If there is a compensation clause
Following the case of Lonsdale vs Howard & Hallam in the House of Lords it was established that the amount of compensation will be equal to that which he would have received if he was selling the agency on the open market. This means that every case would be judged on its own merits and subject to an agreed valuation.
At the time of writing, such cases are being settled at about equal to 2 years commission less expenses. It is therefore somewhat of a lottery to have a compensation clause written into the contract. It is obviously more expensive to fight and the outcome is dependant on the monetary success of the Agency at the point of termination.
Unfortunately you do not know this when signing the agreement. It must be noted that, except where the contract says otherwise, the agent shall be compensated rather than indemnified.
There is no change in the legal position if your agreement has an indemnity clause. i.e. It equates to a figure of around one years commission based on the average last five years commission.
FACT: Approximately 80% of Self Employed Agents do not have a formal Agreement
Even if you do not have a formal agreement with your principal or principals you have a degree of protection under the Commercial Agents Regulations 1993. This regulation is in force whether or not you have a formal agreement and, in a lot of cases, will override what might be written in the formal agreement.
Every Agent should have a copy of this Regulation which can be downloaded from: http://www.opsi.gov.uk/si/si1993/Uksi_19933053_en_1.htm
Many Agents have dealt with their principals for many years and prefer to work on the ‘gentleman’s handshake’ principal and it works well in many cases. However, in interviewing many Agents, we come across many instances of unprincipled Principals who use Agents as easily disposable labour.
FACT: Your independent role
As an agent you must do all you can to stress your independence. Most buyers in the UK are used to being called on mainly by employed salespeople and, if not told otherwise, will treat you in the same light. They expect employed salespeople to give them a biased view. They make their assessments on this view.
Find every opportunity to reinforce your role as an advisor rather than a salesperson. A useful tactic is to tell him of your other agencies, even if they are of no interest to him as a buyer. Always say ‘they’ rather than ‘we’ when talking to him about any of the agencies you hold. Always be ready to take the customers side, assuming he is correct, in any dispute with your principal. Remember they are your customers! They are your main asset.