Estate agents — Commission — Entitlement — Agents introducing purchaser — Purchaser entering into contract — Purchaser failing to complete — Contract rescinded — Whether agent entitled to commission — Whether “purchaser” under Estate Agents (Provision of Information) Regulations 1991 restricted to person acquiring freehold — Whether agent for vendor liable to estate agents
The appellant estate agent was instructed by the first respondent, acting as the second respondent’s agent, in the sale of the second respondent’s house. The parties entered into an agreement that provided for both sole and multiple agencies, the commission rates being 2.25% and 3% respectively. The agreement consisted of a letter, a copy of which was signed by the first respondent, who did not sign as agent only, together with a set of terms and conditions. Under the agreement, the commission was payable “if at any time unconditional contracts for the sale of the property are exchanged”. Initially, a sole selling agreement had been in operation. Later, the respondents instructed additional estate agents, and the agreement with the appellant was altered to a multiple agency agreement. The appellant confirmed this in a letter.
The appellant subsequently introduced V as a potential purchaser. V’s offer of £860,000 was accepted, and he entered into a contract with the second respondent, paying a deposit of £86,000. V did not complete the purchase. The second respondent rescinded the contract and forfeited the deposit. The property was later sold to a purchaser who had been introduced by a different agent. The appellant’s claim to its 3% commission was dismissed in the county court. The appellant appealed.
Held: The appeal was allowed. The change in the arrangements to a multiple agency agreement had been effected by a variation of the agreement between the parties and had not given rise to a new contract. Although, at common law, an estate agent’s commission is normally payable upon completion of the sale, that did not prevent the parties from agreeing that it should be payable upon a different event. Under the agreement, the commission was payable upon exchange of contracts. The second respondent and V had exchanged contracts and the commission was therefore payable. The commission agreement complied with the Estate Agents (Provision of Information) Regulations 1991, made under the Estate Agents Act 1979. The expression “purchaser” in those regulations was not limited to a person to whom the freehold was actually transferred; it also included a person who contracts unconditionally to purchase such an interest. Although the first respondent was merely an agent for the second respondent, he was also liable because the parties had contracted on that basis.
The following case is referred to in this report.
Midgley Estates v Hand [1952] 2 QB 432; [1952] 1 All ER 1394; [1952] 1 TLR 1452, CA
This was an appeal by the appellant, Foxtons Ltd, from a decision of Mr Recorder Hamlin, sitting in Central London County Court, dismissing the appellant’s claim against the respondents, Markus Thesleff and Claire Thesleff, for a commission.
Andrew Davis (instructed by the legal department of Foxtons Ltd) appeared for the appellant; Neil Mendoza (instructed by Roodyn Manski) represented the respondents.
Giving the first judgment, May LJ said:
[1] The first and second respondents in this appeal come from Finland. The second respondent is the first respondent’s mother. The appellant is a London estate agent.
[2] In January 2000, the second respondent wanted to sell her property at 10 Waterside Point, 2 Anhalt Road, London SW11. Her son, as her agent, engaged Foxtons to act for her as estate agent. The parties entered into a sole agency agreement on Foxtons’ terms and conditions. The property did not sell straight away.
[3] In May 2000, the respondents instructed additional agents. Their agreement with Foxtons was varied to a multiple agency agreement, with an increased rate of commission. In 2001, Foxtons introduced a purchaser, Mr Saeed Vafaian, who offered £860,000 for the property. This offer was accepted. On 25 June 2001, he and the second respondent exchanged contracts and he paid a deposit of £86,000. However, Mr Vafaian did not complete the purchase. The second respondent gave notice to complete, which he failed to do.
[4] On 30 August 2001, the second respondent rescinded the contract and forfeited the deposit. The property was sold subsequently to another purchaser for £843,000. That other purchaser had been introduced by a different agent.
[5] In these proceedings, Foxtons claims its 3% commission on £860,000, saying that, in accordance with its terms and conditions, the commission became payable upon exchange of contracts, and that that had occurred.
