The Unfair Terms in Consumer
Contracts Regulations 1999
The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) are totally new. Most
Government Regulations merely build on the earlier edition adding a sequence of amendments.
Unusually, the UTCCR replaces the earlier and similar sounding Unfair Terms in Consumer Contracts
Regulations 1994 version in its entirety. Since it is merely the year number which sounds to have
changed many people are unaware of how significantly the legal obligations have been rewritten. This
starting-from-scratch approach results from the extensive redrafting which was necessary to comply
with the relevant European Directive.
The new 1999 UTCCR introduce an important additional criterion for assessing whether a
contract term is unfair to consumers. Incidentally, it does not effect, or refer to, the Unfair Contract
Terms Act 1972 which means that estate agents (along with all other traders and suppliers) must
ensure their contracts and terms of business comply with both the 1972 Act and the new 1999 UTCCR.
The most critical new Sections of the UTCCR read:
“A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the
requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under
the contract, to the detriment of the consumer.
“A term shall always be regarded as not having been individually negotiated where it has been drafted in
advance and the consumer has therefore not been able to influence the substance of the term.
“Notwithstanding that a specific term or certain aspects of it in a contract has been individually negotiated,
these Regulations shall apply to the rest of a contract if an overall assessment of it indicates that it is a
pre-formulated standard contract.”
That is clever drafting and makes this single aspect of the Regulations extremely wide ranging
and all embracing. Clearly it places the onus on estate agents to demonstrate that their terms of
engagement are not unfair and that the consumer was able freely to negotiate the terms – not just
the commission rate or length of the sole agency.
For good measure the Regulations specify that a contract should be written in “plain intelligible
language” – meaning short, simple sentences free from estate agency jargon – and add that “if there
is doubt about the meaning of a written term, the interpretation which is most favourable to the
consumer shall prevail...”
Previously, decisions over the actual interpretation of an allegedly unfair contract were left to
the Director General of Fair Trading (DGFT). The new Regulations extend these powers significantly,
listing all the Statutory Regulators, all 250-plus Trading Standards Authorities and, in a unique
development, the Consumers’ Association – a non-statutory, self-serving, pressure group. They are
all called ‘Qualifying Bodies’ and entitled to act independently of the DGFT although he must be
advised about and arrange to publicise any orders they obtain.
The Regulations include a list of indicative terms which could be regarded as unfair. One of
these reads: “... making an agreement binding on the consumer whereas provision of services by the
supplier is subject to a condition whose realisation depends on his own will alone”.
Think about it. Most estate agents’ terms include numerous possibilities which are designed to
give the agency considerable discretion. All of these terms could now be called into question as a
breach of the UTCCR 1999.
Other ‘indicative terms’ in the list include unequal rights to cancel a contractural agreement or
alter the terms of the contract unilaterally without a valid reason specified in the contract. That sounds
to put paid to one-sided sole agency cancellation provisions.
The implications for estate agents
Clearly, these new Regulations could have a major impact on estate agency. In the worst case
scenario they may necessitate many terms of business being redrafted – if not rethought completely
from first principles. Either way the effects could be quite significant.
Previously, under the Estate Agents Act 1979 (EAA), the DGFT was the only person who could
take action against an estate agent requiring him to modify his professional behaviour. However the
mechanism for making a Warning or Banning Order is crude and time-consuming. Consequently, it
is also rarely used. The discretion is entirely personal to the DGFT.
In contrast, a Trading Standards Officer (TSO) may intervene where he considers an
advertisement for an estate agent’s services gives misleading price information or terms of business.
However, an officer’s statutory authority in such cases comes from the Consumer Protection Act 1987,
not the EAA.
Under the EAA, a TSO may advise the DGFT of his concerns about an agent’s conduct but,
providing the estate agent’s written terms of business meet the minimum requirements of the Estate
Agents (Provision of Information) Regulations 1991, he has no other specific rights. In contrast, the
Property Misdescriptions Act 1991 gives considerable disciplinary powers to the trading standards
authorities while the DGFT then has no enforcement responsibilities.
