Agent backhanders from contractors

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    Agent backhanders from contractors

    Hi,

    I have just discovered that my letting agent (who manages my properties) is charging commission on the work that contractors (builders, plumbers etc) do on my properties. Thus if I get a plumber in to do a minor repair, the agent will charge the contractor a percentage of the cost of the work done.

    I have only just discovered this as it was not made explicitly clear to me in the terms and conditions when I signed with this agent. When I asked them, I was referred to this in the small print:

    "Commissions from Third Parties: It is possible that in the normal course of business we will be offered commissions by third parties to whom we might introduce you or your property. If we are offered commission or other form of remuneration and we are satisfied that the service provided is as good as and/ or no more expensive than other similar local services, and that your interests are no adversely affected, we may accept such a commission for our own benefit and will not account to you for these".

    However it is my very strong belief that the agent has not done anything to ensure that the contractors have not simply charged me more for the work they do, in order to pass on to this extra commission to the agent. I have asked them and they say they haven't done any checks to make sure this wasn't happening and have no system in place to prevent it.

    Firstly - given that they are taking these backhanders, do you think the words in the small print are fair and explicit enough to explain what they have been doing? Also can I reasonably expect that they tell me what these payments are, who they are paid to and how they are levied (as a flat fee or a percentage of the work that I have asked to be done)? They are registered with the Property Ombudsman which has this requirement:

    "14b You must tell your client in writing as soon as reasonably possible when you find out about circumstances that give rise to a conflict of interest. This would include where you or any connected person own, or have a financial interest in, a business or contractor engaged to provide services to a client".

    Would it be fair to say that, if they are getting these payments from these contractors, that that constitutes a "financial interest" in those contractors?

    I'd also love to know if anyone else has this situation with their managing agents!

    Thanks v much.

    #2
    I'd immediately fire the agent & either find another or manage it myself.

    And then a stiff but calm & polite letter requesting repayment of all back-handers bunged...

    Cheers!
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

    Comment


      #3
      Thanks theartfullodger, certainly in my mind! I wonder if I have any basis for claiming the money back however, and whether what they have done (or the way they have gone about it) is not fair and reasonable.

      Comment


        #4
        Making a "secret profit" is probably fraudulent. However, in your case the agency terms appear to allow for this although not explicity explained. You are right in that the tradesman will probably cover their additional costs by it being passed on to you. I feel the agency terms are not clear enough as to what arrangements are being made.

        BTW all invoices concerning your property should be sent in the name of yourself, c/o the agent. If the agent has been billed directly then in law you are not responsible for its payment, they are.

        You are entitled to see all invoices relating to your property, so if the agent refuses such as trying to hide behind the Data Protection Act then ask him to reimburse you until they provide them or suspend/cancel your agreement and threaten to go elsewhere immediately. You might also want to contact any of the tradesmen yourself to see what arrangements they have with the agent. This will indicate who is in charge here!
        The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

        Comment


          #5
          I would tend to say that this is a pretty clear term (and not unusual in letting agent contracts) and not fraudulent.

          However, if they have replied "that they haven't done any checks to make sure this wasn't happening and have no system in place to prevent it" then you may have a bit of a claim there.

          Comment


            #6
            Originally posted by Paul_f View Post

            BTW all invoices concerning your property should be sent in the name of yourself, c/o the agent. If the agent has been billed directly then in law you are not responsible for its payment, they are.

            You are entitled to see all invoices relating to your property, so if the agent refuses such as trying to hide behind the Data Protection Act then ask him to reimburse you until they provide them or suspend/cancel your agreement and threaten to go elsewhere immediately.
            Thanks Paul, v helpful - and v interesting - do you think I am allowed to see all the invoices between the agent and the contractor relating to my property on that basis, ie am I entitled to see the amount the contractor passed on to the agent?

            Comment


              #7
              Yes of course you are. I thought I already said that. They are your agent i.e. take your instructions and are therefore the "quasi" landlord (they act as though they are the landlord) so you should be able to see everything they do on your behalf.

              A good professional agent will attach copies of all tradesman invoices when sending the monthly statement so as to be "up front" about matters so you can see where deductions are made. This also helps when doing your tax return, so to differentiate between capital expenditure/impovements, and repairs, where different tax relief rules apply.
              The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

              Comment


                #8
                Sorry, didn't make myself clear. It was the invoices between the agent and the contractor I was interested in, the percentage extra that the contractors pass on to the agent when they do the work for me. Might I have the right to see those?

