Of all the
legal obligations imposed upon estate agents by the Estate Agents Act 1979, and
by the orders and regulations made under it in 1991, perhaps the best known is
that which is contained in section 18 (as amended). This is the requirement
that clients should be given, at the very commencement of the agency, full
details in writing of all possible charges which they may be required to pay.
At a seminar last autumn, one of the delegates asked the eminently sensible
question: ‘Does this requirement apply to a subagent and, if so, must he
give the prescribed written notice to the main agent or to the client?’
An
instinctive answer to this question might well have been that the provisions of
the 1979 Act apply to subagency, as it were, ‘one step down’, so that the
subagent is regarded as the ‘estate agent’ and the main agent, in turn, falls
to be treated as the ‘client’. However, a closer examination of the Act and its
subordinate legislation reveals a much more complicated and uncertain picture;
it is by no means obvious that subagents are covered at all! In truth neither the Act nor the new
regulations and orders were drafted with subagency in mind, and it is therefore
a matter almost of chance whether the wording used can be treated as fitting
this common feature of the agency world.
The basic
problem stems from section 1 of the 1979 Act, which defines ‘estate agency
work’. With one exception (which will be mentioned later), unless a person is
carrying on ‘estate agency work’ within the meaning of section 1 he is not
subject to the Act at all. Estate agency work is defined as: ‘things done by
any person in the course of a business (including a business in which he is
employed) pursuant to instructions received from another person (in this
section referred to as ‘the client’) who wishes to dispose of or acquire an
interest in land . . .’.
On one (and
it is perhaps the most natural and straightforward) interpretation, this form
of wording excludes subagency altogether. After all, except where the so-called
‘subagent’ is in truth appointed as another direct agent of the client (in
which case what is really involved is ‘joint agency’), the subagent’s
‘instructions’ come from the main agent, who will pay his fee and to whom he is
responsible. And, since it does not seem realistic to describe the main agent
as wishing ‘to dispose of or acquire an interest in land’ (unless this includes
those who act on behalf of others), it would follow that what the subagent is
doing does not constitute ‘estate agency work’.
Now, on the
assumption that subagents are meant to be subject to the legislative
control, and indeed that they ought to be included, since they are
presumably as capable as main agents of committing the various abuses which the
legislation is designed to catch, we need to find a different interpretation of
the definition given above. It is suggested that the best approach is to treat
a subagent as acting pursuant to instructions which are received from the
client but which have been passed down to him through the main agent. This,
at least, enables it to be said that subagency falls within the Act; however,
it brings other problems in its wake, for it means that each of the obligations
contained in the legislation must be separately examined, in order to see whether
its precise wording can operate in this situation.
Adopting
this approach, if one turns first to section 18 (‘Information to clients of
prospective liabilities’) it is clear that this cannot apply to a subagent. The
section is worded so as to require a contract between ‘agent’ and ‘client’; a
subagent’s only contract will be with the main agent who, as we have already
pointed out, cannot be the client for this purpose. It follows that section 18
(and with it the whole of the Estate Agents (Provision of Information)
Regulations 1991) is out. A subagent accordingly has no obligation to give
written notice to anyone as to his charges or the ‘services’ which he intends
to make available to prospective purchasers. In contrast to section 18, those
provisions of the 1979 Act relating to clients’ money (including its proper
handling and the payment of interest) seem fully applicable to subagents.
Sections 14 and 15 of the Act do not define ‘client’ for this purpose, and
interest must simply be paid to whoever becomes entitled to the capital sum on
deposit.
As for the
various ‘client-based’ duties created by the Estate Agents (Undesirable
Practices) Order 1991, these again seem to be worded in such a way that
subagents are caught. Thus, a subagent must inform the client ‘promptly and in
writing’ of every offer which he receives for the property; he must similarly
inform him if he himself is minded to purchase the property (or sell it to a
‘connected person’), or if a prospective purchaser asks him to provide any ‘services’.
(Remember, in all these instances, that this written notice is to be given to
the client, not to the main agent.)
The
undesirable practices order 1991 also created certain duties for the benefit of
third parties, and these again seem to apply to subagents as much as to main
agents. Thus, it will be an ‘undesirable practice’ for a subagent to fail to
give written notice to prospective purchasers of any personal interest which he
has in the property, to ‘discriminate’ against any potential purchaser who does
not want services provided, or to misrepresent the state of competition for a
particular property.
One last
point. The position described above is so complicated, arbitrary and generally
unsatisfactory that a court faced with the problem might well simply decide
that subagents cannot be regarded as carrying on ‘estate agency work’ as
defined by the 1979 Act. (And indeed, as was pointed out earlier, this is
probably the more natural interpretation of that Act anyway.) It is worth bearing in mind that such a
conclusion would carry with it another major benefit for subagents, in that
they would then not be subject to the Property Misdescriptions Act 1991 when it
comes into force!
homeless
The House of
Lords has recently endeavoured to clarify the legal rules governing the
provision of hostel accommodation for the homeless. Considerable uncertainties
had arisen following the Court of Appeal decision in Family Housing
Association v Jones [1990] 1 EGLR 82
In that case the court had sought to resolve the difficulties arising
from the interaction of the statutory provisions under which local authorities
are obliged to house the homeless, with the common law rules governing the
distinction between a lease and a licence. Unfortunately, as was appreciated by
Slade LJ at the time, the result was to limit the options available for housing
the homeless, to the detriment of the latter. In Jones the Court of
Appeal had decided that the provision of a flat under an agreement which
purported to deny exclusive possession was not a licence since, in line with
the principles established in Street v Mountford [1985] 1 EGLR
128, the occupier in truth enjoyed exclusive possession. Accordingly, she was a
tenant and, in the light of further findings (for which the case was remitted
to the county court), that tenancy could become a secure tenancy (which would,
of course, prevent the use of the property for housing the homeless in the
future). However, and rather more worrying, the court also held that even if
she did not have exclusive possession, section 79(3) of the Housing Act 1985
operated to render non-exclusive licences secure tenancies.
In Westminster
City Council v Clarke [1992] EGCS 13 the House of Lords had to
consider the position of a homeless person given temporary accommodation in a
hostel. Having decided that Mr Clarke was homeless and had a priority need, the
council placed him in a hostel used for single men, many of whom had special
difficulties. The hostel had a resident warden and a team of social workers and
the hope was that after a period of rehabilitation the men could be given more
permanent accommodation elsewhere. Mr Clarke had a bed-sitting-room with
cooking facilities and shared the use of a bathroom and toilet. His agreement
was described as a licence; it denied him exclusive possession and gave the
council the right to move him to another room or to require him to share.
The House of
Lords has ruled that the Jones case was wrong in so far as it held that
a non-exclusive licence can give rise to a secure tenancy; accordingly, in the
present case the issue was whether the defendant enjoyed exclusive possession.
Lord Templeman was quite satisfied that, in the particular circumstances of
this case, this was a genuine non-exclusive licence which could, therefore, be
terminated without restriction by statute. He stressed that the outcome was
greatly influenced by the nature of the hostel and the objectives of the
council in seeking to provided temporary accommodation for a particularly
vulnerable class. These aims would be seriously hampered by the conferring of
security of tenure on the occupiers.
This
decision will be welcomed by those charged with housing the homeless. While it
seems clear that security of tenure may be conferred where exclusive possession
is enjoyed, this decision demonstrates a willingness to view certain
non-exclusive licences in a more sympathetic light.
