Fees and Terms of Engagement Flashcards
(10 cards)
Explain some principles of fee negotiations?
1) Firms should avoid price fixing, fee cutting or collusion with competitors
2) Fees should be market based and agreed on an ad-hoc basis
3) Healthy competition encouraged – aggressive fee cutting not
4) Can negotiate fees after initial fee proposal - may wish to adjust level of service but should able to maintain high level of service
5) You should not be seen to be undercutting another firm
6) Must be transparent regarding any referral fees and ensure this is in accordance with the Bribery Act 2010 and RICE Rules of Conduct
Source: APC Success
What are the main elements of a fee proposal? (8)
1) Terms and Conditions
2) Statement of Service
3) Exclusions
4) Assumptions
5) Fee
6) Payment Terms
7) Experience and Qualifications
8) Timescales
What are Terms of Engagement and what should they include at a minimum? (4)
A written record of agreement between a client and firm. It should include:
● Client’s agreement to fee
● Payment of expenses and calculation
● That a copy of the firms CHP is available on request
● Regulated firms must highlight their regulated status
Source: APC Success
What steps should be followed before agreeing to an instruction? (3)
1) Check you are professionally competent
2) No conflicts or interest or personal interest
3) Confirm TOE in writing and written client approval before starting any work
Source: APC Success
When should you decline an instruction? (8)
1) You are not competent to undertake the work
2) You do not have sufficient facts on the issue
3) Client will not sign TOE and / or complete money laundering checks
4) Conflict of interest or personal interest
5) Liability cap cannot be agreed
6) For a friend / pro bono basis and not covered by PII
7) Client on UK Government’s sanctions list
8) Consider would you be content for your actions to be made public e.g. in the newspapers or internet?
Source: APC Success
What would you expect to be included in TOE? (10)
1) Identification of both parties
2) Conflicts of interest checks / declarations
3) Purpose of instruction
4) T+Cs
5) SoS
6) Assumptions / Exclusions
7) Liability caps
8) Limitations on third party reliance
9) The basis of the fee
10) Complaints handling procedure
How can you limit your liability when agreeing terms of appointment?
● Base appointment on reasonable care and skill rather than fitness for purpose (more onerous)
● Ensure run off cover is in place
● Execution of the appointment under hand will result in a reduced liability period of 6 years (instead of 12)
● Use of liability cap in terms of engagement
When might you agree a liability cap?
● When you enter into an engagement for professional services with a client to limit risk
● Should use them where legally permissible
● The less the surveyor is paid the lower they want the liability cap
How would you set out third party reliance in ToE?
● Include a clause in ToE that prevents third party reliance
● Clause should be repeated in prominent position in the body of any report also
Tell me about what you would do if you felt that an instruction was outside your scope of experience or knowledge.
● I would not accept the instruction
● I only work within the limits of my competence, and only undertake work that I have the knowledge skills and resources to carry out competently (rule 2)
● I would be open and honest with the client and refer the client to someone else or if I didn’t know someone refer to the RICS find a surveyor service
