The Royal Institute of Chartered Surveyors (RICS) have introduced a professional statement setting out new requirements for its members and regulated firms when acting on the open market sale or acquisition of a commercial investment real estate opportunity in the UK. The requirements are intended to avoid conflicts of interests on such transactions and will take effect from 1 January 2018. Failure to comply with these requirements may result in legal or disciplinary action and will have a bearing on claims of negligence.
A number of situations which might give rise to a conflict of interest are dealt with in the professional statement:
‘Dual agency’, where an agent represents both the seller and buyer on the same deal.
‘Multiple introductions’, where an agent has competing contractual relationships with buyers for similar real estate investment opportunities.
‘Incremental advice’, where an agent is approached by another party to provide advice related to a purchase or disposal that is incremental to an existing instruction including, but not limited to, building surveying, planning and valuation. An example of this would be where an agent acts for the seller on a transaction but then provides further advice to the buyer on valuation
The practice note provides guidance on each of these situations:
Dual agency must not be undertaken under any circumstances.
When engaged in ‘multiple introductions’, agents should advise their new potential client of this in writing (email, letter or fax) before accepting instructions and ask for the clients written confirmation that they would still like the agent to act on their behalf.’
Terms of engagement must also be agreed in writing. These must make it clear whether the agent is acting on an exclusive or non-exclusive basis. If terms of engagement are on an exclusive basis, other potential buyers must be informed that the agent is not able to advise them. If the terms are
non-exclusive, the agent must obtain informed consent from clients.
A number of requirements are set out relating to incremental advice:
Information barriers must be in place between the team dealing with the existing instruction and the new ‘incremental’ instruction and confidentiality must be maintained at all times.
Where an agent has an exclusive order to purchase, informed consent must be obtained from the client before any ‘incremental’ advice is given to another buyer.
Where an agent is instructed to sell, the client must be notified before any incremental advice is given to a buyer.