Now we have a totally new situation. In effect, any Trading Standards Authority, having given
the DGFT notice, could make an order alleging that a local estate agent’s terms of business are unfair
using the provisions of the UTCCR 1999. It would then be down to the estate agent to prove the TSO
wrong – effectively, guilty unless proved innocent!
Presently, most estate agents provide potential clients with terms of engagement which allow
them minimal opportunities for argument or meaning negotiation. Some firms will allow their
prospective clients to choose between sole and multiple agency, and the actual commission rate may
also be slightly flexible, but most terms are pre-determined and almost always pre-printed. They are
to provide information and non-negotiable – though, perhaps, not for much longer!
But it gets worse: there’s a joker in the pack!
The new player in these Regulations is the Consumers’ Association (CA) which is the only
non-statutory qualifying body in the Schedule. Unfortunately, as an organisation, the CA is rarely
supportive of estate agents in general. It now has the power to institute enforcement action and could
decide to take an estate agent to court. If the Association Council chose the right target it could attract
much publicity and public support.
That may sound unduly alarmist but, some years ago, it was published CA policy to campaign
for estate agents to charge on a quantum meruit basis. These new Regulations could be used to
achieve that objective if the CA was to single out for criticism a payment provision based on
compensation for work not carried out or a penal element for loss of opportunity to earn commission,
or whatever. The Regulations state that such a term cannot be ‘reasonable’ regardless of the wording.
That sounds to put paid to the ‘Ready, Willing and Able’ earning criterion unless it relates to the
amount of work actually done. In other words, quantum meruit.
Presently, there appears to be only one answer – individual negotiation. The suggestion may
sound revolutionary but it might be a worthwhile approach to adopt if it then enabled estate agents to
recover their fees without legal challenge.
The key to this suggestion lies in Section 5.-(1) which says “a contractual term which has not
been individually negotiated shall be regarded as unfair ...” That gives support to the converse: any
contractual term which was individually negotiated should then be enforceable. Surely the courts must
accept some limitation on the degree to which a consumer should be protected from a legitimate
The next question is how to handle an individual negotiation. In practice this may involve a check
sheet which the client is offered with a number of options which the negotiator talks about aiming to
achieve agreement on each individual point. After this discussion the client could be asked to sign
the certificate at the bottom confirming that the terms were explained, discussed and individually
agreed. This document should met the Section 5 obligations in full and be carefully filed away in case
of any future dispute.
Back in the office the agreed points from the check list could then be transfered into an
customised agreement in simple straightforward English avoiding professional or technical jargon.
This is also an important aspect as it must then meet the Section 6 obligations which talk about
Ideally this should also be signed by both the seller-client and a representative of the estate
agency although signatures are not a statutory obligation under the EAA. However, the earlier signed
check list should suffice from a legal point of view under the UTCCR.
Summing up, while this approach may sound novel, it could allow for greater flexibility in estate
agency terms of business maybe to mutual benefit.
Put the other way however, unless steps are taken to comply with the 1999 version of the Unfair
Terms in Consumer Contract Regulations it is hard to avoid the conclusion that estate agents claims
for remuneration will, in future, be unenforceable.
And so it came to pass ...
This paper – to the end of that last paragraph – was originally drafted in June 2000. It mooted
the fear that the Consumers’ Association might flex its new muscle and criticise estate agency terms
of business. It even suggested that the ‘ready, willing and able’ criterion might attract early attention.
And so it came to pass.
In August 2000 the CA announced that it was to take up the case of two Association members,
Neil and Eleanor Cameron, where FPDSavills had submitted an account for 50% of the commission
it would have been entitled to receive had their North London flat been sold. The couple had,
reportedly, withdrawn from two previously agreed sales. “We are entitled to a fee for discharging our
obligations under the contract of finding a buyer who was ready, willing and able to proceed with a
purchase of the property,” the agency said. This provision stems from Clause 5 of FPDSavills’
Standard Terms and Conditions. “The purpose of this clause is to deter clients who prove themselves
to be uncommitted to a sale.”
