The general principle that applies to estate agency contracts is that the estate agent must earn its commission. In other words, an estate agent is not generally entitled to commission unless its services were the effective cause of the transaction. However, it is often difficult to determine whether an agent actually caused a transaction, as opposed to having caused the events that enabled the transaction to occur.
The issue for the judge in Dashwood v Fleurets Ltd [2007] EWHC 1610 (QB); [2007] PLSCS 145 was whether a sole agency agreement, on terms that were in substantially the same form as those prescribed by the Estate Agents (Provision of Information) Regulations 1991, had dispensed with the requirement that, to be entitled to commission, an estate agent must have been the effective cause of the transaction.
A sole agency agreement confers on estate agents exclusive rights to market a property for a specified period and an entitlement to commission even though a sale is concluded after the exclusivity period, if the eventual purchaser was introduced during the exclusivity period by the agent or, indeed, by any other person. Consequently, if an agent introduces the eventual purchaser during the exclusivity period, it is entitled to commission, even if another agent concludes a deal subsequently.
The contract in this case provided that Fleurets would be entitled to commission “if unconditional contracts for the sale of the property are exchanged after the expiry of the period during which Fleurets have sole selling rights but to a purchaser who was introduced to you during that period whether by us or any other person including yourself or with whom we had negotiations about the property during that period”.
The judge remarked that the effect of this, and similar clauses, had not previously been directly considered by the English courts. He ruled that the clause absolved Fleurets from having to prove that it was the effective cause of the transaction – and could see no business reason for implying any such requirement into the contract because this would be inconsistent with the wording of the contract and was unnecessary. The wording “introduced to you” did not require Fleurets to “find a purchaser”; it was merely required to introduce someone who did eventually buy the property.
The decision means that estate agents that enter into well-drafted contracts, on similar terms, will be paid, even if instructions have been withdrawn, if the seller sells to a buyer who was introduced to the property during the exclusivity period.
Meanwhile, estate agents that remain responsible for “introducing a purchaser” were left in suspense about whether they must prove that they were “the”, or, as some recent authorities suggest, only “an”, effective cause of the transaction.
Sellers beware: each case will turn on its own facts. However, the judge warned, in some cases, two sets of fees may be payable as a result of the contracts of agency that apply.
Allyson Colby is a property law consultant
