Tenants purchased property - what is fair compensation for the agent

This one is more of a moral question rather than a legal question. In these circumstances, should I offer to pay anything to the agent and if so how much should I offer to pay them:

I owned a property, it was rented via a rental management agreement.
The tenants wanted to buy the property and informed the agent.
The agent phoned me and told me the tenants wanted to buy the place.
I contacted the tenants and spoke to them. Initially I was not going to sell it. I paid to get a valuation, then changed my mind, contacted the tenants and sold it to them. The contracts have just been exchanged.

I know the agent and I like them a lot, I phoned them to let them know what was going on and offered them a case of champagne or some money as a finders fee. They have suggested that the right thing to do would be to pay them 1.8% of the $280,000 sale price as a 'reduced' commission.

A few things here:

I was (naively) surprised at the above. My thoughts had been that under a rental management agreement they are acting simply as a managing agent. ie, as it says on the front of the agreement: My-Name Landlord, care of managing agent, their address-and-contacts. Thus, if the tenant requested them to contact the owner and they passed this on, if they got the business, all the better for them. But otherwise they have no *entitlement* to it. As to the exact legalities of this I have no idea. Can anybody add any comments on this? I had honestly not even considered that I was under any obligation to do anything. Hence why I was surprised.

After talking to them I got legal advice. The Lawyer told me that I "was not to pay them a single cent under any circumstances" and pointed to item 55 in the Property, Stock and Business Agents Act 2002. I was already reasonably clear that I had no legal obligation to pay them and to the agents credit he had told me that they likely have no legal way to extract the money from me.

So the final and most important question is this. Morally, how much should I pay these guys? I like the guys, and do I feel for their waisted effort. I don't want to feel that I am ripping them off, and I certainly don't want to feel ripped off my self. Approximately what portion of the effort or cost of a sale did they put in? If I can come up with some 'non-emotional' figure, that would make me happy and make it easier to present to them. Here is approximately what they did:
Tenants contacted them, they contacted me, I said had to think about it.
They mentioned a ball park range, ie 'under 300,000'. (I later got two valuations (that I paid for) one at 270,000 and one at 245,000).
They called me again, I had not had a chance to think about it properly, and said that I still had to think about it.
They never called me again (I think the specific agent had gone on holiday).
They drove the tenants around to look at other similar properties.

They had no advertising costs, no legal costs or major paper work, did not take any photos and they did not utilise their database of clients to find other interested clients that may have driven the price up.

So considering that their full price commission would have been $10,920, what approximate portion of that value did they actually do?

Cheers! -alex
 
Obviously you don't have a contract with the agent to sell your property, so I doubt they have anything legal to back up their demand for payment.

However, I do agree a wee sum would be a kindly gesture.
 
Legally - if you didnt have a signed sale agreement with them - you dont owe them one cent. Morally i'd fling them a check for a thousand bucks for making a phone call. With a note saying "legally you are not obliged to pay them but as a gesture of goodwill heres $1000" That should do it.

Asking for 1.8% on their part without an agreement is a bit rude. Looks like an ambit claim to me.

http://en.wikipedia.org/wiki/Ambit_claim
 
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I think your nice gesture of champagne or a small fee was enough and it ended when they got greedy.

Quite clearly this property sold itself with the agent doing nothing to help.

As far as liking him goes his expectation must be leaving a bad taste in your mouth about now.

I'd let it go now. You tried to do the right thing.
 
Hi there
it does go back to the management agreement you have with your agent - I have seen some agreements which do specify if the property is sold to the tenants in the property - there is an entitlement to a specified commission. I note that I normally delete any such reference in my agency agreements - as If I am selling the property - I want to negotiate with the agent at that time what commission etc should be.
I agree something like a nice basket of goodies may be a nice gesture but I would agree with the lawyer you saw, if there hasn't been compliance with the legislation then there is no obligation to pay a cent.
thanks
 
I think most of you have forgotten, always tip the waiter, and you will get a better seat next time around, if you dont, well! next time be prepared to sit out side in the cold and wait your turn?
The $6k gesture could save you $30k on your next purchases. can't belive you all??
 
Nice case of wine and a thankyou note.