                Comment


                  #9
                  Originally posted by MarkWat View Post
                  It was the invoices between the agent and the contractor I was interested in..........
                  That is exactly what I have been referring to; I don't think I could have been any clearer.
                  The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

                  Comment


                    #10
                    Because thought you were referring to the invoices between the contractor and me. I am referring to the invoices that reflect the amount that is paid by the contractor to the agent ie the commission they charge. If you are saying I am entitled to see those, where does this entitlement come from? Surely they will just say that is their private business and I do not have that right?

                    Comment


                      #11
                      Originally posted by MarkWat View Post
                      Surely they will just say that is their private business and I do not have that right?
                      That's correct.

                      I run a service company (clearances) and we give kick backs (referral fees) to letting agents / estate agents. This is a fixed sum, and is per paid for job. We invoice / receipt these once a month, along the lines of 3 x referrals @ £XX each.

                      However, if we are due to invoice for the work carried out through the agent, this is separate, and seen by the LL. I don't even know if the LL are away of the payments we make, but at the end of the day, the agents we use get more than one quote.

                      With us, we don't add that fee onto what the LL pays, but we won't negotiate on the quote. If someone rings us up, gets a quote and then wants to haggle, then fine, but through a referral, no.

                      Comment


                        #12
                        That's not Chilli Shop drew is it??
                        I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

                        Comment


                          #13
                          drewdrew,

                          That's really useful, thanks drewdrew. I would not be at all bothered if the agent wants to make money out of the contractors, what I object to is footing the bill myself. And I think I have the right to know whether these contractors are passing on these payments to me and whether the letting agent is checking they aren't.

                          If the letting agent is telling me they are sure these bills aren't being added to, then I want to know how and why they are so sure. And it really isn't enough for them to say "we check these quotes are competitive" as their only point of comparison is the other contractors who are doing business through them - and they could all be inflating their fees!

                          Comment


                            #14
                            Originally posted by MarkWat View Post
                            Because thought you were referring to the invoices between the contractor and me. I am referring to the invoices that reflect the amount that is paid by the contractor to the agent ie the commission they charge. If you are saying I am entitled to see those, where does this entitlement come from? Surely they will just say that is their private business and I do not have that right?
                            I'll give this a final try..............

                            1. The agent employs contractors on your behalf therefore they should invoice you and not the agent, although it is sent to the agent for processing, they have nothing else to do with it in law.
                            2. There is no contractual arrangement between the agent and the contractor as the contractor is not doing the work for the agent - they are doing the work for YOU a landlord, at your property so the agent is NOT party to the contractual nature of the work being carried out.
                            3. The agent is merely the 'facilitator' on any such transaction.
                            4. You seem to have too much sympathy with the agent.
                            5. If there is any 'enhancement' to the invoice such as the agent receiving a kickback then you are entitled to know about it, how much it is, and that you agree to it; if you don't agree ( and you don't have to) then it should be removed.
                            6. If the agent is entering into paying 'commission' to tradesmen, then who is ultimately paying for this? I would suggest the landlord.
                            7. If agents are entering into this murky world, which many unfortuantely do without landords having knowledge of this then it is not being up front and therefore not following the OFT Guidelines, which leaves any agent open to challenge.
                            8. Drewdrew is therefore entering into an agreement with an agent when he is doing work for third party landlords and receiving a 'hidden commission'. If so the agent is at fault and not the trader.
                            The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

                            Comment


                              #15
                              Well it's an opinion, although it isn't really backed by anything more than a guess. The relationship between the contractors and me isn't quite as straightforward as being employed directly by me as they are chosen by the agent and paid by them (after collecting the money from me). And yes, there is a contractual relationship between the contractors and the agent as the latter has set one up to be supply work and get a payment whenever it is done. I really don't know where you think I remotely have any sympathy for the agent (did you read my first posting?) - they have behaved in such an underhand way and I am seeking ways to get redress against them. However just wanting to isn't enough, I need some proper basis for doing so.

                              Unfortunately I cannot see what the OFT can or would do about it, it is the Property Ombudsman who are the relevant body (they are signed up with it) but it is the particular rule that I'm seeking to discover which they have broken.

                              Comment

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