Estate Agents Beware. Don’t lose out on commission over a lack of contract.
18th September 2017 by Rob Kelly
There has been a case in court (Wells v Devani (2016) EWCA Civ 1106) that highlights the importance of ensuring you have a written contract in place with the seller of the property detailing your agreed commission and when you will receive it (the ‘trigger’) before the completion date, otherwise you may be in danger of walking away with nothing.
The case concerned a development in Hackney, which had some remaining unsold flats. The developer was introduced to an estate agent with whom the developer agreed a commission of 2% plus VAT during a telephone conversation, should he find a buyer. The new estate agent then introduced a housing association which made an offer to buy all the remaining flats. Following completion, the new estate agent submitted an invoice for £42,000 plus VAT in accordance with the agreement reached between them, however the developer refused to pay.
At first, the court held that although the parties had not agreed what would actually trigger a right to commission, a term could be implied that payment would be due “on the introduction of a person who actually completed the purchase”, however the developer took the case to appeal.
The Court of Appeal, by a majority of 2:1, overturned the original decision, stating that there was no binding contract detailing what triggered the entitlement to commission, meaning the agent was not entitled to commission when the flats were sold to a purchaser he had introduced.
From this, it is clear that parties should expressly agree all essential terms upfront in order to be certain that they will be able to enforce their contract against the other party.
If you would like further information on this case or advice on any dispute matters please contact Rob Kelly.