[6] The respondents defended the claim. On 10 June 2004, Mr Recorder Hamlin dismissed the claim, holding that, under the terms and conditions, the commission became payable only if the contract for sale were completed, which it was not. This is Foxtons’ appeal against the recorder’s decision, for which he himself gave permission.
[7] The respondents, by a respondent’s notice, seek to uphold the decision for additional reasons that had failed before the recorder. They also say that the recorder had been wrong to find that the first respondent would have been liable in addition to his mother. He was merely her agent, as Foxtons accepted it knew.
[8] The original sole agency was effected by means of Foxtons’ letter of 8 February 2000, written to the first respondent. Under the heading “Fees”, the letter referred to Foxtons’ enclosed terms of business that, it stated, should be read in conjunction with the letter. The sole agency fees were to be 2.25% of the “achieved sale price”, plus VAT. The letter asked the first respondent to sign an enclosed copy, thereby confirming his acceptance of Foxtons’ terms and conditions. |page:30| The first respondent did this. He did not, in signing the letter, say that he was signing as agent only.
[9] The terms and conditions included the following. Under the heading “Sole Agency”:
Where Foxtons act on your behalf as your sole agents, you will be liable to pay remuneration to us, in addition to any other costs or charges agreed, if at any time unconditional contracts for the sale of the property are exchanged:
With a purchaser introduced by us during the period of our sole agency or with whom we had negotiations about the property during that period; or with a purchaser introduced by another agent during that period.
[10] Under the heading “Multiple Agency”:
Where Foxtons are instructed along with other agents, you will be liable to pay remuneration to us, in addition to any other costs or charges agreed, if at any time unconditional contracts for the sale of the property are exchanged:
With a purchaser introduced by us; or with a purchaser to whose attention we brought the availability of the property.
[11] Under the heading “Fees Payable”:
Foxtons fees are calculated as a percentage (%) of the sale price achieved plus VAT at the prevailing rate.
[12] Under the heading “Responsibility of Fees”:
The responsibility for the payment of fees remains with the party(ies) to whom the letter overleaf is addressed.
[13] Under the heading “Time and Payment of Fees”:
All Foxtons fees become payable upon exchange of contracts. Without prejudice to the foregoing provision, and at the discretion of Foxtons, fees may be paid out of completion monies. On your signing the enclosed copy letter you are hereby authorising your lawyers to pay our fees out of the sales proceeds.
In subsequent parts of the terms, there is use of the expression “prospective purchaser”.
[14] The change from sole agency to multiple agency was effected in a conversation, confirmed in Foxtons’ letter of 4 May 2000 to the first respondent. This said that the first respondent had now instructed Foxtons on a multiple agency basis, at a rate of 3% of “the achieved sale price” plus VAT.
[15] In my view, this plainly effected a variation of the existing contract, which otherwise remained in being on the existing terms. The existing contract itself contained, as I have indicated, a term relating to multiple agency. The recorder was correct to reject the submission that was resurrected in the respondent’s notice, and by Mr Neil Mendoza orally, that the original contract came to an end entirely and that there was a new contract on the bare terms of the letter. This seems to me to be quite unarguable. The parties were quite obviously adjusting an existing contract.
[16] At common law, an estate agent’s commission is normally payable upon completion of the sale, but that does not prevent parties from agreeing that it should be payable upon a different event. The question depends upon the construction of the particular contract: see Midgley Estates v Hand [1952] 2 QB 432, especially the judgment of Jenkins LJ, at pp435-436.
[17] In my judgment, the construction of this contract is quite plain. For a multiple agency, Foxtons’ remuneration was payable “if at any time unconditional contracts for the sale of the property are exchanged… with a purchaser introduced by us”, and “all Foxtons fees become payable upon exchange of contracts”. There is no ambiguity in either of these expressions. In the context, “purchaser” means the person who has contracted unconditionally to purchase. Completing the purchase is not necessary for Foxtons to be entitled to its fees.
