Pictured above: Mark Hodgson, Partner with Talbots
Solicitors
A recent case, from the Court of Appeal, highlights the
importance of sellers understanding the terms upon which they
appoint their estate agent, reports Mark Hodgson, Commercial
Property partner at Talbots Solicitors.
In the case of Nicholas Prestige Homes v Sally Neal, a seller
has lost her case after breaching a sole agency agreement with a
firm of estate agents. She sold her property through another agent
during the sole agency period, and the Court of Appeal has ruled
that she will now have to pay the commission the firm would have
earned, of £10,883.
In this case, the Court of Appeal stated that the breach of
contract caused the agent, Nicholas Prestige Homes "to lose the
very real and substantial chance of earning the whole of its
commission, and it was accordingly entitled to the damages based on
the commission it would have earned".
Mrs Neal put her property on the market for sale with a number
of agents in 2006. In December, she withdrew instructions from all
but two agents and informed Nicholas Prestige Homes that as from
January 1, 2007, they would be her sole agents. However, she failed
to cancel instructions with the second agent.
Later in January, the eventual buyer of the property rang
Nicholas Prestige Homes but the phone was engaged and she left a
message. Nicholas Prestige Homes rang straight back, but failed to
get through to the buyer. The buyer therefore called the other
agent who was still representing Mrs Neal, and eventually bought
through them in May 2007.
Nicholas Prestige Homes issued proceedings against Mrs Neal,
claiming either their commission or damages for breach of contract.
At court, the district judge found that as Nicholas Prestige Homes
had not introduced the buyer, they were not entitled to their claim
for commission, but failed to consider the claim breach of
contract.
Nicholas Prestige Homes took their claim all the way to Court of
Appeal upon the basis that the judge should have considered their
claim to compensation for breach of contract. The court agreed and
ruled that the seller had been in breach of the contract after
saying that no other agent would be instructed after 31st December.
On this basis it was more than probable that, but for the breach,
the firm could have sold the property to the eventual
purchaser.
The seller therefore had to pay the firm damages, based on the
commission it would have earned.
Although it is not specifically mentioned in the case report,
Mark adds that it should be noted that Mrs Neal would also have had
to pay the other estate agent's fee.
It just goes to prove, warns Mark, that sellers must be aware
that sole agency means sole agency, and that sellers who breach
this type of agreement could find themselves having to pay a double
fee.