Estate Agent Due Commission Despite Disputed Verbal Contract
It is common for “find me a purchaser” agreements to be entered into informally between real estate agent and seller, such as by way of telephone call. Section 18 of the Estate Agents Act 1979 however, provides that an estate agency contract shall not be enforced unless, among other requirements, the agent has given the client particulars of the agent’s commission, including the amount of commission and the circumstances in which the client will become liable to pay commission.
In the case of Wells v Devani the Supreme Court has ruled that an estate agent was entitled to commission on foot of a (disputed) verbal agreement to find a purchaser of flats, concluded by phone. It was ruled that both parties had understood that the estate agent’s terms were that he would be entitled to a commission of 2% plus VAT if he introduced a buyer to the client. Despite there being no express term of the contract specifying the event giving rise to the entitlement to commission (in accordance with Section 18 of the Estate Agents Act 1979), the Supreme Court found that, where there is a “find me a purchaser” agreement and the agent introduces a prospective purchaser to the client, then a reasonable person would understand that the parties intended the commission to be payable on completion and from the proceeds of sale. The agreement was therefore sufficiently certain to constitute a binding contract and the agent was entitled to commission.
This case was ultimately decided in favour of the real estate agent, however it should serve as a reminder to all agents of their statutory obligations as regards providing details of their terms of business, and the importance of providing them at the earliest stage in order to avoid potential disputes.
While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.