Right to cancel: a legal hazard for estate agents

The European Union’s consumer rights directive has introduced a harmonised right to cancel for consumers. Particularly estate agents must ensure that they abide by the law. Failure to do so can lead to a loss of commission, even if services have already been performed.

Right to cancel: a legal hazard for estate agents ©-ferkelraggae-Fotolia-Fotolia_31081868_XS

Right to cancel: a legal hazard for estate agents ©-ferkelraggae-Fotolia-Fotolia_31081868_XS

Right to cancel

On 13th June 2014, the European Union’s consumer rights directive introduced harmonised rules on the right to cancel online purchases. As soon as the requirements for the commencement of the time period are fulfilled, consumers have 14 days to exercise their right to cancel.

The time period begins to run once consumers receive sufficient information concerning their rights. If incorrect information is given to consumers, the right to cancel can be exercised for up to a year following an online purchase.

These rules apply to online traders, including estate agents who conclude contracts with consumers via the internet.

Estate agents and the right to cancel

Estate agents should ensure that they thoroughly inform online consumers about their right to cancel. In the event that estate agents fail to provide the correct information, they risk receiving warning letters from fellow competitors.

Estate agents should also make sure at the time the consumer concludes the contract, that the consumer confirms they have been informed about their rights.

Consumers should also be informed that the provision of service may be completed or started before the deadline to cancel has expired. In this way, estate agents can avoid having performed a service, only to find that following cancellation by the consumer, they have no right to claim compensation. This is because following the cancellation of a transaction by a consumer, any benefits received must be returned. In other words, the estate agent must repay any commission received and the consumer must provide compensation for the value of the services already provided. This value may well exceed the level of provision received.

On the other hand, there is a limit on the assessment of the value of services provided. Where the full price agreed is considered to be unreasonably high, the market value for the services is used as a basis (§ 357(8) German Civil Code). This means that in the event of a cancellation by a consumer, estate agents may not always receive compensation to the sum they would have asked for.

Information on the rights to cancel

One thing that remains certain is that estate agents should ensure they provide their online customers with sufficient information concerning the right to cancel. Failure to do so could lead to heavy losses.

Kilian Kost joined WILDE BEUGER SOLMECKE as a lawyer in 2009. He specialises in internet law and competition law. In 2013 he became an accredited intellectual property lawyer.

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