COMPLAINT

A case that The Property Ombudsman (TPO) was asked to investigate came from a seller against a quick sale agent and related to their communication and approach to the purchase of her property.

The seller said that the agent had confirmed that they were the buyer but she believed this was false. She also said that they advised they would offer 80% of the market value, which she was willing to accept as she required a quick sale. However, there were delays in the agent presenting their market valuations and when they eventually did it was £30,000 below her expectations, which meant their offer would be significantly below her requirements.

No contract was entered into between the agent and the seller and as such, the agent said the seller was not obliged to accept their offer.

The seller felt that the agent’s approach was, in her view, dishonest and took advantage of her position which required her to achieve a quick sale.

INVESTIGATION

Following an investigation, which involved listening to telephone conversations, the Ombudsman noted that the seller made the agent aware that a sale had fallen through, and she was looking to sell the property swiftly as she had an onward purchase to complete.

The agent confirmed they would be ‘the buyer’ and would offer 80% of the market value. The seller confirmed the property had been valued by a surveyor at around £265,000 and in response, the agent advised that they would be looking at £200,000 to £210,000 as an offer.

It was confirmed that the agent would be seeking two independent estate agents to value the property and that they were independent to the agent. A follow up email was sent to confirm the facts discussed in the telephone conversation the same day.

One valuation took place but the second was delayed and then cancelled. The agent was informed by the third party responsible for sourcing and arranging valuations, that they were having difficulty getting a second agent to agree to provide a valuation.

The agent confirmed by text that they were organising a desktop valuation and the seller replied to ask whether the other report had been received. The agent confirmed that it had been received but the valuation was quite low at £220,000. The seller expressed her disappointment and the agent confirmed that as they could not help, they would close her file.

A total of nine days elapsed between interest being submitted by the seller and the withdrawal of the agent’s willingness to purchase the property.

The seller expressed her concern that the agent identified themselves as cash buyers but believed they were acting as “middlemen.” As the process did not proceed beyond initial valuations and no contract was signed, there was no basis on which to dispute that the agent was intending on purchasing the property with cash themselves.

The valuation report provided three figures; a market value, an achievable value, and a quick turnaround value. Given the valuation of a property relies on many factors in order to determine, the Ombudsman did not consider this practice to reflect an unethical or unfair approach. The agent’s approach to also use two independent agents to provide a value was also considered fair.

However, given the seller’s disclosure of the need for a swift sale in order to complete on her onward purchase, the Ombudsman would have expected the agent to make the seller aware that given the need for such a swift sale, their offer would not be based on the ‘open market’ value, but rather that of the ‘quick turnaround’ figure which was significantly less.

Accordingly, there was an expectation on the agent to inform the seller from the outset that their offer would be based on the lower ‘quick turnaround’ figure and the reason for this - that being that they would have to negate certain checks to achieve the quick sale the seller was seeking and thus meant increased risk for them.

By not informing the seller of this, the Ombudsman understood that the seller’s subsequent awareness of the three figures and, specifically the ‘quick turnaround’ figure, had led to the seller’s perception of the agent’s actions being dishonest and unfair.

OUTCOME

The Ombudsman noted that the agent’s shortcomings were not in keeping with 1d of the Code - to act with fairness, integrity, and best practice. Although it was noted that the stress experienced by the seller was inherent to her circumstances at that time – needing a quick sale to continue her onward purchase.  

This inherent stress also amplified the necessity for more transparency by the agent on the ‘quick turnaround’ figure from the outset.

The Ombudsman supported the complaint on this basis and made an award of £200 in compensation.

COMPLAINT

A case that The Property Ombudsman (TPO) was asked to review came from leaseholders against an estate and management company over who were responsible for £1,020 in legal fees. 

The leaseholders were seeking a refund of the £1,020 in legal fees to resolve the dispute, as they considered that the estate and management company had failed to correctly interpret the details of the residents’ voting rights, and as such were responsible for the disputed fees. 

The estate and management company did not believe that their service fell short in this instance, stating that they did not agree to cover legal fees to resolve the dispute and no evidence had been provided to suggest otherwise, therefore the legal fees should be covered by the leaseholders. 

INVESTIGATION

The Ombudsman noted that there was a disagreement with regards to the voting rights of the residents at the property between the directors of the resident management company (the leaseholders) and the estate and management company at the Annual General Meeting.
 

