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Estate agents’ duties and entitlement to commission on abortive sales

Foxtons v O’Reardon [2011] EWHC 2946 (QB)

Foxtons introduced a purchaser who agreed to buy the Defendants’ property for £3.3 million in July 2007. Contracts were exchanged (entitling the Defendants to payment of a 5% deposit into a stakeholder account) but the purchaser failed to complete the sale. In June 2011, following protracted but ultimately unsuccessful negotiations with the original purchasers, the Defendants sold the property through a different agent to a different purchaser for £1.8 million. In these proceedings Foxtons claimed its 2.5% commission on £3.3m. The Defendants sought to resist the claim on a number of grounds, including (a) asserting that Foxtons owed them a duty of skill and care both in contract and in tort which was breached by introducing a purchaser who was unable to complete and (b) that by making commission payable on exchange of unconditional contracts, Foxtons’ terms and conditions were unfair within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999. They also counterclaimed for the costs of financing the abortive sale (including bridging finance), the diminution in value of the property, the costs of purchasing and then selling a second property and consequential losses. The counterclaim exceeded £1.5m.

HHJ Seymour QC rejected the Defendants’ arguments. In relation to (a) he said: “The basic service of an estate agent is simply to advertise property for sale and to introduce prospective purchasers to the intending vendor” and that commission is due once contracts are exchanged with such a purchaser, whether or not the transaction completes. In doing so, he followed Foxtons v Thesleff, another case in which Andrew Davis represented Foxtons. In relation to (b) he accepted Foxtons’ argument that the payment of commission was the main subject matter of the contract and as the term was in plain intelligible language it was outside the assessment of fairness under Regulation 6(2). The judge also accepted that the commission provision was entirely usual and in accordance with the Estate Agents (Provision of Information) Regulations 1991. Once contracts have been exchanged, the estate agents’ job is done and they may expect payment.

Andrew Davis represented Foxtons.

The judgment is available here.

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