Estate Agents’ Sole Agency Commission

The Court of Appeal has just handed down what can only be described as a mixed decision on the effect of the Estate Agents Act 1979 and the associated 1991 Regulations.

These require agents to explain terms such as “sole agency” and to provide details of when “remuneration” is payable. There is a useful definition of sole agency in the Regulations for agents to adopt in their contracts.

In this case the agreement did not include the statutory information in full. Significantly it did not include the necessary express reference to an obligation to pay remuneration if a sale contract were exchanged with a purchaser introduced by another agent during the period of the sole agency. Furthermore, despite being described as a “sole agency”, it included no express prohibition on dealing with another agent during the period of the contract.

The agent came up with three offers but the seller sold elsewhere using another agent. He paid their commission and was reluctant to meet the first agent’s claims under their “sole agency agreement”.

The Court’s decision

The agent’s claim failed in the High Court and failed again on appeal.

• The majority found it unnecessary to decide whether the seller had acted in breach of his obligations under the contract, and was therefore liable to pay damages.
• They held instead that “remuneration” in the statutory scheme covered damages in lieu of commission and that the agent had failed to comply with the requirement to give adequate particulars about the seller’s obligation to pay this. Merely to include the words “sole agency” was not sufficient.

In view of the breach of the statutory requirements, the sole agency agreement could not be enforced without a Court Order, and the Court had power to dismiss or reduce the agent’s claim. In this case the claim was dismissed as the Court was satisfied that the seller was prejudiced by the absence of the information required by statute.

The message

Agents who wish to act on a sole agency basis should, if they are not already doing so, ensure compliance with the statutory requirements by using the full statutory wording wherever possible, or otherwise ensuring that their agreements comply with the information requirements in full.

If you would like to discuss this article, or any other matter relating to disputed agency or other contract issues please contact John Cadywould on 01603 675629, or e-mail jbc@rogers-norton.co.uk.