To resolve the dispute, the estate and management company opted to abort the meeting and seek legal advice regarding the voting rights of the residents costing £360. The leaseholders also opted to seek independent legal advice in an attempt to resolve the dispute in a swift manner resulting in a further charge of £660. 

The leaseholders felt that the estate and management company should be responsible for the entire legal costs as it was their misinterpretation of the details regarding the residents’ voting rights which caused the necessity for legal advice. 

Having considered the available evidence, the Ombudsman noted that the dispute at the AGM was a contentious issue. It was clear from the fact that both parties independently sought legal advice that the interpretation of the voting rights terms was not as clear as believed by the leaseholders. Therefore, the Ombudsman concluded that as both parties were clearly unable to come to an agreement on the interpretation of the voting rights, the act of seeking legal advice to resolve the dispute was fair and reasonable. 

The leaseholders said that the estate and management company verbally agreed to cover the legal costs, but the agent denied this. As there was no evidence of this conversation the Ombudsman was unable to verify the claim. 

Having considered the management agreement, the Ombudsman noted that it stated “issues of legal proceedings or instructions to Solicitors for Breaches of Covenant or other matters will be charged at £50, plus associated costs and disbursements (such sums will be recharged to the respective Leaseholder or Freeholder account).” 

Based on the above, the Ombudsman concluded that the management agreement indicated that where legal involvement was needed, the cost would not be paid for by the estate and management company. Overall, the Ombudsman found the actions taken by the estate and management company to be fair and reasonable and therefore was satisfied that they were not liable for the fees. 

With regards to the legal costs incurred by the leaseholders, the Ombudsman noted that the leaseholders stated that this was sought as they were unaware the estate and management company had also opted to seek legal guidance. 

The email from the leaseholders to the management company after the AGM stated that they disputed the claim that they had agreed for solicitors to be involved, so they should not have the expense of the legal fees. The leaseholders then emailed the management company advising that if they were “still in the process of obtaining advice from any other source this should cease immediately”. However, at this stage, legal advice had already been sought by the management company who received advice later that day. 

Based on the evidence, the Ombudsman concluded that on the balance of probability, the leaseholders were aware or should have been reasonably aware that the management company was already seeking legal advice on this issue. Therefore, she did not agree that the additional legal costs incurred by the leaseholders were ultimately necessary or the responsibility of the management company. 

The Ombudsman was satisfied that the management company were able to obtain legal advice within a reasonable timeframe and as such found that the management company’s actions were acceptable. 

OUTCOME

Given that the dispute centred around the need for a clear interpretation of voting rights, the Ombudsman considered that obtaining legal advice to resolve the issue was a reasonable approach. The evidence indicated that the leaseholders were aware of the management company’s intentions to obtain this advice and that, under the management agreement, the cost would be to them. As such, the Ombudsman did not support this complaint and did not make an award for compensation. 

COMPLAINT

A case that The Property Ombudsman (TPO) was asked to review came from a tenant against a letting agent in relation to the Energy Performance Certificate (EPC) and the Electrical Installation Condition Report (EICR) for the property. 

The property was let to the tenant under an Assured Shorthold Tenancy (AST) for a period of twelve months, for a monthly rent of £3,500. 

The tenant’s complaint form stated that the EPC gave the property an EPC rating of F, which she says was out of date and the property was actually G at the point it was let.

The tenant stated that an Environmental Health officer surveyed the property and found it to present a severe risk of cold, as there was no heating. She has also complained that she was not given a copy of the EPC or EICR until several months after the start of the tenancy, when she requested copies. 

In resolution, the tenant requested an apology and compensation. In response to the issues the tenant raised in her TPO Complaints Form, the letting agent said that they were aware that the property had an EPC rating of F, but believed at the time that it was exempt from energy efficiency requirements on account of being Grade II listed, and that it had been registered accordingly. However, they acknowledged that their understanding of these matters at the time was incorrect. 

With regard to the provision of the EPC and EICR, the letting agent said that whilst they were instructed to market the property to let and find a tenant, the landlord took direct responsibility for the move-in process and issuing documents at the start of the tenancy. 

Therefore, the letting agent said it was the landlord who was responsible for matters such as issuing copies of the EPC and EICR at the start of the tenancy, and later when the tenant asked. They said that the tenant confirmed that she had had sight of these documents when she signed the tenancy agreement. 

