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OFT secures changes to estate agent's contracts

116/06    18 July 2006

Following referrals from Which?, the OFT has secured the amendment or removal of a number of unfair terms from the contracts of 25 estate agency businesses. The terms in question breached the Estate Agents Act, the Estate Agents (Provision of Information) Regulations and the Unfair Terms in Consumer Contracts Regulations. Amongst the terms found in a number of the contracts were:

• Terms that were unclear as to the duration of the contract period because of the termination provisions. Contracts were often stated as being for a minimum period of, for example, 12 weeks. However, the contracts were also subject to 14 days cancellation notice after that minimum period, in effect extending the duration of the contracts by a further two weeks.
• Terms that stated that the seller gives his solicitor 'irrevocable authority' to pay the agent's fees. Such terms may have the effect of unfairly restricting the seller's right to withhold some, or all, of the agent's fee if he considers that the agent has provided an unsatisfactory service.
• Incorrect/misleading definitions of the terms 'sole selling rights,' 'sole agency' and 'ready, willing and able purchaser.' The law requires that estate agents must adhere to the statutory definitions of these terms unless it would be misleading to do so because of other terms in the contract.
• Terms which placed the responsibility on the seller to declare a personal connection with the agent, whereas the law requires the estate agent to disclose any personal interest.
• Terms which required sellers to pay disproportionately high default charges on late payment of the agent's fees.

Christine Wade, OFT Director of Consumer Regulation Enforcement said:

'House sellers should be able to rely on fair and balanced contracts when using an estate agent to sell their property. We will continue to challenge unfair terms in estate agents' contracts and we are grateful to Which? for bringing these matters to our attention.'

NOTES

1. The Estate Agents Act 1979 and related subordinate legislation covers anyone who, in the course of business, is engaged in 'estate agency work.' This means introducing to someone else a person who wishes to buy, sell or lease land or property, and being involved in negotiating the subsequent deal. The work must be in the course of a business, whether as employer or employee, and as a result of instructions from a client. The land or property may be commercial, industrial, agricultural or residential. This does not include acting as a letting agent.

2. The Estate Agents (Provision of Information) Regulations 1991 ('the Regulations') provide that if any of the terms 'sole agency', 'sole selling rights' or 'ready, willing and able purchaser' are used by an estate agent in the course of carrying out estate agency work, he shall explain the intention and effect of those terms to his client by means of a written explanation having the form and content of the statements set out in the Schedule to the Regulations. The statutory explanations must be used in the form set out in the Regulations unless this would be misleading because of the other provisions of the contract.

3. The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR's) apply to standard contract terms used with consumers. The UTCCRs protect consumers against unfair standard terms in contracts they make with traders. The OFT, and certain other bodies, can take legal action to prevent the use of potentially unfair terms. A term is likely to be considered unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of consumers. The regulations say that a consumer is not bound by a standard term in a contract with a trader if that term is unfair. Ultimately, only a court can decide whether a term is unfair.

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