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Ally Tow
Ally Tow,
Second bite of the cherry for estate agents?
18 January 2011

In 2008 the Court of Appeal case of Foxtons Limited v Pelkey Bicknell & Anr found that to be entitled to commission estate agents must show that they introduced the purchaser to the purchase and not merely to the property. 
In that case, Foxtons had been appointed as sole agents. Their terms of business stated that they were entitled to commission if, at any time, contracts were exchanged with a purchaser introduced by them during the period of the sole agency.

Foxtons had shown the property to the potential purchaser who, at the time, did not want to buy it. Three months later, after Foxtons’ sole agency had ended, the same potential purchaser saw the house by arrangement with another agent and purchased the property. Commission was paid to the other agent and Foxtons brought proceedings to recover its commission from the seller. 
The Court of Appeal implied a clause into the agreement that the agents should be the “effective cause” and dismissed its claim.

A recent case has now given agents a “second bite of the cherry” by seeking an alternative claim for damages for breach of contract.

In Nicholas Prestige Homes (“NPH”) v Neal [2010] the court at first instance dismissed NPH’s claim for commission finding that NPH were not the “effective cause” of the sale. However, the court omitted to deal with the alternative breach of contract claim. Accordingly, NPH appealed.

In November 2006, the seller had met with two representatives of NPH. She already had her property marketed for sale with various agents but agreed to terminate all instructions with other agents, save for one which was to terminate with effect from 1 January 2007. Pending termination of all the agreements, the seller instructed NPH initially on a multiple agency basis but then on a sole agency basis when the last of the other agreements was terminated.

The sole agency agreement included provision that the seller agreed not to market the property for sale privately or to instruct any other agents to do so during the sole agency period.

The eventual purchaser of the property saw the property on and tried to contact NPH but the line was engaged. She left a message but then telephoned Plumm, other agents who were also shown by Rightmove to be marketing the property. Although NPH took immediate steps to return the purchaser’s telephone call she continued to deal with Plumm.

The court found that there was a breach of contract on the part of the seller by other agents being instructed during the sole agency period and awarded damages to NPH for the loss suffered as a result. The court held that there was a real chance (as opposed to purely speculative) that NPH would have had a chance of selling the property themselves. That real chance had been lost to Plumm and the seller was therefore ordered to pay damages to NPH for the full amount of the commission that it would have earned but for the lost chance.

 For more information about this case or to find out more about how the Dispute Resolution team can help you please contact Ally Tow on 0118 952 7206 or email [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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