Insights

Update on Estate Agents’ Commissions


08/04/2011

In the Autumn edition of GDnews, we ran an article on estates agents’ commission and the High Court judgment of May 2010 in Glentree Estates Limited, Beauchamp Estates Limited and Savills L & P Limited v Favermead Limited which rejected a claim by estate agents for commission on the sale of a £50m property in Kensington Palace Gardens.

The Court of Appeal recently overturned the High Court’s decision and the estate agents won their battle for £1m commission on the sale.

The Court emphasised that this was a particular ‘one off case’ and, in light of the particular wording of the agency contract, the agents did not have to prove they were the effective cause of the sale in order to be entitled to commission. In this case, an introduction to someone who, in the event, purchased was sufficient.

In construing a contract, the authorities in general are strongly in favour of implying effective cause as a term, but this case shows that is not universally applicable if the contract itself “points in an opposite direction”.

However, the Court did state that, if necessary to do so, it would have concluded that the estate agents were the effective cause of the transaction, in the absence of any credible evidence that some other person(s) were the effective cause.

This was a one off type of case with special circumstances and it should be noted that it is unlikely that the ‘effective cause’ requirement would be displaced in a normal residential agency situation.

The Defendant, Favermead, has now applied for permission to appeal to the Supreme Court.

Gordon Dadds