standards
Consultancy and Client Agreement Standards
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This guide provides information about agency agreements, where you can get more information and how to query the service performance and results. This guide only relates to the sale of an asset and investment consultations. This guide is just that – guidance. You should not rely on it for legal advice.
There is no legal requirement to use an investment agent when selling assets, most investors engage agents to assist with the marketing processes.
Employing an investment consultant means that your asset will be listed and marketed by us. If you want to use our services, you will need to have an agency agreement as this gives us the right to market, to represent your selling position and negotiate on your behalf.
An agency agreement is a contract between you and us as the agents. It sets out the terms and conditions on which you appoint us, what Mountesque will do for you, and what you will be your obligations for payments.
What Is An Agency Agreement?
When you enter into a consultation agreement with an investment agent, you are listing your asset for sale, either on the open market or off market, as instructions direct. One Mountesque agent may sign you up, but once your asset is listed, any agent in the company may work towards and accomplish a sale and purchase agreement.
What do I need to know before I sign an Agency Agreement?
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Before you sign an agency agreement the agent should give you the following information.
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• A written market appraisal: This is the agent’s best estimate of the price they expect your property could be sold for, based on sales and prices for similar properties in your area or a similar area. You can also get your own valuation.
• How they recommend you sell your property: This could be sale by advertised price, by tender or by auction. They should recommend the best way of selling and how they will market and advertise it.
• How they will be paid: Information on what you will have to pay the agent (usually referred to as commission), when you will have to pay, and how this payment is calculated. Commissions can vary from one agent to another, so you may want to compare them. You can also negotiate on the amount or rate of commission to be paid. Commission is usually calculated as a percentage of the selling price, plus VAT.
The agent must:
• explain the formula that is being used
• provide you with an estimate in dollar terms of the commission you would have to pay if your property sold at the appraised price.
• Expenses: Information on whether you will have to pay any expenses (e.g. advertising costs) that are not included in the commission.
What can I expect to see in an agency agreement?
While the layout and content of agency agreements vary from one agent to another, the following is a general indication of the main things you should expect to see.
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Details about the property for sale
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• The address of your property.
• The chattels that are to be sold with your property e.g. Whiteware, drapes, television aerial.
• Details about your property e.g. number of bedrooms and bathrooms, land area.
You must be honest and ensure that any details you provide to the agent are accurate and factual. If you knowingly provide misleading or incorrect information, you may leave yourself open to legal action.
Information about the parties to the agreement
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• Your name, address and other contact details.
• The name and contact details of your lawyer.
• The name of the agent who is dealing with the marketing and sale of your property on a day-to-day basis.
• The agent’s business name and address.
• Confirmation that you have the authority to sign the agency agreement on behalf of all owners of the property If you are not the sole owner of the property, you must ensure either that all owners sign the agency agreement or that you have the authority of all the other owners to sign for them.
• Acknowledgement that you have read this guide
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Appointment of the agent and Details of What the Agent is Authorised to do
The agency agreement appoints the named agent(usually a company) and details what they are authorised to do. For example:
• Put a ‘For Sale’ sign on your property
• advertise your property for sale at the price, in the way, and on the conditions you have authorised
• Arrange viewings of your property for prospective buyers
• Send an invoice to your solicitor to request a deduction of the agent’s commission from the deposit in the event that an offer becomes unconditional.
The Type of Agency Agreement and the term of the Agreement
The agency agreement will state whether this is a sole agency or general agency, the date on which the agency agreement starts, when it ends, and how to end the agreement. The term of an agency agreement is negotiable.
Sole Agency
A sole agency agreement gives one agency the exclusive right to market and sell your property. A sole agency means that only that agent (and the salespersons who work for that agent) can carry out real estate agency work on the property identified in the agency agreement.
General Agency
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A general agency agreement gives more than one agency the right to market your property. You’ll sign a separate agreement with each agency but should only pay a commission to one agency. The agencies should tell you if there is a risk of you paying two commissions.
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If you sign a sole agency agreement, there are some things you should be aware of:
• You shouldn’t sign another agency agreement with anyone else. If you do, you may have to pay both of the agencies a commission when your property sells.
• If you sell the property privately with a sole agency agreement in place, you will still need to pay the agency a commission when you sell.
• If you change your mind immediately after signing, you can cancel the agreement by 5pm on the first working day after the agent has given you a copy. You must cancel in writing (for example, by letter or email).
• If you sign a sole agency agreement for a term of more than 90 days, either you or the agency can end the agreement after 90 days. This must be done in writing.
• In some agreements, cancelling a sole agency agreement means it becomes a general agency agreement. You’ll need to cancel this too if you don’t want to continue with the agency.
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Details of any rebates, discounts or commissions the agent may receive
If an agent gets a discount, rebate or commission on any services they arrange for you and you’re paying for, they have to tell you. For example, an agent may receive a discount on the cost of advertising your property in a newspaper. This disclosure is done in a format that must be included in the agency agreement. The agreement must state either:
• The estimated amount of rebate, discount or commission and its source, or
• That the agent won’t be receiving any rebates, commissions or discounts. Recommended standard clauses Real estate agencies can choose to use standard clauses in their agency agreements.
These clauses help protect you by:
• Reducing the likelihood of you being charged commission by two agencies.
• Clarifying when the agreement ends and when you need to pay a commission. We recommend you only use agencies that use these standard clauses. Ask your agent about the clauses before you sign.