In the last two years our Civil Litigation Department has seen an increase in the number of instructions from businesses in the defence of contractual claims by commercial agents for ‘outstanding’ fees.
These agents generally offer their services under what are commonly known as ‘sole selling business rights’ which means that for the duration of the contract, unless and until terminated, they have the exclusive right to market the client’s business and property. Payment of the agent’s fees are usually contingent upon the conclusion of the contract for the sale of the business although there is often a ‘one off’ marketing fee which is paid up front.
Utilising a reputable commercial and business agent in the sale of a business or property can result in a very successful outcome for the client. However, it is advisable for any business who is contemplating instructing an agent to do so with caution.
The protections afforded under the consumer rights legislation are unlikely to apply since on the application of EU Regulations in this area, the Courts have decided that a person who is exploiting his or her trade by selling their business to realise a capital asset is acting in the course of that business and not as a consumer. They are effectively seeking to achieve one of the purposes of having business, namely to realise its capital value.
Commercial agents usually operate under standard terms and conditions in small print which can obligate the client to pay a fee, in certain circumstances, long after the contract has come to an end. The terms may not stipulate what the client is getting for their money. Cancellation of the contract may be contingent on payment of a cancellation charge. The agent may seek to bind the person signing the agreement under a personal guarantee and if the client has second thoughts after signing, unless there is a ‘cooling off period’ in the agreement, the client will usually find that they are unable to cancel the agreement.
It’s also worth bearing in mind that the Sales Representative for the agent may work on a commission and will have a financial incentive to get the client signed up.
If you are approached by a commercial and business agent or you approach them, it is advisable to:
- Research the agent. Are they reputable and have they got a good track record?
- Check the agent a member of the Property Ombudsman Scheme and subject to the Ombudsman Code of Practice (tpos.co.uk)?
- In the first instance, ask the agent to send you a draft copy of their terms and conditions.
- Do not be pressured in to signing the agreement. Give yourself plenty of time to read the terms and conditions. Make sure you understand them!
- Check who the parties to the contract are and does it purport to include a personal guarantee?
- Check the standard terms and conditions very carefully including the services the agent will provide; the fees and the circumstances when a fee will become; your rights to terminate how this is achieved and whether a termination fee is payable.
- Satisfy yourself about the nature and extent of the services provided i.e. what exactly is included with the price.
- If you are in any doubt about any aspect of the terms and conditions seek written clarification from the agent although if the agreement includes a ‘non-variation’ or ‘entire agreement’ clause then what is stated either before or after the agreement has been signed may not be binding.
- If necessary, seek legal advice.
If you require any legal assistance from the Civil Litigation Department at Williamsons Solicitors, please do not hesitate to contact us on 01482 323697.