Calling all estate agents: good and bad news from the Supreme Court

15 February 2019

Author: Claire Elliott
Practice Area: Real Estate

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On the 13th February the Supreme Court announced its judgement in the case of Wells v Devani [2019] UKSC 4. On the face of it, the ruling is good news for estate agents, but it comes with a health warning.

  • The facts

Mr Devani was an estate agent who had introduced a buyer to Mr Wells following a phone call during which Mr Devani said he had mentioned that his commission would be 2%. Mr Wells denied that commission had ever been discussed and refused to pay anything to Mr Devani when he sold his flats for £2.1m to the buyer whom Mr Devani had introduced. The trial judge accepted Mr Devani’s version of events and ordered Mr Wells to pay commission, but the Court of Appeal subsequently found that there was no contract between the two because there had been no discussion of the circumstances in which commission would be payable. As such, Mr Wells was not obliged to pay, so Mr Devani appealed to the Supreme Court.

  • The good news

The Supreme Court has taken a common-sense approach and found that there was an enforceable contract, even though the discussions between Mr Devani and Mr Wells were informal and vague at best. While it wasn’t spelt out, the “natural understanding” was that commission would be payable on completion from the sale proceeds, and this understanding formed the basis of an enforceable contract. Estate agents should welcome this aspect of the decision: it is now less likely that clients will be able to escape paying commission in circumstances where introductions/sales have followed informal discussions but a deal has clearly been made as to commission nonetheless, albeit that terms of business have not yet been provided.

  • The bad news

All that said, the case is a reminder of the importance of providing potential clients with terms of business as soon as possible after an initial contact is made, as required by s.18 of the Estate Agents Act 1979. Failing to do that can mean that your commission will be reduced or even entirely disallowed. At the very minimum, you will have to go to court to obtain an order permitting you to enforce your contract. Mr Devani had sent his written terms of business to Mr Wells, but only after Mr Wells had accepted his buyer’s offer, which was too late to comply with the 1979 Act. The trial judge deducted one third of the commission to take account of this failure, and the Supreme Court upheld that ruling. While it is perhaps heartening that the court did not see fit to disallow any commission altogether, the fact remains that, had Mr Devani supplied his terms promptly, he would not have had to spend ten years in litigation for an award which was quite possibly dwarfed by his legal costs.

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