Estate Agents beware – your clients could cancel contracts without paying you a penny

8th November 2017 | Written by Daniel Dickson

It is becoming more common place for estate agents to sign up their clients during a valuation of their property. If you adopt this practice then you may be exposing your company to significant financial risk.

Whilst it makes sense to secure the business as soon as possible, if your client signs a contract in their own home, or indeed anywhere outside of your business premises, then this could potentially result in the client cancelling the contract at any time without having to pay a penny for your services.

Why do they have the right to cancel without paying?

In June 2014, The Consumer Contract Regulations came into force, which gave rights to consumers to cancel a contract that had been made at a distance or “off premises”, without any reason other than they have changed their mind.

The time in which a client has the right to cancel, known as the “cooling-off” period, is 14 days from the day the contract is entered into providing the client is made aware of their right to cancel.

This is where many estate agents come unstuck. Their failure to inform their client that they have the right to cancel means that the 14 day cooling off period has yet to begin, leaving clients the right to cancel your contract at any time. Needless to say this can leave your business exposed to unnecessary financial risk and worse, a potentially expensive and damaging dispute.

What is distant selling and “off premises”?

There are of course some legal definitions as to what constitutes “off premises” but as a general rule, if you are not signing the contract together with the client, simultaneously, at your business premises, then it is likely to be deemed distant selling and the 14 day cooling-off period comes into play.

Practical tips to protect your business

There are a number of simple ways that estate agencies can make sure they protect themselves when entering into contracts with clients:

  1. Update your terms of business – Prior to 13 June 2014, the cooling-off period was only 7 days. Make sure that your current Terms of Business have been updated to reflect the new cancellation period of 14 days.
  2. Make sure your clients know their rights – Provide your clients with the information listed in Schedule 2 of the Regulations, including the new model cancellation form for your clients to exercise their right to cancel if they wish. These can be obtained from http://www.legislation.gov.uk/uksi/2013/3134/schedule/3/made. Failure to do so may be a criminal offence and the agency may be liable to pay a fine.
  3. Ensure your costs are clear – It’s important that your Terms of Business provide clear information about the costs of your service, and the basis upon which any final cost will be calculated. This should help to avoid any disputes that later arise.
  4. Take caution when providing services inside the 14 day cooling off period – If your clients want you to begin providing a service within the 14 day cancellation period, you should gain their written consent and advise them that if they later cancel your contract they will need to pay for any services delivered until the point at which they cancel. If you do fail to do so, the consumer may not be liable for any costs that you have incurred during this time.
  5. Inform your client – Once the contract is signed, you should provide your clients with a copy of the signed contracts. The burden of proof that the required information has been given rests with the trader, so it is in your interests to keep good, clear records.

For more information and guidance on how to implement robust distant selling contract processes or if you have a disputed contract with a client, contact Daniel Dickson on danieldickson@rixandkay.co.uk