Court of appeal provides certainty in commission claims

Blake Lapthorn Tarlo Lyons is pleased to announce that it successfully represented Hamptons International and Mrs Treld Bicknell in the Court of Appeal in a case which is now the leading authority on estate agents' commission. The judgment was handed down on Wednesday 23 April 2008.

Mrs Bicknell appointed a firm of estate agents to find a purchaser for her house. The agents were appointed in accordance with their terms of sole agency. At a viewing in July 2005, the agents showed the person who was to become the eventual purchaser around the property. However, the prospective purchaser declined to see the property in its entirety and no offer was made. The agents had given the impression to the prospective purchaser that the price was not negotiable.

The agents were unable to find a buyer for the property during the period of sole agency and Mrs Bicknell eventually instructed Hamptons International along with the original agents. In October 2005, Hamptons International arranged another viewing with the same prospective purchaser and subsequently negotiated the sale through to completion at below the asking price.

The Court at first instance found that the original agent was entitled to commission for simply introducing the eventual purchaser to Mrs Bicknell's property. The Court came to this conclusion despite the fact that the agent discouraged the purchaser from making an offer below the asking price and despite the fact that it was Hamptons International (who supported Mrs Bicknell throughout the litigation) who were eventually able to negotiate a successful sale with the purchaser at a reduced price.

In the leading judgment handed down by the Court of Appeal, Lord Neuberger concluded that estate agents' Terms and Conditions, which in most cases are based upon statutory Regulations, do not allow claims for commission in circumstances where they merely introduce the eventual purchaser to the property. In order to be entitled to claim a commission, an agent must instead introduce the purchaser to the sale transaction itself, not just the property.

Nick Arnold, lead partner on the case at Blake Lapthorn Tarlo Lyons comments: "The decision is significant because it is now clear that in order for estate agents to claim commission under either their sole or multiple agency terms in residential sales, they must do more than simply introduce a purchaser to the property. In practical terms, an estate agent must be the 'effective cause' of the sale transaction."