As for the 1.8% "reduced" commission, well they can ask, but I wouldn't even bother responding to that suggestion...
 
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management agreement clause

Hi there
it does go back to the management agreement you have with your agent - I have seen some agreements which do specify if the property is sold to the tenants in the property - there is an entitlement to a specified commission. I note that I normally delete any such reference in my agency agreements - as If I am selling the property - I want to negotiate with the agent at that time what commission etc should be.
I agree something like a nice basket of goodies may be a nice gesture but I would agree with the lawyer you saw, if there hasn't been compliance with the legislation then there is no obligation to pay a cent.
thanks

Hi, and thanks for the replies!

There is definitely no such clause in the management agreement. I read the fine print after the agent phoned me and it basically says something like they are only acting in the capacity of a managing agent and have no other responsibility other than managing on your behalf. The wording distanced themselves from the property and implied that they are basically being paid to act on your behalf, nothing else. Thus, I went ahead as I would have otherwise leading to my naive surprise, when they were asking for money.
It is the bog standard proforma contract buy the way.

So this is important: What is the deal here? I would have thought that if you pay them 8.8% to act as an agent and the tenant wants to pass a message on to the landlord (after all it does say Landlord Me, care of agent) that you have already paid them to pass this message on. Obviously if you were going to use an agent you would use them, and obviously you would thank them. But it is up to you. The agents reply to me re. above was, that I probably did not understand the management agreement and that they could have simply chosen not to tell me (which is obviously counter productive).

Any thoughts on the above?

-alex
 
I am with Evand and co.

All the PM did was let you know the tenants wanted to buy the property, when it wasn't even on the market. They did no marketing, no open inspections, Nada! So other than contact you, what exactly did they do to earn the fee that Agents charge. I think a case of champagne is on order, maybe a smallish cheque, but no way hose for the 1.8%

In terms of liking the PM, they were well paid for doing their job, and really, can you say you still like them as much for asking for something they really don't deserve?
 
You want to pay them? For what! Making a phone call. Must have taken all of 2 minutes.

Actually, I may have been inclined to have done the champagne thing but after they hinted at 1.8% (around $5k) I think all my goodwill would have disappeared.

Legally? Nothing.

Morally? Nothing after they tried to grab five grand from you.
 
Here is approximately what they did:

1. They contacted me

2. They called me again

3. They drove the tenants around to look at other similar properties.

What approximate portion of that value did they actually do?

OK, for # 1 it's about 24c. # 2 is again about 24c. # 3 might be about $ 10 in fuel and about $ 80 of their time.

I reckon a green bill would be more than enough.

A non-descript case of bubbly with no note from yourself would be more than ample to assuage your moral pangs.
 
All the PM did was let you know the tenants wanted to buy the property, when it wasn't even on the market. They did no marketing, no open inspections, Nada! So other than contact you, what exactly did they do to earn the fee that Agents charge. I think a case of champagne is on order, maybe a smallish cheque, but no way hose for the 1.8%

In terms of liking the PM, they were well paid for doing their job, and really, can you say you still like them as much for asking for something they really don't deserve?

Yep, I hear you. I can see very little value that they added to my transaction. To be fair, it is hard to get it across in text, but they were not as forceful as it might sound. The wording they used was: "you have to think about what is fair and come back to us, we often do a deal with another agent where we split the commission 50/50 (1.8%), keep that in mind when you think about it". I said that if I paid an amount it would be significantly smaller than the commission or a half commission.

The amount I had in my head from the very start was $200 to $500 as a gesture of good will.

Why would I bother giving them anything, when I don't have to?::
Two reasons: ONE: it is a large country town, and myself and my family regularly run into the staff of the agency. I have no interest in having even slightly bad terms with anybody. TWO: They have been a very good agent, always friendly and more than the call of duty helpful (admittedly, that has been strained somewhat with this). After them being good, I wanted to return the favour (with a case of champagne preferably) rather than just let it slide and mention nothing. My intentions were good and I thought that would be more than enough.

Thanks for the input. -alex

P.S. Any other thoughts on the role of the agent in a management agreement? Are they not obliged to pass information on?
 
To be honest, even if you gave them something, the "bad blood" is always going to be there for both you and the agency. Them telling you a percentage is pretty much what they are wanting, by the sounds of it.