INVESTIGATION

The Domestic Minimum Energy Efficiency Standard (MEES) Regulations set a minimum energy efficiency level for domestic private rented properties. 

From 1 April 2018, private landlords were prohibited from entering into new tenancies to let domestic properties with an EPC rating assessment of F or G, unless an exemption applied, and was registered. Local Authorities can issue penalty notices and fines to landlords who let properties in breach of these regulations.

The legislation sets out specific exemptions which may apply when a property has an energy efficiency rating of F or G. If a property meets the criteria for an exemption, it is possible to legally let it once the exemption has been registered on the National Private Rented Sector (NPRS) Exemptions Register. 

The above is reflected in the TPO Codes (4f and 6a), which set out agent’s obligations when letting residential property. 

The Ombudsman would therefore have expected the letting agent to have established whether the property had a valid EPC, or whether one had been commissioned, before marketing the property to let. 

The Ombudsman checked the EPC register and have found that the most recent EPC certificate for the property was issued on 19 August 2019, and was valid for ten years until 18 August 2029. 

The letting agent advised that this was the certificate they had sight of when marketing the property to let. It was therefore clear that there was an EPC for the property at the time of the letting. However, at the assessment in August 2019, the property was given an energy efficiency rating of F. As this was lower than the minimum permissible rating for the letting of a property under the MEES Regulations, the Ombudsman would have expected the letting agent to have checked whether the property had been registered as exempt from energy efficiency requirements before proceeding to market it to let. 

The Ombudsman did not consider that it was enough for the letting agent to take the word of the landlord that the property was compliant with EPC legislation given its EPC rating and would have expected them to have verified this information for themselves, in-line with their obligations under the TPO Code.

After checking the NPRS exemption register for information about the property, the Ombudsman noted that property was registered for an exemption in October 2022. However, there was no indication that the property was registered as exempt at the point that it was marketed to let in 2021. The letting agent acknowledged that the property was not in fact registered for an exemption in 2021, and admitted that their belief, at the time, that it was exempt, was incorrect. 

The Ombudsman was not satisfied that the letting agent carried out sufficient checks, as had these steps been taken they would have discovered that the property was not exempt. She noted that the appropriate course of action would have been for the letting agent to have declined to market the property until an EPC with an energy efficiency rating of E or higher had been obtained, or the property had been registered as exempt. 

The Ombudsman was critical of the letting agent for failing to verify that the property was registered as exempt from energy efficiency requirements, and for marketing it contrary to legislation. This aspect of the complaint was supported. 

These actions placed the landlord at risk of receiving a penalty notice from the local authority. 

Regarding the tenant, the agent had an obligation to bring all relevant material information relating to the property to the attention of the tenant, which the Ombudsman was satisfied that the agent did, including the fact that the property only had an EPC rating of F and had electric heating. Therefore, therefore the tenant was aware that the property was inefficient to heat before making any transactional decision. 

In relation to the information that must be provided to a tenant before they move in, the Code says: 

13c You must ensure that tenants are provided with relevant and appropriate documentation, statutory or otherwise, prior to their occupation of the property or commencement of the tenancy, whichever is the sooner. 

However, these  obligations cover the situation where the agent is responsible for the entire tenancy including set-up and move-in process. The letting agent in this case explained that the landlord wished to carry out the move-in process himself, which was corroborated by the evidence provided.  Therefore, this aspect of the complaint was not supported. 

OUTCOME

The Ombudsman supported one aspect of the complaint but, as the tenant was fully aware of the EPC rating and that the property was energy inefficient from the outset, she did not consider that the circumstances merited an award of compensation.  

COMPLAINT

The seller instructed Agent 1 to market the property on a sole selling rights basis. This was a fixed price agreement, which also granted Agent 1 the option to purchase the property at a fixed price of £125,000 for a period of 16 weeks (the option period). Agent 1 would then resell the property to a third-party buyer, retaining the price difference in lieu of a traditional commission fee arrangement. 

When Agent 1 began marketing the property it became apparent that the tenant would not permit access to allow viewings to take place. No viewings took place with Agent 1, yet they maintained that the eventual buyers requested a viewing and so argued it demonstrated that their marketing introduced the buyers to the property. 

Agent 1 ceased their activities in respect of the property a month later, and the option period ended after a further three months. Following this date, the seller, having secured vacant possession from the tenant, instructed Agent 2 to market the property for sale. The buyers viewed the property with Agent 2 and a Memorandum of Sale was issued the following month. 

