A staggering two thirds of adults in the UK are thought to have not prepared a will, meaning that their possessions, money and property could be left with someone they have not chosen.

Of those people who have made a will, many may have overlooked entitlements which may arise upon their death. One of those is the entitlement of an agent upon death to compensation or an indemnity under Regulation 17 of the Commercial Agents Regulations.

In the same way that an agent is entitled to compensation or an indemnity upon the termination of the agency during his lifetime, he is entitled to the same benefit upon death as if the principal had terminated the agency agreement.

This right of the agent to claim compensation or an indemnity, in addition to other post-termination payments, is one of many protections afforded to agents by the Commercial Agents Regulations. Such a claim passes to the agent’s estate upon death, but can only be pursued if the executor of the estate is aware of the entitlement in the first place.

The difficulty arises when the person dealing with the estate has no knowledge of the agency, or more fundamentally, the right to post termination payments upon the death of the agent, or how to go about claiming the compensation.

Such lack of knowledge and awareness is easily remedied by the agent at very little or no cost, and is a step which all agents can and should take regardless of their age, health or otherwise.

To ensure the estate benefits from the agent’s entitlement on death, reference to the entitlement should be included within the agent’s will, or within a letter of wishes accompanying the agent’s will. Of even greater assistance would be detailed instructions to an executor regarding the estate’s entitlement to compensation.

It is also advisable for the agent to highlight in his instructions that notification of a claim under Regulation 17 must be made to the principal within 12 months of the date of death, otherwise the entitlement will lapse. The agent could also, if he so wished, specify a law firm with expertise in administering complex estates and commercial agency law to act as executor. The more detail an agent can provide at this stage, the easier the process will be for the person who ultimately deals with the estate upon the agent’s death.

Whether an agent is entitled to compensation or an indemnity depends on whether the parties have specifically agreed that an indemnity shall apply. If the agreement is silent then the compensation alternative will apply. This benefit can certainly be substantial, particularly in the case of compensation where there is no cap on the value of the payment. It is certainly not a benefit to be overlooked when calculating the assets of an estate.

The value of an agent’s entitlement to compensation can vary enormously and is dependent on a variety of factors. Ensuring that up to date records of sales, commissions and agency expenses throughout the term of the agency agreement are readily and easily accessible will be invaluable to the executor as this is central to the valuation process.  The executor will also need a clear understanding of the terms of the agency. Those terms may be embodied in a written agreement which should also be readily accessible. If there is no written agreement it would be advisable for the terms to be detailed in a letter accompanying the will. 

This important and often substantial entitlement should be viewed as a “death in service” type benefit. A termination payment on death will increase the size of an agent’s estate and will assist dependants financially upon the agent’s death.

Nobody likes talking about preparing for death, but if you want your loved ones to benefit from the years of efforts you have put into your agencies, you need to act now. Preferably you need to instruct a firm that understands the Regulations and that has a specialist private client department.

At Myerson Solicitors LLP we have a team of specialists who can advise on all aspects of commercial agency law. We also have a team of lawyers who are experts in the drafting of wills and administration of estates. 

We recommend all agents be proactive and take steps to protect their post termination agency claims upon death. For more information, please email us at lawyers@myerson.co.uk or call us today on 0161 941 4000 to speak to a member of one of our specialist teams.

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