COOLING-OFF PERIODS AND ESTATE AGENCY CONTRACTS
From the 1 October 2008 consumers have extended rights to cancel contracts for the sale of goods and services. 1987 Regulations gave consumers rights to cancel contracts entered into with people who made unsolicited calls to their home. New regulations, the Cancellation of Contracts Made in a Consumer’s Home or Place of Work etc. Regulations 2008, extend this right to cancel if the contract is entered into anywhere other than the service providers own premises, including the consumer’s home, even if the call was requested by the consumer.
For residential estate agents (or letting agents) this means that if clients come to the estate agent’s office and sign a contract for the estate agent to sell (or let) their property there will be no right to cancel. If however, the signing of the contract takes place elsewhere, either at the consumer’s home, or at a viewing of a property they wish to buy, or anywhere else other than the estate agent’s own office, the consumer will have a right to cancel within 7 days of signing. Cancellation must be in writing (this includes email)
Estate agency contracts that are signed by consumers in their own homes or away from the estate agent’s business premises must now also incorporate
- a notice of the right to cancel (Schedule 4 Part I) and
- a form of cancellation notice able to be filled in (Schedule 4 Part II)
The Department for Business, Enterprise and Regulatory Reform (BERR) have issued a guidance note related to these regulations which is also attached to the usual explanatory memorandum published with the Statutory Instrument.
Local trading standards departments will administer and police the regulations and will have similar powers of investigation and entry to those under the PMA. An estate agency as well as the member of staff breaching the regulations will be liable to prosecution. There is also a defence of due diligence for estate agencies (Regulation 18) similar to the PMA.
Failure to give notice of the right to cancel is an offence. If found guilty, the penalty is a fine not exceeding level 5 on the standard scale. Currently this is a maximum of £5,000.
This will undoubtedly have an impact on the way that residential estate agencies (and letting agencies) take instructions from clients and when and how they start to implement the instructions to sell. An estate agency is likely to have three options
- start immediate marketing and write off any expenses if the client cancels
- delay marketing until the 7 day period has passed
- insist that all contracts for estate agency work are signed in the agent’s office
A further possibility allowed by the Regulations (Regulation 9) is for the client to request in writing that the estate agency start to perform the contract immediately or before the 7 day period has expired. If they subsequently cancel within the 7 day period allowed they would then be responsible for paying the ‘reasonable’ costs of the service up to the point of cancellation. ‘Reasonable’ is not defined in the regulations.
This latter point could cause some problems in an active market where a buyer could be introduced within a few days, the contract could be cancelled within the 7 day period allowed and the introduced party could continue to buy the property. Normally an estate agent would claim a commission in such circumstances but it is not clear how the courts would interpret the regulations in such an instance.