FPDSavills prepared a detailed response to the various points raised by the CA. Although these
negotiations were confidential, an article in ‘Which?’ magazine explained that the CA was threatening
to use the new legal powers, under UTCCR 1999, to challenge the “ready, willing and able” term on
which the claim was based. The CA said:
“Savills wants half its fee when a seller pulls out for whatever reason, which we think is too wide – a seller
may die and the term seems to allow Savills to claim against the estate. ... Even when the seller is to blame,
Savills contract allows it to charge over the odds – the £9,400 being claimed is likely to be far higher than
the cost to Savills of finding a buyer.”
To be fair to FPDSavills, the agency said it would not claim in such a situation but this was the
second time an agreed sale had been cancelled due to the Camerons changing their mind. In the
second incident the buyer had reduced his offer by £30,000, which was refused. The buyer then
agreed to proceed at the original £645,000 asking price but the Camerons now wanted a higher figure.
The negotiations failed when the full price offer was rejected. The agency decided to submit an account
for loss of opportunity to earn its commission. That had triggered considerable publicity, quickly picked
up by the CA.
After protracted negotiations with the CA lawyers – with which the author of this paper was
involved advising the FPDSavills legal team – the matter was finally settled with the Agency agreeing
to make amendments to ten separate Clauses in its standard Terms of Business.
Among the changes – as formally reported to the DGFT by the CA – were all four terms relating
to the payment of fees which had been scattered throughout the original document. The CA argued
that this made the payment requirements unclear. They were revised so that all of the payment
requirements are now grouped together.
In relation to the main complaint the CA statement sounds contradictory. One paragraph implies
that the ‘ready, willing and able’ provision remains though reworded:
“In relation to payment of an agreed fee if a ‘ready, willing and able’ buyer was introduced and terms were
agreed for sale of property and the seller later withdrew for whatever reason and contracts were not
exchanged. This provision was revised so that a fee was not payable if a seller withdrew due to circumstances
beyond his control with 50% payable if the seller withdrew for other reasons. The critical words ‘for whatever
reason’ were deleted.”
However the schedule continues by saying that reference to a ‘ready, willing and able’ buyer
was deleted with the Clause in question being renamed ‘Withdrawal Fee’.
The CA also took issue with a Clause which many estate agents use in an effort to ensure they
get paid. This provided for an ‘irrevocable mandate’ obliging the seller-client’s solicitors to pay the
agency all outstanding monies plus sale fee from completion monies, thus effectively removing client’s
right to set-off.
Here the words ‘irrevocable mandate’ were deleted with the Clause revised to state that the
seller agrees to instruct solicitors to pay properly payable outstanding invoices out of completion
monies while a new Clause has been added to provide for any dispute to be referred to arbitration.
An additional term was added clarifying that the option to have disputes resolved by arbitration did
not affect the consumer’s right to pursue a dispute through the courts.
The CA commentary concluded that the FPDSavills Contract was amended as a result of action
taken by the CA in its capacity as a Qualifying Body under the UTCCR. The original contract had
appeared to be a ‘sole selling rights’ contract but was in fact also using a ‘ready; willing and able’
agreement which had payment implications which were not immediately apparent. The revised
contract makes it clear that it is only a ‘sole selling rights’ agreement, with no reference to ‘ready;
willing and able’ condition. It concluded by reporting that the Board of FPDSavills Limited had signified
its acceptance of these Undertakings on 27 November 2000.
Without sight of the new Contract, what sounds to have happened is that the words ‘ready,
willing and able’ have been withdrawn from the Terms of Business but a provision has been included
which allows the agent to charge when the seller withdraws of his own volition after a sound
prospective buyer has been secured – albeit at 50% of the full sale commission.
