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Setting up your initial agreement with clients

Setting up your initial agreement with clients

Matters to consider before accepting instructions

Think carefully about whether your firm can deliver what the client needs. This can prevent you from:

  • breaching the RICS Rules of Conduct and
  • taking on work you may struggle to deliver to the right standard or within your client’s budget.

Consider the following questions before accepting an assignment.

  • Are we qualified for the work?
    The responsible person should possess the relevant professional qualification to undertake the task; i.e. Assoc RICS, MRICS or FRICS (or other relevant professional qualification). Check if specific relevant qualifications or certifications (e.g. Registered Valuer) are needed for the assignment and, if so, whether they are held.
  • Are we competent to do the work?
    ‘Competence’ means the responsible person having sufficient current specialist knowledge and technical skill to be able to deliver advice to a satisfactory standard. They should not provide advice beyond the normal scope of their professional work unless they are resourced to do so through appropriate training or supervision.
  • Do the services we offer meet the client’s needs?
    Does the client need someone with your qualifications, experience and size of firm, or would they be better off instructing someone with a different skill set, or who can meet their needs more cost effectively? Also consider whether your professional indemnity insurance will cover the value and risk of the proposed work.
  • Do we have any conflicts of interest?
    The current edition of Conflicts of interest, RICS professional statement, requires members and firms to check for and identify actual and potential conflicts of interests, and to take appropriate action if any are found. Record evidence of the checks made and the management of any conflict in writing. This should be kept with the working papers for the file.

If you think you shouldn’t accept the instructions after considering these questions (for instance, because you aren’t suitably experienced in this area of surveying practice), explain why you are unable to proceed and consider suggesting other firms who may be able to help.

What to include in terms of engagement

Good terms of engagement can help to avoid later misunderstandings with your client. They ensure that both the client and firm are clear about:

  • the scope and nature of the service being commissioned and
  • the framework within which it has been agreed to be carried out.

Before accepting an instruction, make sure the client understands which services you are providing and any limitations to these. For some types of client services, it can be helpful to have a standard sales pack, including standard terms of engagement, that you can send to clients early in the contracting process.

The firm and RICS member (or other responsible person) should, as a minimum, set out clearly, and agree in writing with the client, the essential matters which constitute the client’s instructions. Terms of engagement are a written record of the agreement between the client and the firm, in order to avoid doubt and confusion. They should be held with the working papers. For some types of work there are RICS technical standards that set mandatory requirements for terms of engagement; for example, for valuation work (see RICS Valuation – Global Standards).

Your terms of engagement should also include information about how the client’s data will be used (see section 6), although this will not replace the need for a privacy policy in the UK or EU. Remember to communicate to the client any proposed changes to the terms of engagement during the delivery of the work.

For a model framework for terms of engagement, see Appendix A. It has been designed to be readily adaptable to the particular case and type of work, and includes reminders:

  • to agree what due diligence you will undertake
  • to agree what you will not check and the assumptions you will therefore need to make and
  • to consider any limitations to liability you are accepting (more information about limiting liability is available in the current edition of Risk, liability and insurance, RICS guidance note).

It can be helpful to produce a checklist of the matters you will need to include in the terms of engagement which can then be used when taking instructions from clients.

For each piece of work, remember to check that the standard terms are accurate and suitable, even if you have standard clauses that you often use or service level agreement for clients for whom you do a lot of work.

Client due diligence

You may need to carry out checks on your client’s identity in order to comply with:

Carrying out identity checks is particularly important where your work has higher risks relating to money laundering.

If for any reason your due diligence leads to a decision that you should not accept the work, consider how to inform the prospective client of this. You may not be able to give full information. You do not have to give a reason for turning down work but some firms have found it helpful to have a stock reply which is honest without disclosing inappropriate matters; for example, it may be true that the firm’s insurers would not be comfortable with you taking on the work.

Transparency about fees and timescales

An important element for clients is:

  • how much the work will cost and
  • how long the work will take.

Clarity about these matters is important in building and maintaining trust with your clients, particularly if you are dealing with a consumer or a small company who may not have experience about what to expect.

You may have a price list for straightforward work which is relatively repetitive and where fees are easy to predict. Providing this publicly (e.g. on your website) or at an early stage to prospective clients can help them to see you as trustworthy and open and may encourage them to choose your firm.

You might propose a fixed fee or an hourly rate, or some other charging structure. Whatever structure you propose, it is a good idea to provide an estimate of the cost for your services. This should include information about:

  • what services are included within the cost estimate
  • any services not included in the price that a client might reasonably expect to be included
  • payment terms, including when clients will be invoiced and when they will be expected to pay
  • details of the experience and qualifications of teams/individuals who will carry out the work and
  • typical timescales and key stages.

Remember to communicate to the client any changes to the fee estimate as soon as possible – the final invoice for your services should never come as a surprise.

If you receive or pay any fees to introducers, commissions, referral fees or anything similar, be transparent with clients about these payments.