Estate agency

Citation

(1999), "Estate agency", Property Management, Vol. 17 No. 2. https://doi.org/10.1108/pm.1999.11317bab.001

Estate agency

Estate agency

Savills Land & Property Ltd v. Kibble [1998] EGCS 170 C.A.

This case concerned the interpretation of the commission clause in the agreement between the estate agent and the vendor of the property.

The sale was of a farm, including farmhouse, cottages and bungalows, subject to various tenancies, together with over 200 hectares (500 acres) of land. The farm was divided into two lots.

The estate agency agreement, clause 5.1, stated that half commission would be payable ‘‘if a ready, willing and able purchaser is introduced to the property and terms are agreed for the sale in accordance with the client’s instructions.’’

The estate agent introduced a ready, willing and able purchaser who made an offer for both lots, subject to contract. During pre-contract negotiations, the defendant withdrew one 22.6-hectare (56-acre) field from the sale. As a result, negotiations with the purchaser broke down one month later and the defendant withdrew the property from the market. The plaintiff submitted a bill for half commission relying on clause 5.1.

At first instance the judge found that the purchasers had been able and prepared to exchange unconditional contracts and therefore the estate agents were entitled to the sum claimed. The defendant appealed on the basis that the judge had misinterpreted the contract requirements.

The Court of Appeal held that the commission clause was protection for a sole agent when instructions were withdrawn. If a purchaser withdrew, the estate agent would earn no fee, but if the estate agent’s client withdrew then, according to the clause, the estate agent was entitled to half commission even if the withdrawal was not immediately before the exchange of contracts. The question was whether the purchaser was ready willing and able at the time to purchase by entering into a contract both parties presupposed would be drawn up for exchange. The time this had to be assessed was at the time of the vendor’s withdrawal. At that time the purchaser had been ready willing and able to proceed. Their Lordships felt that any other interpretation of the clause was unrealistic. The appeal was dismissed.

Duncan Investments Ltd v. Underwoods [1998] EGCS 98

This is an interesting case which illustrates the danger to the estate agent who steps beyond the role of simply advising his own client and adopts the role of advisor to both parties to negotiations.

The defendant estate agents were instructed by receivers to market 16 residential properties. One of the partners of the defendant firm thought he knew that the plaintiff firm, with whom he had had some previous dealings, might be interested in purchasing the properties as an investment. In fact, the plaintiff firm was only interested in purchasing the properties for a quick re-sale at a profit.

The plaintiff and defendant together inspected the properties. The defendant noted for each property a price for marketing on an immediate re-sale and a second ‘‘minimum achieve’’ price which he could reasonably expect on a re-sale within six months. There was a conflict of evidence as to who provided these figures but the court found that they were provided by the defendant and were informal, as he had claimed, only in the sense that they were not provided in writing. The court felt that they were too specific to be ‘‘general’’ as the defendant had claimed.

Eventually, on the basis of these prices, the plaintiff purchased the properties in February 1996 for £530,000. They were ultimately sold at a loss through other agents. The plaintiff issued a writ against the defendants alleging that they were in breach of the duty of care owed to the defendants in providing negligent advice as to price.

At first instance Lloyd J, although acknowledging that the defendant’s primary duty was to his own client, held that a duty was also owed to the plaintiff because the defendant knew that the plaintiff expected informed comment from the defendant on re-sale values, and the defendant assumed the plaintiff would rely on them. Thus the defendant had assumed responsibility to the plaintiffs and was responsible for the plaintiff’s losses.

The defendant appealed to the Court of Appeal but did not argue the assumption of responsibility point again even though it might reasonably have been argued that the advice was not a fully paid for valuation and the plaintiff should not have expected to rely on it as such.

Instead the defendant chose to rely on their standard disclaimer that ‘‘neither the agents nor any of their employees has any authority to give any representation or warranty about the property’’. The Court of Appeal held that this form of words is only appropriate to protect the vendor from liability for anything said by the agent, not to protect the estate agent against things said on his own behalf.

The second point raised by the defendant concerning the extent of their liability was successful. That the true value of the properties should be the aggregate of their individual values and not, as found at first instance, the discounted value of the progenies as a portfolio. This had the effect of significantly reducing the defendants’ liability to pay damages.