extract emails from the time of the referred to correspondence.
- Though the Case Assessor noted that other terms in the agreement reverted back to the Agent’s standard rate of commission at 12.5%, they concluded that the increased rate was not made fully transparent to Mr Brown at the start of the contract.
- In addition to other compensation payments for the original issues, the Case Assessor’s solution recommended that the Agent disregard the commission invoice – this resolution was accepted by both Agent and Mr Brown and the case was closed.
Key Points from the Case
- Fee transparency means that there should be no surprise costs; Landlord’s should know what they are expected to pay before they sign a contract with an Agent.
- Agents cannot introduce a new fee further along the line unless this is agreed to in writing with their client. If the Agent does not have evidence to support that their fees were made clear from the outset, it is unlikely their case will be upheld.