They are not going to be happy with a case of champagne, but I don't think passing on a message warrants 1.8% of the sale price. If the tenant wanted to buy your car and asked them to pass on a message, would this agency want a slice of the sale price of the car?

You are never going to have back the "old" relationship, so I would pass on my thanks, give them a case of champagne and hope they don't do the dirty when next your place is up for rent.

Is there another agency in the town?
 
Relationship under rental management agreement.

If the tenant wanted to buy your car and asked them to pass on a message, would this agency want a slice of the sale price of the car?

Thanks for all of the replies.

Cutting to the chase: More and more it looks to me like the real question here is whether they were acting as my agent, in a 'care of' style relationship while the rental management agreement was in place.

Am I wrong in thinking that paying them to manage my property, I have effectively paid them to act as an agent and they just pass on any important messages?

Adding to the example above, if the tenants passed on a message that a neighbour had started building without approval and this effected my property (eg my view), would they pay me a percentage of the reduced capital? Or a percentage of the legal fees? As far as I can see you are paying for a service, they act as your agent, they have no ultimate responsibility or ownership. From as far as I can tell this is exactly what the management agreement states.

Correct me if I am wrong!

Cheers -alex
 
You mentioned you got legal advice? I don't know why you would seond guess that advice, it certainly seems sound.

I'd be sending them a case of fizzy, with a note explaining.... my "advice" is that I'm not obliged to pay anything, but as a gesture of goodwill I'd like you to have this case of bubbly. Thanks for doing a great job managing my property. I hope we can continue blah blah blah....

Do not send them any money. IMHO that's an admission of fee for service. Fizzy OTOH is more of a thank you note.

If it wasn't a small town, I'd probably not even do that after their implied demand for 1.8%.
 
Why would I bother giving them anything, when I don't have to?::
Two reasons: ONE: it is a large country town, and myself and my family regularly run into the staff of the agency. I have no interest in having even slightly bad terms with anybody.
Bummer, I know exactly what that might mean for you. Hm, whatever you do, as Wylie says, they will now be cranky for the 1.8% I really dont think they understand that they haven't really done anything though. But news spreads in a country town, maybe you had better spread the news before the Agent does.
TWO: They have been a very good agent, always friendly and more than the call of duty helpful (admittedly, that has been strained somewhat with this). After them being good, I wanted to return the favour (with a case of champagne preferably) rather than just let it slide and mention nothing. My intentions were good and I thought that would be more than enough.
Yep, can see your intentions, they just took your goodwill gesture a long way past the 'thankyou for everything' kind of thing. For them it is a business transaction, for you a simple 'thankyou'.

Cutting to the chase: More and more it looks to me like the real question here is whether they were acting as my agent, in a 'care of' style relationship while the rental management agreement was in place.

Am I wrong in thinking that paying them to manage my property, I have effectively paid them to act as an agent and they just pass on any important messages?

I think this is the complexity of being in a small country town. I only have a rental agreement with the PM; a completely separate part of the business would deal with sales issues. In SA, this Agent has actually acted illegally; he cannot make a sale for a property UNLESS YOU HAVE A SIGNED SALES AGREEMENT. This is all part of the Auction/dummy bid movement that is happening. Maybe it might be the same where you live?
 
Hi there
there seems to be some concern about such a message and whether it should be passed on or not.
For the record, we have tenants in one of our properties who have passed on both to us and to our agents that they love living in the property and should we wish to sell - they would quite happily buy.
By no stretch of the imagination is there any obligation for me to pay a commission for that information. That is dealt with in a sales agreement.
thanks
 
Give them 6K

Yes, you are right you owe them nothing legally. There was no listing agreement. But, you like them and they passed a message on which they had to as property managers.

If you were an agent selling a property and they introduced the seller to you, with no advertising and no costs to them, then you would have to pay them half of your commission. Usually formally agreed to among real estate agents.

I think if you offered them 6K that is good. For that 6k they are going to point out every good deal they come across saving you thousands in the future. You are showing respect as a business property investor. Respect shown both ways always comes back with even better returns. Plus it is good karma.

Think of the long term benefits rather than the short term benefits of 'Do I have to?'
 
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