Receiving & Ending Instruction Before Taking Another Real Estate Client’s Instruction

Prior to accepting an instruction, you must clarify for whom you will be working and how you will be paid, thereby spelling out unequivocally whose interests you will be representing.

The relationship between you and your client will be based on terms of engagement or a contract, which will determine the rights and duties of both parties. If the contract does not set out specific terms these may, be implied by law (at least by common law). Before taking instructions from a client you must check that you will not have any conflict of interest. A conflict of interest is anything that impedes your ability to focus on the best interests of the client. You must make every attempt to avoid any conflict of interest that might not be in the best interest of a seller or a buyer for whom you are acting. You must disclose any interest in the property promptly and in writing. In the event of multiple agencies for one of the parties, you must pay equal respect to your clients‘ interests and also work in this situation with the highest possible degree of transparency. Conflict of interest should be avoided but where this is impossible you should cease your activities for all clients involved. But where dual agency is accepted this should be only as an exception to the rule, and only if both contracting parties have given their express consent.

Be Sure of your Client
Money laundering is serious concern in Nigeria. You must use every reasonable effort to confirm the identity of your client before accepting instructions. Section 5(1) of the Money Laundering (Prohibition) Act 2004 classified professionals dealing in transactions involving money into financial and non-financial institutions. The section provides that a designated non-financial institution dealing in cash transaction must submit to the Federal Ministry of Commerce declaration of its activities, including seeking information about the clients and filling of reports about him and his financial transactions within seven days. Section 6(2) made it mandatory for non-financial institution (to which estate agents are classified) to disclose financial transactions involving funds in excess of N500,000 or its equivalent (in case of individuals) or N5,000,000 or its equivalent (in the case of body corporate). The Estate agents are expected to report every transaction earned out by their clients, failure of which criminal proceedings may be instituted against the Principal estate agent, and employees of the firm charged with conspiracy. It is clear that the authorities are serious about money laundering, and that offenders can expect a harsh penalty, if found guilty of money laundering.

Sharing information with your potential client

Terms of engagement
You must give written confirmation to your client of their instructions for you to buy, sell or let a property on their behalf. This should include details of your fees and expenses, of your business terms and the duration of your instructions. You must give your client these details before they are committed or have any liability towards you. Terms of engagement should clearly state the scope of the business you will carry out and specify what activities are not included, for example formal valuations, building surveys, technical surveys. Terms of engagement can include a single document or a number of documents, which are to be read in conjunction with each other. You must ensure that your terms are fair and the documentations is written in plain, intelligible language. You must not discriminate against any existing or potential party to a transaction. You must not discriminate on the basis of gender, age, race, creed, religion, disability, sexual orientation, or national origin, or favour any party because they are likely to instruct you on other property matters, or use services offered by you or your related parties. You must ensure that you do not discriminate unfairly against any party in the terms on which a property is offered, by refusing to sell or lease the property or in your treatment of persons in need of property for occupation or investment purposes. You must ensure that you do not discriminate against vulnerable customers explicitly or implicitly by your actions. Vulnerability can include anything that may have an impact on a person’s ability to make a sound and reasoned decision. You must be willing and able to offer appropriate advice about the transaction process to all potential and actual customers. You should not make assumptions about the degree of knowledge that a person has. Be prepared to set out all the necessary information, explain what you will do, and what others (e.g. legal advisers, surveyors, financial advisers, lenders) will do. If, in your opinion, the customer may be vulnerable you should take this into account in any information or guidance you give to them particularly if any decision they make is based solely on that information or advice. If a customer makes a decision that may have legal connotations, you should explain that they should discuss this with their legal advisers. You might also consider speaking to the customer’s legal advisers if you are concerned about any decisions that are being taken. If you use standard terms of engagement you should ensure that you give clients an opportunity to negotiate individual terms. Your terms of engagement must state that a copy of your complaints handling procedure is available on request.
You should sign and date your terms of engagement before they are given to your client. You should also ask your client to sign a copy and provide them with a copy for their records. You should take all reasonable steps to satisfy yourself that your client is entitled to instruct you. Any future changes to your terms of engagement must be agreed with your client and promptly confirmed in writing and signed by yourself and your client.

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Fees, Charges and Taxes
You must provide full and clear written details of your fees and expenses to your potential client this should include:
a) Details of the circumstances in which the client will become liable to pay you a fee or commission;
b) Details of the amount of your fee;
c) Particulars of any payments which do not form part of your payment for carrying out estate agency work but which will, or may in certain circumstances, be payable by the client to you or any other person, and particulars of the circumstances in which these payments will become payable (e. g. marketing expenditure, travel expenses or a fee payable if the client withdraws the property from the market) and
d) Particulars of the amount of any payment falling within (c) above or, if you do not know the amount at the time the information is given, an estimate of that amount together with details of how it will be calculated. You should make clear reference to whether you commission or fee and/ or any expenses are exclusive or inclusive of any relevant taxes.

Dual Fee Liability
Where a property has been marketed with another agent or a buyer or tenant client has used another agent you should make clear any circumstances where they may be required to pay a fee to both yourself and to any other agent and advice of this in writing.

Timings
You should specify in your terms of engagement the point at which your entitlement to your commission or fee is to be triggered, for example, on completion of the sale, purchase or lease.

Penalties
You may have a legal right to interest on late payment. You should check relevant legislation to determine this and include the relevant information in your terms of engagement.

