Estate Agents’ Commission: Supreme Court considers Courts’ discretion to allow estate agent’s commission based on verbal agreement

Insights - 29/04/2019

In February 2019 the Supreme Court held that a verbal agreement reached between an estate agent and a property developer, which provided for the payment of the estate agent’s commission, should be upheld.

What we know:

We know that section 18 of the Estate Agents Act 1979 requires:

  • estate agents to give clients information before entering into a contract for estate agency work including strict details of commission, other remuneration and fees for services other than estate agency work; and
  • where a contract does not comply with the legislation it will not be enforceable unless there is a court order making it valid.

Wells (Respondent) v Devani (Appellant) [2019] UKSC 4

Mr Devani (an estate agent) contacted Mr Wells (a property developer) by telephone, offering his services with the sale of some flats in return for commission. Shortly after that call Mr Devani found a buyer, the transaction completed and Mr Devani claimed his commission. Mr Wells refused to pay, disputing the content of the call and alleging Mr Devani did not mention commission. There was no written contract delivered to Mr Wells on or before the oral agreement was reached. Mr Devani sent a written contract to Mr Wells a week or so later.

Amongst other things, Mr Wells argued that Mr Devani’s failure to provide written terms in accordance with section 18 had prejudiced him. The key issue for the court under section 18(6)(a) is whether it would be just to dismiss the estate agent’s claim for fees in its entirety. If the fees are allowed, then under section 18(6)(b) the court would need to consider the prejudice suffered by Mr Wells because of the failure to provide written terms of business.

The court at first instance held that commission was payable but should be reduced by 1/3 due to the prejudice suffered by Mr Wells. The prejudice was said to be Mr Wells’s inability to consult with his business partner and his solicitors before agreeing to Mr Devani’s terms. He was also open to an uncertainty with regards to the time for payment of the fees and that could have caused problems with Mr Well’s other estate agents.

Mr Wells successfully appealed that decision. The Court of Appeal held that no commission was payable. It found that the agreement was too vague and terms for the payment of commission could not be implied into their arrangement by the court.

The Supreme Court disagreed with the Court of Appeal in favour of Mr Devani.  It said that there was no doubt that the parties intended to create legal relations and Mr Wells understood Mr Devani’s entitlement to commission. Mr Devani should have provided written terms at the start, albeit the period of delay was less than one week. There was criticism of the reasoning behind the judge at first instance’s decision to reduce the fees, however the Supreme Court would not go as far as to say the judge exercised his discretion so wrongly as to overturn this element of his decision.

If you have any questions regarding the above please contact Kellie Williams-Jauvel, Partner in our Dispute Resolution team. Kellie is contactable by telephone on 020 8971 1031 or by email at [email protected] 

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Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.