This sounds fine save for the Estate Agents (Provision of Information) Regulations 1991 which
may have been conveniently overlooked. Section 5(2) says that:
“Any other terms which, though differing from those referred to in paragraph (1) above, have a similar purport
or effect shall be explained by the estate agent to his client by reference to whichever of paragraphs (a), (b)
or (c) of the Schedule to those Regulations is appropriate, subject also to the proviso to paragraph (1) above.”
In other words if the terms effectively allow an estate agent to seek remuneration in
circumstances where contracts are not exchanged although the agency has found a buyer whose
offer had been acceptable then that would have a similar purpose to a ‘ready, willing and able’
provision and so, in my opinion, the appropriate statutory wording should still be included.
In my reading the UTCCR specifically allows for this to arise as Section 4(2) says:
“These Regulations do not apply to contractural terms which reflect (a) mandatory statutory or regulatory
provisions (including such provisions under the law of any Member State or in Community legislation ...”
Now that one of the largest estate agencies in the country has bowed to pressure from the CA
matters can only get worse.
A Further Update
Moving on, for the last two years – it is now June 2003 – criticism of estate agency has continued.
There is a sustained line of attack which points to increased complaints contrasted with the low
number of firms in membership of the Ombudsman for Estate Agents (OEA).
Meanwhile the Office of Fair Trading (OFT) is mid way through a further review of estate agency.
The last one (in 1989) recommended the introduction of the Estate Agents (Provision of Information)
Regulations and the Estate Agents (Undesirable Practices) Order in 1991. It is not hard to imagine
the latest agenda, nor the thrust of the main recommendations. It will inevitably point to the increased
complaints and contrast this with the low number of firms in membership of the OEA.
Surprise, surprise – perhaps not
The newly empowered OFT has numerous responsibilities – and one of them is to increase the
number and effectiveness of Ombudsmen. Last year it targeted seven industries and the OEA Board
quickly signed up. In my assessment the new Code, which came into force in April, is actually worse
than Mark II version it replaced – applicants and clients must be advised how to complain at virtual
every stage in the process.
The OEA Report for 2002, published in early May, was critical of the profession, all as per usual.
Meanwhile, under this new Code the OEA reserves the right to check up on future levels of compliance.
However, quick off the mark was the Consumers’ Association (CA) which has just published a
scathing commentary following some undercover research. If the figures are accurate and if they can
fairly be extrapolated across the industry then they do indeed make sad reading. Compliance with
good practice is not ‘rocket science’. When we drafted the 1991 Orders and Regulations they were
based firmly on good professional practice. Most estate agencies work closely with their clients. That
said, the ‘Which?’ report found that a significant number were not.
The ‘Which?’ Commentary
On the next page I have included a few paragraphs from the ‘Which?’ commentary which gives
strong ammunition to the OFT Review team. This is no co-incidence: clearly, the CA and the OFT are
both singing from the same Hymn Sheet – perhaps that is not a surprise in view of the UTCCR 1999
– but it is still an unwelcome development.
Notice, in particular, the comment that estate agents using ‘unfair terms’ are already being
tackled by the CA using its powers under the UTCCR. Looking back at how it took FPDSavills to task
that is no ideal threat.
“In March, Which? asked ten home owners in England to put their properties on the market. Each requested
valuations from three estate agents and asked for copies of their contracts. Researchers then posed as
potential buyers for the properties.
“... one agent seriously violated the law. It lied to one of our buyers by saying that a higher offer had already
been rejected ... the higher offer was a complete fabrication.
“Although the Estate Agents Act 1979 sets out the way estate agents are meant to behave, there is no
systematic way to prevent these types of breaches of the law, because no one sees it being broken.
“... agents are supposed to pass on all offers promptly in writing ... only two of the six agents that received
offers did so. The others passed on information only over the phone, and several were less than prompt in
telling their clients what was going on.
