The judgment in a recent case, Wells v Devani [2016] EWCA Civ 1106 means that it could now be significantly more difficult for land agents to make a successful claim to be paid for their efforts. The case involved the introduction of a buyer by the land agent but the principle would seem to apply equally to other types of land agents such as those who introduce sellers or lenders.
The case concerned 6 flats in a development in Hackney, London, being the unsold portion of a development of 14 flats. The land agent agreed to try to introduce a potential purchaser for a fee of 2% plus VAT. Upon the successful introduction of a purchaser and the completion of the purchase by that purchaser, the land agent sought his fee.
The Judgment
The Court of Appeal found (by a majority of 2-1) that the land agent was not entitled to any payment.
The basis for the Court’s decision is that there was not a completed agreement between the seller and the land agent for payment of the fee. The Court found there was a failure to identify the “trigger event” that would cause payment to fall due. The Court was unable to find that it was obvious or reasonable that the trigger event was the completion of the purchase as there were other possibilities (e.g. the introduction of a person who makes an adequate offer, usually not less than a stipulated amount, irrespective of whether he then proceeds to buy the property).
Why this is important
Land agents’ work is valuable: it avoids stagnation in the property market and can benefit the public purse (through SDLT). However, land agents often work on a speculative basis. They may make numerous introductions with minimal opportunity to introduce detailed contractual terms, which are difficult to track and which may not bear fruit for many years. They are often dealing with sophisticated principals, who will not pay them unless they absolutely have to, and even then, it may be a bumpy ride.
This decision may therefore make a difficult job considerably more difficult. It is also not currently clear if there are any good routes around it apart from the obvious, i.e. to agree explicitly the trigger event. Where land agents do more than merely effect an introduction, they may be required to specify the trigger point under the Estate Agents Act 1979 and the Estate Agents (Provision of Information) Regulations 1991 in any event. The law of unjust enrichment might also provide an alternative way for land agents to recover their fees, but there is no indication in the report whether such a claim was made in this case.
