Both Sides
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The principles of contract and the principles of agency - the what? I know, It sounds a real snooze but do not switch off! You really should know about both if you are into buying or selling a property in the UK, or have used or intend to use the services and expertise of an estate agent, or are considering taking out a mortgage loan. Yup, you know full well what a mortgage loan is, right? A mortgage has two sides to it - you, the borrower looking for cash to purchase a property, and the lender, providing the cash by which you can purchase the home of your dreams.
However, geting a mortgage and purchasing a property, both very common occurences, are in fact contracts, involving you and the seller, and you and the mortgage loan provider. Hence, the contract in its simplest form requires at least two, with each of the parties bound by legal requirements. Thus the principles of contract, and the principles of agency, add glue to the whole process. The principles of contract are fairly easy to grasp. At its simplest, a contract is a legal arrangement in which two or more persons agree to enter into.
A contract implies that something tangible is given by one party and accepted by the other side. Doing so places legal obligations on both parties. Something tangible must be given - a consideration. In terms of property, a buyer hands over money and the seller hands over property. But there's more to a legally binding contract than the numbers involved and the handing over of a consideration.
For one, both sides must have the capacity to enter into the contract from the word go. To enter into a contract in the United Kingdom, both sides must be 18 or over. They must also both be legally able to sell property, or buy the property. And both must be mentally sound. Then there's telling the truth. Both sides of the deal have to be absolutely honest in the dealings with each another. It is known as utmost good faith.
Put simply, it means when any query is asked by one half, the other side gives an honest reply. No ifs or buts, this is particularly important when it comes to any and all dealings in property. The buyer's solicitor will almost certainly ask one or two probing questions as a matter of routine. So many issues can have an effect on a property's value - disputes with neighbouring property owners, for example, or environmental factors, and so on. Legal consequences might follow if it is realised later that information provided was less than the truth. Now let's take a look at the principles of agency because in most instances an estate agent is employed by the seller. The task of the estate agent is to advertise the property and hopefully bring in a steady stream of potential buyers.
In simplistic terms, an agent is someone who acts on behalf of someone else, called the principal. The estate agent is the agent. And the seller is the principal. Thus in law, whatever is done by the agent is deemed to have been carried out by the principal. Of course, it can be more complicated. But as far as the relationship between the seller of the property and the estate agent is concerned, which surely is what the majority of us have some experience of, the estate agent's role is that of messenger, passing on offers on a property to the seller.
Compare this to other types of agency where the agent may enjoy greater authority to act on behalf of the principal, within certain agreed and predefined parameters. A good example is the relationship that often develops between IFAs (independent financial advisers) and their clients. On occasions IFAs will make independent investment decisions, within agreed parameters, but without seeking permission of the client.
But, no matter what the relationship between agent and principal, prior to any action being taken, all rules and conditions should be set out clearly in writing. Thus, when the agent commences working for the principal, the agent knows precisely what the boundaries of the relationship are and where they lie. He or she knows exactly where they stand. However, life - like many a business relationship - is often not quite as simple as it ought to be. Know the feeling?
For example, actions by the principal may appear to have given the agent authority way beyond what has been agreed. This apparent authority serves to legitimise the agent's actions, despite the actions being way outside the parameters agreed at the commencement of the relationship. Agents occasionally do step across the boundaries set down. In such a situation, legal action may be taken by the principal if required.
Or if the actions taken by the agent are later deemed acceptable, after the event, the principal may in fact decide to ratify the actions. This state of affairs is known as ratification. In this extremely short article, we've underlined some of the issues surrounding the buying and selling of property. We've also considered the principles of contract and the principles of agency. Both are very important parts to understand.
Take a look at Mortgage Advice [http://www.mortgageadvice4free.co.uk] 4 Free, a website set up by John Donaldson. There you will find reviews of other mortgage loan sites in the UK. It's a great starting point for anybody looking for a mortgage loan.
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