“Unfair or misleading contracts were the most common problem ... some contracts were needlessly
complicated, some misleading, and some potentially unfair in law. In the worst cases, unfair or misleading
contracts leave people paying thousands of pounds even if an agent has done nothing to help the sale.
“Which? has started taking action against the unfair contract terms of the worst offenders found in the
investigation ... most estate agents investigated weren’t following the basic provisions of the law. Which? is
calling on the OFT to take urgent measures to address this.
“The first measure is being able to see what estate agents are up to; for example every estate agent should
be subject to unannounced checks of their records.
“The second is calling time on voluntary regulation. At present, only a third of estate agents are signed up
to the voluntary ombudsman scheme, whereas people need guaranteed access to a body with the power to
“The third is mandatory training for all estate agents. Currently, anybody can set up as an estate agent without
any formal qualifications.”
Helen Parker, Editor of Which?, said: “Our undercover investigation cast light on parts of the house-buying
process the public doesn’t usually see, with worrying results. We would like to hear from people who have
been stung by estate agents so that we can work towards putting an end to their dirty tricks. Without anybody
checking to ensure they are behaving competently and honestly, some estate agents are routinely getting
away with using dodgy contracts and even breaking the law.”
The Editor’s Notes add that the CA has powers of enforcement for the UTCCR 1999. Where
an organisation is using terms which are unfair under the Regulations, the CA can negotiate with
them to change the terms to make them fair to consumers. If negotiation fails, the CA can take
organisations to court to compel them to stop using unfair terms.
In legal terms, the definition of an ‘unfair’ clause in a contract is a term which has not been
individually negotiated and which causes a significant imbalance in the parties’ rights and obligations
arising under the contract, to the detriment of the consumer.
It gets worse
I question the efficacy of using ‘agents provocateur’ at the best of times but as you see the CA
readily admits it has been using actors to put in fictitious offers. That is bad enough but the CA has
decided that this is to become an on-going ‘Hometruths’ campaign and it is asking anyone who has
had a bad experience with an estate agent, especially over their agency terms, to get in touch with
the ‘Which?’ researchers and tell all!
No more from me: let the last words go to CA. Don’t say you weren’t warned!
Are you suffering from estate agents aggravation?
Are you in the process of selling your house and have reached your wits end with
your estate agents?
Did you sign a sole selling or sole agency agreement without realising what you were
getting yourself into?
Are you being sued for commission by your estate agent?
If any of these situations sound like yours, the CA would like to hear from you. We are
launching a campaign against unfair terms in estate agency contracts and are looking for individuals
who are currently under attack from their agents as a result of clauses in their contracts that they
were not fully aware of?
We are particularly interested in those of you who are in the following scenarios:
Have you found a buyer for your house privately and with no assistance from the estate agent,
but are still liable to pay them commission?
Do you wish to remove your property from the market, but have been told by your estate
agent that you must still pay them commission because they have found a buyer?
Have you got a contract with an estate agent that you are not happy with?
If you are facing any of these difficulties at the moment, we want to help. While we may not
be able to assist everyone we need to build up a market picture, so please E-mail
email@example.com and tell us your story.
This commentary was prepared by David Perkins CPEA, initially in June 2000. It was amended
following the public anouncement of the agreed compromise, and again in June 2003 following the
critical ‘Which?’ Report.
It is understood that FPDSavills also agreed to drop its the legal action against the Camerons for
the outstanding unpaid remuneration. In due course we may well hear from the CA as these other
estate agencies capitulate to the CA intervention.
The opinions expressed are those of the author and should not be assumed to represent those of
any other organisation or professional body: they are entirely personal to the author who may be
contacted at David Perkins & Co., Estate Agency Compliance & Training Consultants, PO Box 176,
Oxford OX2 8PD – Tel: 01865 310112 – Fax: 01865 310163 or E-mail: firstname.lastname@example.org