On the day of completion, the seller’s solicitor discovered that Agent 1 had lodged a unilateral notice against the title of the property which prevented the seller from completing the sale without written consent from them (Agent1). Agent 1 advised that they believed that they had introduced the buyers and required payment of £12,999.60 in order to remove the unilateral notice. The seller instructed her solicitor to pay this to allow the sale to complete, but subsequently sought a full refund from agent 1 in settlement of her complaint. 

INVESTIGATION

1. The contract 

The seller stated that she was not provided with a copy of the contract, despite requesting it, and said she was assured verbally that there were no ‘tie-ins’ and that Agent 1’s involvement would cease with the expiry of the option period. 

Agent 1 stated that their records showed that the seller signed a copy of their contract via docusign and that they found no record of the seller requesting a copy of the contract thereafter. Agent 1 maintained that their contract clearly set out the circumstances in which payment would be due to them. 

From the copy of the contract supplied, it was clear that this was presented to and signed by the seller on the same date. The contract stated that it was subject to the ‘standard conditions of sale – fifth edition 2018’, but the Ombudsman was not provided with a copy of any such conditions, nor any evidence that the same was presented to the seller. 

Clause 20 set out that Agent 1 was being instructed on a sole selling rights basis. However, this was not defined in the manner prescribed by the Estate Agents (Provision of Information) Regulations as required under paragraph 5i of the Code. Rather the remainder of the contract set out an arrangement under which Agent 1 had the option to purchase the property.

In respect of the sale occurring after the expiry of the option period, the contract stated that if a third party introduced by Agent 1 subsequently purchased the property within 12 months of the expiry of the option period, then a fee was payable equivalent to the difference between the option price and the purchase price (with a minimum amount of £7,000). 

This did not align with the requirements of paragraph 5t of the Code, which sets out the limits of an agent’s ongoing fee entitlement. 

Agent 1’s contract also failed to warn the seller of the potential for more than one fee to become payable in respect of the sale of the property. Therefore, whilst the Ombudsman was satisfied that the seller was presented with a copy of Agent 1’s contract, she was not satisfied that the terms, particularly those relating to Agent 1’s remuneration, met the requirements of the Code. 

2. The introduction of the Buyers 

Agent 1 maintained that they introduced the buyers by virtue of a viewing request. However, this did not take place since the tenants refused access. 

TPO’s guidance and case law refers to the need for an effective introduction in establishing whether commission fees are due. This means that the agent should demonstrate that they made an introduction to the purchase and not merely to the property. The Ombudsman was satisfied that it was Agent 2 who secured the sale and introduced the buyers to the purchase of the property. 

TPO’s dual fee guidance confirms that an effective introduction must evidence that the agent carried out an act that initiated the buyer’s reaction to the property.

The Ombudsman took into account that the buyers viewed the property more than three months after they requested a viewing with Agent 1, and that when the buyers viewed the property with Agent 2, it was with vacant possession. This was a material difference to the situation when Agent 1 was instructed at which point there was a sitting tenant which could have impacted the buyers’ decision.  

Whilst the fact that there was a sitting tenant was no fault of Agent 1, impacting their opportunity to conduct viewings, the Ombudsman was not satisfied that this was sufficient grounds for their later claim for a fee in the sum of £12,999.60. 

Additionally, correspondence between the seller and Agent 1 demonstrated that the property had been withdrawn when the tenant refused access. At this point, Agent 1 did not clarify any ongoing fee entitlement nor did they provide details of any parties they considered that they had introduced to the property. This is contrary to the requirements of Paragraph 5u of the Code. 

Regarding the unilateral notice, Agent 1’s contract stated that the seller consented to the registration of a unilateral notice against the title to the property at HM Land Registry. However, the contract was clear that the purpose of this was to protect the option, which had ended. In the Ombudsman’s view, any unilateral notice already lodged should have been withdrawn at that point. 

OUTCOME

Having carefully considered the evidence the Ombudsman supported the complaint with an award of £13,999.60. £12,999.60 in respect of the financial loss incurred by the seller in paying the fee claimed by Agent 1, to which they had no contractual, nor fair or reasonable entitlement, and £1,000 in compensation for the avoidable aggravation, distress and inconvenience caused.