It is not uncommon for prospective sellers to enter into a multiple agency agreement with a number of different estate agents in an effort to achieve a quick sale. However, there is a very real potential that you may have to pay commission to more than one estate agent if there is a dispute over who introduced the eventual buyer to your property.
The small print of estate agency contracts can be tempting to ignore or simply skim read, but the commission terms are always worth a second look. Most often you will find a clause stating the seller will be liable to pay commission for sale to “a purchaser introduced by us”. These words are lifted from the Estate Agents (Provision of Information) Regulations 1991 and leave some room for ambiguity. The courts have tried to fill the gaps.
In the key case of Foxtons Limited v Bicknell, the court was asked to consider whether commission was due to Foxtons on a sale to Mr and Mrs Low. Foxtons had been the original estate agents and had shown the Lows around the property, but it had eventually been sold to them through another agent. Nevertheless, Foxtons claimed that they were due commission under the terms of their multiple agency agreement.
Foxtons argued that “a purchaser introduced by us” meant a person who eventually went on to buy the property. However, the judge decided it meant “a person who becomes a purchaser as a result of our introduction” as this reflects the key element of causation. In other words, the estate agents must have “introduced the purchaser to the purchase, and not merely to the property”.
What factors are relevant?
In Foxtons v Bicknell itself, it was crucial that the Lows had lost interest in purchasing the property after they had viewed it through Foxtons. At that point, they ceased to be potential purchasers and Foxtons’ entitlement to commission disappeared. The Lows’ interest only revived through the new estate agents later that year.
It will therefore be important to know whether the eventual purchaser first mentions the property to the new estate agents, or vice versa. If the new estate agents mention it, there is a strong argument that only they will be entitled to commission. However, if the buyer enquires about the property, the previous estate agents may also have a claim to commission.
Some solace to prospective sellers will be the court’s indication that it will “very readily” interpret contracts to avoid double commission in a residential property context. Nevertheless, it is important to understand when you will be liable to pay commission and when you will not, and consider taking legal advice on the issue.
Mark Smith is a barrister specialising in crime, extradition, family and civil work. He appeared regularly in the High Court (Admin) in relation to extradition appeals, as well as in criminal matters in the Crown Court for both the prosecution and defence. He is also experienced in proceeds of crime and prison proceedings. Mark accepts instructions in a wide range of civil proceedings, including judicial review, immigration, property, personal injury and general contract matters. Mark is currently working on the Undercover Policing Inquiry.