In theory, getting paid should be pretty straight forward for an estate agent. A commission based on a percentage of the sale price is agreed and payable on an agreed trigger event – most likely on completion and from the proceeds of sale.
It begs the question why we have seen so much litigation in this field. Perhaps one answer is the value of the commissions to both parties; no one wants to part with a significant sum of money if they don’t think they have to. Another, though, is the failure of many estate agents to ensure that their commission arrangements are watertight.
This year the Supreme Court's decision in Wells v Devani [2019] UKSC 4 reminded us once again of the importance of getting your ducks in a row right at the outset. Here's our quick guide to the key things to watch out for:
Cover all bases
Don't assume that some things 'go without saying'. Ensure that you explicitly agree the terms on which you want to rely - even if you think it's obvious – before acting upon the client's instructions.
While the rate of commission might be your primary concern, agreeing on the trigger event upon which the commission becomes payable, the timing of the payment and whether or not you will be the only estate agent instructed is all crucial if you want to avoid disagreement at a later date.
Contractual requirements
Remember that all the usual essentials of contract formation apply. Offer, acceptance, consideration and intention to create legal relations are the basics but it can still be easy to lose sight of these during multiple conversations or in the back and forth of emails.
Lack of certainty can cause real problems. If an agreement is incomplete or otherwise uncertain, the Courts may not be able to enforce it. It is possible for the Courts to honour an apparent intention of the parties to enter into legal relations and for terms to be implied but it will depend entirely upon the particular facts of the case.
Put it in writing
We all know how easy it is to have a conversation over the phone, or in person, only to find later that one person's interpretation or memory of what was discussed is wildly different to our own.
When it comes to business, it's a costly mistake to make but one that has resulted in countless Court cases, many relating to estate agents' commissions. The only way to be sure you are on the same page is to put it in writing and get it signed.
The Estate Agents Act 1979
Section 18 of the Act requires you to provide prescribed information to clients before entering into the contract. The importance of this should not be underestimated - where an agent fails to comply the contract will be unenforceable without the permission of the Court.
Each case will turn on its own facts but in Wells v Devani the Supreme Court decided that despite the agent's failure the contract with the client was enforceable. However, the agent's fee was reduced by approximately one third.
Ensure you are the 'effective cause'
Buyers and sellers often speak to multiple agents but you need to make sure that it's you that makes the introduction and gets paid. If there is any doubt about that, it's important that you can show that you were the effective cause of the transaction. The way to do that is by ensuring you stay involved after those initial conversations. So make sure you play a pivotal role in the negotiations and getting that deal over the line.
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