Estate Agents Acting for Sellers

Terms of Engagement
In addition, when acting for a seller you should also provide written particulars of any services you or anyone else connected with you or your firm may intend to offer the prospective buyer or tenant.
There may be different types of agency agreement that you are able to enter into with a client. This may depend upon whether you are the only agent acting for the client or whether others will also be working on the same assignment for the client. You should clearly identify and defined the nature of the agency agreement within your terms of engagement.
Your terms of engagement should be signed by both yourself and your client. You may choose to include matters such as agreed marketing expenditure and commission rates in a separate letter, together with general marketing advice. It is your decision which individual clauses are included in your terms of engagement, other than those prescribed by relevant legislation.
Commissioning other documentation
When marketing a property there may be specific legislative requirements regarding documentation that must be provided at the point of marketing or during the marketing process. There may not beany defined form of procurement for these documents but you must make it clear how these will be produced within your terms of engagement. In some cases they may be produced in-house and in others must be externally produced. You should, of course, satisfy yourself of the ability of any external provider to meet the necessary time scales. The way by which payment should be made for these documents should also be clearly set out.
Offering services to other parties
You should advise your client in writing if you intend to offer services to buyers and what these services would be. The term ‘services’ can mean ‘any service that could be offered to a prospective buyer in connection with an acquisition of real estate’. You should be mindful of any specific legislation regarding offering services to other parties. You should notify your client in writing at the time when communication commences between you and the client or as soon as is reasonably practicable. This should be before the client enters into a contract with you if you or any connected Person wishes at any stage to offer services to prospective buyers of a property you are selling for a client. You should also gain your client’s written agreement.

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Special Types of Sale or lease
If you receive instructions to deal with a sale or lease you should ensure that your client has the right to dispose of an interest in the property. This can be particularly relevant for the sale of a deceased person’s real estate or following repossession by a lender. If there is reason for doubt you should ensure that you have sight of relevant paperwork confirming your client has this right.

Estate Agents Acting for Buyers

This is situation where you are acting for a buyer seeking a property.
Securing Instructions
The same general principles apply when securing terms of engagement with a buyer to those when acting for a seller. You must confirm your terms in writing. Before confirming terms you should communicate with the client and discuss their requirements and the reasons for these in reasonable detail. You should act within the limit of your experience, knowledge and competence to meet your client’s requirements. You should agree with your client the level of feedback they wish to receive and whether they would like to receive details of all properties that you consider or a shortlist. You should also consider whether they wish to view properties with you and, if not, how you will present information to them (e. g. online videos and photographs).
You should also confirm the details of your fee and the details of the service you will provide (e.g. from property search to completion of the purchase).This might include both a commission based on the purchase price and any time related retainer. You should clearly state whether any time relate retainer, should it exist, is refundable and, if so, under what conditions. An example might be where the buyer does not decide to buy a property within a specified time limit (typically three months to a year) or on successful completion of the transaction (i.e. when your transaction fee is paid). You should also clearly state whether expenses are to be charged and if so how these are calculated. Transaction fees should be agreed in a way that will provide transparent evidence that you will negotiate the best deal for your client. Transaction fees based on a percentage of the agreed purchase price may not give this evidence. An alternative structure could be an agreed percentage of the eventual purchase price or an agreed percentage of the discount that you are able to achieve through negotiation whichever is the greater.

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Dealing with conflict of interest
This section provides specific guidance relating to issues that may arise when acting for more than one buyer. It may be that your clients are interested in similar properties, which can then create a potential conflict of interest for you. Where you are asked to act for a buyer seeking properties similar to other clients for whom you are acting you should advise your new potential client of this in writing (email, letter or fax) before accepting instructions and ask for their written confirmation that they would still like you to act on their behalf.

Sub-agents
It” you wish to appoint a sub-agent you must firstly obtain your client’s authorization. The appointment of a sub-agent without authorization may be considered a breach of your duty to your client. Even where a real estate agent appoints a subagent with the specific authorization of the client, there may be no direct legal relationship between client and sub-agent and you could find that you are responsible for the sub-agents actions and for payment of their fees. You should check relevant legislation regarding this.

Ending the Instructions
The instruction could be ended by either yourself or your client. It may be at the natural end of your work or as a result of a decision taken by yourself or your client.

Written Confirmation
If you receive instructions from your client that they wish to terminate your instruction or if you decide that you wish to cease to act for them, you must confirm in writing that you are no longer acting for them, the actual date of termination and details of any fee or charges the client owes you or may owe you.
You should also explain any outstanding liability the client may have in terms of fees. An invoice should be issued in accordance with the relevant local legislation.

Invoice
Whether your instructions come to an end when you complete the work for your client or because either you or your client wish to terminate the instructions, your client may owe monies to you.
You should submit an invoice clearly setting out all costs owing, including itemizing the fee owing, any expenses (in accordance with your terms of engagement) and taxes. This should be sent to your client within a reasonable time after your instructions come to an end. If you intend to charge your client a fee for terminating the instruction, this must have been made clear in the written terms of engagement you agreed with them. The terms should specify the amount of the fee and its purpose .A final receipt should be sent to your client when the invoice is paid. This should confirm the final amount received.
If Completion of the Transaction Does Not Take Place
If you have negotiated a transaction that does not finally result in legal completion you may still be entitled to your fee or commission or some alternative agreed amount of remuneration. You should check your terms of engagement and relevant legislation regarding this.

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