Fee Negotiation & Terms of Engagement

Question 1

What should a surveyor consider throughout fee negotiations?

Answer 1

• Firms should avoid price fixing, aggressive fee cutting or collusion with competitors
• No fixed scale charges – abolished in 1980s
• Healthy competition is encouraged but aggressive fee cutting is not allowed
• You can enter into further fee negotiations with a prospective client after you have submitted your initial proposal; as long as you act in a professional manner
• You should not be seen to be undercutting another firm

Question 2

What must you ensure when involved with referral fees?

Answer 2

• Must remain completely transparent with clients/consumer
• Members must record receipt/payment of referral fee and state in terms of engagement
• Refer to Bribery Act 2019 and Rules of Conduct 2nd February 2022

Question 3

What should you send accompanying a fee proposal?

Answer 3

A set of T&Cs with the scope of services to be provided.

Question 4

What do you include in fee proposals?

Answer 4

Scope, fee breakdown, clarifications & exclusions, details of insurances & PII.

Question 5

What would your approach be if a client wanted to pay you in advance for works?

Answer 5

• Advise clients who pay fees in advance that this money is not covered by the Client Money Protection scheme.
• Provide a receipt.
• RICS advises against cash payments & request made by transfer & held in a client account.

Question 6

If your client asked you to lower your fees because of their limited funding, what would you do?

Answer 6

• The client would have to pay the required price for the level of service required or reduce the scope of works involved.
• I could consider if the scope of work could be reduced however on the client request I would not just lower my fees.

Question 7

What should be the basis of your fee?

Answer 7

Fees should be market based and agreed on an ad-hoc basis with clients.

Question 8

What should you do if accepting or offering referral fees?

Answer 8

• Must be completely transparent with your clients and consumers, so they understand you are receiving or offering a referral fee.
• State in you terms of engagement if applicable.
• Consider your actions in context of the Bribery Act 2010 and the Rules of Conduct 2nd Feb 2022.

Question 9

What are the three steps prior to instruction (CIT)?

Answer 9

• Check professionally competent.
• No conflict of interest or personal interest.
• Confirm terms of engagement in writing and get approval from the client BEFORE you start work on the instruction. Include Complaints Handling Procedure.

Question 10

What additional checks may you need to undertake before accepting an instruction?

Answer 10

• Money laundering checks

Question 11

Give an example of when it may be appropriate to decline an instruction.

Answer 11

• You are not competent to undertake the work - it is outside your limitations.
• There is a conflict of interest.
• A Professional Indemnity Insurance liability cap cannot be agreed.
• Work provided on a pro bono basis (PII will not cover work carried out on a personal basis).
• The potential client is included in the UK Government Sanctions list.

Question 12

Why is transparency important at the start of an instruction?

Answer 12

You must remain completely transparent with your clients and consumers, so they understand that you may be in receipt of, or offering, a referral fee and state so in terms of engagement if applicable.

Question 13

If you had agreed an appointment with a client, what would you send them to secure the contract?

Answer 13

• Appointment document
• Terms & Conditions
• Scope of Works
• PI insurance & limit of liability
• Fee proposal

Question 14

Why does your firm have Terms of Engagement? What should be included in Terms of Engagement?

Answer 14

• Creates a contract with the client.
• Sets out the proposed fee basis, payment of expenses and that a copy of the firm’s complaints handling procedure is available upon request.