[18] The “achieved sale price” in the two letters plainly means the price stipulated in the contract. I accept that, in other circumstances, this expression, taken alone, could refer to a price achieved upon completion, but this cannot be so when the expression “sale price achieved” also appears in the terms and conditions under the heading “fees payable” and in the context of the terms and conditions and the letter taken as a whole.
[19] The recorder dismissed Foxtons’ claim because he persuaded himself that the word “purchaser” meant a person who completes the sale and purchase. He got this idea, not from the terms of the contract, but from the definition of “purchaser” in the Estate Agents (Provision of Information) Regulations 1991 (SI 1991/859). These regulations are made under section 18(4) of the Estate Agents Act 1979. Section 18 requires estate agents to give their clients certain information before the client enters into a contract with the agent. This includes, by section 18(2), particulars of the circumstances in which the client will become liable to pay remuneration to the agent and the amount of the remuneration or the manner in which it will be calculated. The Secretary of State may make regulations requiring further information to be provided.
[20] The 1991 Regulations prescribe additional information. This includes explanation about the intention and effect of the terms “sole selling rights”, “sole agency” and “ready willing and able purchaser”. Foxtons’ terms used the term “sole agency” in relation to the initial engagement in this case. Its terms, which I have quoted, complied with the requirements of the regulations. The regulations define “purchaser” as “a person to whom an interest in land is transferred or in whose favour it is created”.
[21] The recorder himself noted that this would, on the face of it, apply to the making of a contract to purchase since this would create an equitable interest, but he also noted that “interest in land” means, in the regulations, any of the interests referred to in section 2 of the 1979 Act, which, for present purposes, is limited to a legal estate in fee simple absolute in possession, or a lease.
[22] The Schedule to the regulations requires the terms “sole agency” to be explained in these terms:
SOLE AGENCY
You will be liable to pay remuneration to us… if at any time unconditional contracts for the sale of the property are exchanged
with a purchaser introduced by us
[23] This shows that the word “purchaser” in the regulations is not there limited to a person to whom a fee simple absolute in possession is actually transferred, but also, as is natural in common parlance, to a person who contracts unconditionally to purchase the fee simple.
[24] Although Foxtons’ terms did not use the expression “ready, willing and able purchaser”, I note that the regulations require explanation of this expression as a person who is “prepared and is able to [exchange unconditional contracts for the purchase of your property]”. This again shows that the eventual willingness and ability to complete is not necessarily comprised in the word “purchaser”, as used in the regulations.
[25] The recorder considered that, because the definition of “sole agency” in Foxtons’ terms was derived from the 1991 Regulations, the word “purchaser” should have the meaning provided for in the regulations. I disagree. The regulations are not there to provide obligatory definitions for expressions used in estate agents’ terms. They are there to require terms to be explained to the client. It is to be supposed that the respondents here will never have seen the regulations.
[26] I do not see how the regulations can affect the proper meaning of the contract that the parties made, but, if they did, the meaning of “sole agency” in the regulations makes it quite clear that the entitlement to remuneration, if those words are used, would arise if an unconditional contract for the sale of the property is exchanged and that “purchaser” were used in an anticipatory sense.
[27] The suggestion in the respondents’ notice, that the terms were unusual and were not sufficiently drawn to the respondents’ attention, is entirely unpersuasive. The letter of 8 February 2000 explicitly drew attention to the terms that were themselves clear. The first respondent signed a copy of the letter as an acknowledgment.
[28] As to the point that the first respondent should not be liable because he was an agent to the disclosed principal, this would, of course, normally be the position in law. But there is no principle of law that says that parties may not contract on the explicit basis that the agent |page:31| also is liable, and this is what the parties here did. The terms of business explicitly state that the responsibility for payment of fees remains with the party “to whom the letter overleaf is addressed”; that was the first respondent. He did not sign the letter “as agent only”. There are many other examples where disclosed agents nevertheless contract upon terms of personal liability.
[29] For all those reasons, I would allow this appeal.
[30] Rix J: I agree.
[31] Jacob LJ: I also agree.
Appeal allowed.
