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Recovering introduction or brokerage fees without a fee agreement

Introductory fee dispute

A case was recently settled for a property agent client in relation to an introduction it made between a lender and a property company, which resulted in a significant property refinance.

The property company argued that no fee was payable because:

  • Our client was not retained to act for them.
  • There was no written or verbal fee agreement.
  • There was no introduction because the property company and lender already knew each other.
  • Even if there was an introduction, this was just a favour between friends.
  • An introduction alone, without any further work negotiating terms with the lender for example, did not justify a fee.
  • Our client had no expertise in the relevant property field or this type of financing.
  • The individual our client believes it introduced to the lender did not work for the group company claimed against, and was not authorised to agree fees on that company's behalf.

In other words, the odds appeared stacked against our client. 

Resolution for the property agent

During the claim we were able to show that even though  there was no written or verbal agreement  that a fee would be paid, a fee was owed because:

  • The parties both understood that a fee would normally be paid for a property finance introduction of this nature, given their long careers in the property industry.
  • Expert evidence supported the standard industry practice of paying fees for introductions, even where there was no express fee agreement at the outset and no other work was involved.
  • Specialist expertise is not necessarily required for an introduction alone; it is the value of the introduction itself that matters.
  • The surrounding circumstances showed this was not a favour between friends.
  • It did not matter that the individual introduced worked for a different group company, as he was representing the group as a whole.
  • Any previous interaction between the property company and the lender was irrelevant as it did not relate to this transaction.
  • The appropriate fee can be determined by expert evidence and/or the parties' own experience of paying and receiving introduction fees.

How to avoid these disputes

To avoid disputes, a clear fee agreement should be entered into with clients before they make an introduction or (for non-introduction related fees) before any proper work is carried out.  That agreement should set out precisely what work will be carried out, the fee for that work or how that fee will be calculated, and the event that will trigger payment of the fee. 

Trusting the client to agree a fee at a later date, or agreeing a fee over a handshake, can invite trouble when it comes to requesting payment. 

TLT Commercial Dispute Resolution team

Where events overtake you and the formalities are not tied up at the outset, all is not lost.  We have extensive experience of resolving disputes and have a good track record of resolving disputes between agents and their clients over fees.

We recognise that no professional wants to fall out with their clients over fees so the approach we take is pragmatic.  We focus on getting the issue resolved quickly by negotiation, using mediation where appropriate and only going to court as a last resort.

We also have expertise in acting for agents in disputes with suppliers, professional negligence claims against advisers and in partnership and LLP bust ups.

We also provide training to agents who act as expert witnesses in property related disputes.

Find out more about the experts that make up our Commercial Dispute Resolution team

Contributor: Robert Naylor, Associate, Commercial Dispute Resolution team

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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