When an NDA Might As Well Have Stood for the National Dental Association
There are agreements that protect you and agreements that make you feel protected.
They are not always the same thing.
In property sourcing, the Non-Disclosure Agreement has become something of a default tool - reached for instinctively when a sourcer wants to feel secure before sharing deal details with a prospective investor. I have always had reservations about how well it actually serves that purpose in this context.
One situation, brought to us by a sourcer asking for advice, illustrated those reservations more clearly than I could have done myself.
The Setup
The sourcer had found a deal on one of the property platforms, negotiated a purchase price with the estate agent, and identified an investor who appeared to be a strong fit.
Before sharing the full details of the property, they asked the investor to sign an NDA. They also collected a small upfront fee of a few hundred pounds. Both steps felt, on the surface, like sensible protection.
The investor signed. The fee was paid. The full deal details were shared.
A viewing was arranged through the estate agent. The investor attended, looked around, and confirmed they were happy with the property.
Then the silence started.
The Silence
Emails. Text messages. Voicemails. Nothing came back.
After a few days of no response, the sourcer contacted the estate agent directly to ask if they had heard anything from the investor.
They had.
The investor had been in touch, negotiated a lower purchase price directly with the estate agent on the basis of being a cash buyer, and the sale was already progressing through conveyancing. The sourcer had been cut out entirely.
The sourcer was furious and wanted to know exactly what they could do.
I told them, as clearly and as kindly as I could: basically nothing.
Why the NDA Did Not Help
The sourcer was understandably surprised. The investor had signed an agreement. Surely that meant something?
It did. Just not what they had assumed.
An NDA — a Non-Disclosure Agreement — is a legally binding document that establishes a confidential relationship between the parties named in it. Its purpose is to prevent sensitive information or intellectual property from being shared outside that relationship.
In this case, the information in question was the property deal details.
Here is the critical point. The investor had not shared those details with anyone. They had not passed the deal on to a third party. They had not disclosed the confidential information the NDA existed to protect.
What they had done was go directly to the estate agent and negotiate their own purchase. That is not a breach of a Non-Disclosure Agreement. The NDA contained no clause preventing the investor from circumventing the sourcer and approaching the seller's agent independently. Without that clause, there was simply nothing to enforce.
The agreement the sourcer had relied on was the wrong tool for the situation entirely.
What Should Have Been Used Instead
The right agreement for this situation is a Non-Circumvention Agreement, sometimes included as a clause within a broader Terms of Business Agreement.
A Non-Circumvention Agreement does exactly what the sourcer needed. It prevents the other party from going behind your back, bypassing you, and dealing directly with a contact you introduced them to. Had that clause been in place, the investor's actions would have constituted a clear breach and the sourcer would have had a genuine basis for pursuing their fee.
An NDA alone, without a Non-Circumvention clause, leaves a very significant gap. It stops people talking about your deal. It does not stop them acting on it independently.
Every agreement in the sourcing toolkit has its place. The Terms of Business Agreement secures the investor relationship. The Non-Circumvention clause protects you from being bypassed. The NDA protects confidential information. They serve different purposes, and using one in place of another leaves you exposed in ways that may not become apparent until it is too late.
Fit for Purpose Agreements: Protecting Your Property Sourcing Fee
The sourcer in this story did not lose their fee because they were careless or inexperienced. They lost it because they reached for an agreement that felt protective without fully understanding what it actually covered.
That is an easy mistake to make in an industry where legal documentation can feel complex and where the instinct to get something signed before sharing a deal is entirely reasonable.
The solution is not to sign more agreements. It is to understand what each one does, use them in the right combination, and make sure that the specific risk you are trying to protect against is explicitly covered in the document you are asking the other party to sign.
Before your next deal, ask yourself one question. If the investor I am about to share this with decided to go around me, what would actually stop them?
If the honest answer is nothing, it is time to look at your paperwork.
The right agreement at the right time is not a legal nicety. It is how you protect your fee.
At NAPSA we have made it straightforward to get the documents you need in place:
Our Complete Setup to Sourcing Success Programme includes everything you need to launch and run a compliant sourcing business, including your legally required documents pack.
If you already have your business set up and just need the right contracts, our Documents and Contracts Pack for Property Sourcers covers the full suite of agreements you should have in place.
Or if you specifically need a professionally drafted Terms of Business Agreement, you can purchase it as a standalone document here.
Whichever stage you are at, make sure your paperwork is working as hard as you are.
