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2 Panels for Energy Assessors today announce price cuts and slow payment

So not only are mortgage approvals continuing to find even lower levels than anyone has ever previously recorded but today we had yet another industry bombshell that both The Energy Portal and The Energy Assessors Organisation have once again either cut EPC fees payable to Energy Assessors carrying out the energy survey work or are going to pay them slower than had been agreed. Its worth looking carefully at the phraseology used in their announcements.

The Energy Portal - EPC fee revision briefing note 30 July 2008

It is with regret that the next reduction in our EPC fees comes only one month after I last wrote to you, but the gross EPC fees we are now able to achieve in contract negotiations with HIP Providers and Lettings organisations for bulk supply have hit another all-time low.

The UK housing market is clearly in recession with property listings down significantly in June/July against the April/May numbers. House sale prices are falling and there seems to be nothing in the short term likely to reverse this trend.

At such difficult times it is hardly surprising that our customers ordering via EPC supply contracts are looking to reduce EPC costs to achieve savings in their HIP price and remain competitive in their own marketplace. I regret that the dynamics of this supply chain means that such fee reductions have to be passed down the line to the DEAs, if panel management is to remain viable as a distribution method.

EPC instructions passed from the-energy-portal from 1st August 2008 will now be paid at 40+Vat, per completed EPC.

Those EPC cases panelled out to you prior to 1st August, but completed on or after 1st August will still attract the former fee of 45+Vat, until cleared.

The-energy-portal has always striven to remain competitive in paying a fair EPC fee to our consultant members and I understand that other EPCs Panels are paying as little as 32+Vat per EPC, so we still maintain our intended position as one of the better paying EPC Panels.

Please remember that our consultant members and Panel firms remain responsible for all their own disbursements including accreditation fees, lodgement charges and IT software fees including the Quest online system charges. I am aware that Quest have only recently started to collect EPC system fees from many DEAs but these have been due from our individual consultant DEAs since 01 Feb 2008 as communicated to you during January.

There are no abortive fees paid for cancelled instructions unless the pack provider client makes a special concession (usually this will only occur where there has been a clear administrative error on their part).

If a case is instructed in duplicate to two DEAs on our panel by our client company and this becomes apparent to you upon reaching the property, you should call us and await our instructions, as abortive fees will seldom be available if you proceed and inspect the property. HIP providers are working to tight margins and will normally only pay one EPC fee per case to the first DEA that completes and returns the case RNN on the Quest system.

Best Regards

and from The Energy Assessors Organisation:

DEAs,

As you are aware, in some cases we have been later than normal in paying invoices for the last two months.

This is due to the fact that we are experiencing some issues in receiving payment from some of our clients, meaning in turn, we have had to delay some payments to you.

You can be assured that we are doing everything we can to resolve this, but in the meantime, regrettably, there will need to be cases where payments will be delayed throughout the next couple of months.

I will write out to you to let you know exactly when payments will be made each month.

Your payments due in August will be paid and cleared into your accounts on 20/08/08.

Once again, please accept my sincere apologies and be assured that everything is being done to both resolve this as soon as possible and to minimize the inconvenience caused in the meantime.

Yours Sincerely

The analysis

So I am sorry to be hard-nosed about this but given NRG Experts is a national panel of 1981 DEA/HIs and we have carried out thousands of EPCs all over the country it should not be a surprise that I have a view on the 4 points I pull from the above text.

1. Fee reductions have to be passed down the line to the DEAs if panel management is to remain viable as a distribution method.

Really? Its a weak argument I'm afraid, have search providers been squeezed to within an inch of their lives or are pack providers still using deals made on search costs and volumes many months ago. I have seen search prices drop 20% in the last 4 months, and frankly I know I can source cheaper at the same quality should I wish to do so- but I am busy doing other things right now! IT costs too high? Also, what about the rest of the infrastructure, have you cut back on head office staff, lost the company cars, actually increased company borrowing, looked for additional investment or partnering? Moved to smaller premises? Cut staff wages?

Or are DEAs the easiest people to squeeze in terms on fees? The answer there is of course "Yes" without any hesitation.

2. If a case is instructed in duplicate to two DEAs on our panel by our client company and this becomes apparent to you upon.....

Erm, pardon me? Duplicate instructions! Hang on, some people do insist on using QUEST for reasons that remain beyond me unless QUEST is compiling the HIP- which is not the case in many instances, and now you are telling me that it is possible to have duplicate requests. This is worse than the 'fastest-finger-first' strategy used by more than one panel. They simply text out the property details to 5 DEAs and whoever replied with "Yes" gets the work. Now, its more a case of "Yes, but I hope someone else hasn't said Yes too!"

3. We have been later than normal in paying invoices for the last two months

I am speechless. Honestly I am.

4. We are experiencing some issues in receiving payment from some of our clients, meaning in turn, we have had to delay some payments to you

OK, other than in specific cases in the construction industry no company can simply impose 'pay when paid' contracts on their employees without having previously notified them and had their agreement to these modified and unusual terms. Even the construction industry is now showing case law that is ruling against pay when paid clauses.
Falcon Building Materials Company Limited v Fine View Engineering Limited [2008] is a helpful summary and we have Durabella Limited -v- J. Jarvis & Sons Limited (September 2001) which now establishes the position in English Law.

The change to 'pay when paid' contracts is pretty plain. Someone up the food chain is having cashflow problems and lets face it, which estate agents aren't right now?

Humberts is now in administration since it completed the mother of all fire-sales earlier this year. Countrywide raised 100mil in cash to keep paying its bills and stopped paying interest on borrowing. Connells have closed another branch and then of course we lost Hip Payment Services and we also had Habitus Surveyors keel over, First Sale Pack printing company entered administration and so on. We even had Paul Smith from SpicerHaart flouting the HIP Regulations as initially he had instructed his branches to only order the EPCs- he did rectify this problem but sadly only after it become published in the national agency journals. Clearly this has been a shambles right from the off, and things are not getting better quickly.

A serious point then - Every time a company either sits on the edge of an abyss or falls into it, someone somewhere is going to lose a lot of money. I know of various small search providers extending five-figure sums of credit to estate agents by providing HIPs and then invoicing and waiting to get paid. They are going to get burned, agency cashflow is beyond diabolical and with so much choice an agent can play off pack providers and run up quite a bill, The only solution, get the funding from the seller or agent upfront- this should be utterly non-negotiable.

So back to the point then 'pay when paid contracts'. Well I guess somebody thinks its a bright move, but in a property and construction industry falling to its knees my only advice is to all DEA/HIs is to immediately stop working for anyone who offers 'opportunities to earn income' but isn't sure when they might settle up.

I haven't seen as many recessions as those older and wiser than me, but I was plum in the middle of the telecomms boom and bust in 2001-2002 and I did not miss an industry heartbeat in watching that multi-billion pound industry implode taking hundreds of thousands of jobs with it. Yes HIPs is a small industry, but the smell of fear doing the rounds right now is a familiar odour.

Labels: EPC-fees-cut-yet-again The-Energy-Assessors-Organisation The-Energy-Portal Pay-When-Paid-Contracts The-Smell-of-Fear