Commercial agents enjoy significant protection for deals covered by the Commercial Agency Regs. So how do you maximise the revenue you will receive when negotiating the agreement? At Hamlins we work closely with our clients to optimise the position in each agency agreement and set out below 5 tips.
- Indemnity vs Compensation
Agents in the UK can elect for an indemnity or compensation payment on termination of their agreement, so which one is best? As compensation is uncapped it is often the best choice for agents but there will often be situations where the indemnity value is greater. Which payment to choose depends on a multitude of nuanced factors and something which often benefits from legal advice. We have maximised the payout for many clients by working with them to identify which payment is most valuable.
- Pipeline Commission
One of the most potentially lucrative benefits of a terminated agreement is the ability to claim for commission from transactions completed for a period following termination, often known as ‘pipeline commission’. However, this entitlement can be excluded from an agency contract. It is also possible for businesses to use ambiguous wording to remove your rights to pipeline commission. We help many agents by reviewing and drafting contracts which safeguard this right to commission and also seeking to increase this right via negotiation.
- Altering Notice Periods
The minimum notice period for terminating an agency contract is:
- 1 month for a 1-year term;
- 2 months for a 2-year term; and
- 3 months for 3-year+ arrangements.
These periods allow for sourcing of new business opportunities and continuation of commission payments. Therefore, we often seek to negotiate longer notice periods to maximise this income stream.
- Protection Against Variation
Informal communications are often the basis for parties attempting to vary agreement terms. This can cause problems for the agent as the principal may attempt to enforce these informal agreements against them. Agents can avoid this uncertainty by including provisions such as a “no oral variation clause” in the original agency agreement and drafting agreements in a way which makes the position of both parties clear. The extensive drafting experience of our Commercial Team allows all our clients to protect and enhance their rights.
- Sales Targets
We understand sometimes in business things go wrong. Markets become unexpectedly volatile, factors outside your control can inhibit sales or products can become less popular. Missed sales targets are often claimed as the basis for a principal to terminate an agency agreement. However, agents will still be entitled to an exit payment in most cases. Careful drafting and negotiation can help agents maintain their right to a termination payment. Our sharp legal and business acumen has helped many of our clients receive termination payments they often considered were not due.
Hamlins combine commercial, corporate, regulatory and drafting expertise to help our clients maximise their position under every commercial agreement. For more information on how Hamlins can add value to your business, or if you require specific legal advice relating to the Commercial Agency Regs, please contact Matthew Pryke on firstname.lastname@example.org.