News | November 12, 2018

The Supreme Court Considers – The Estate Agents’ Act 1979

The Estate Agents Act 1979 (“the Act”) is concerned with, amongst much else, what information must be given by estate agents to clients about their prospective liabilities. It indicates when they must provide it and what happens if they fail to do so. The size and enforceability agents’ fees is a fertile source of dispute and dissatisfaction, and so too are issues about the circumstances in which their commissions have become payable.

For the first time the Act is being considered by the Supreme Court, whose judgment is currently awaited. What might its decision mean for estate agents and their clients?

  • Estate agents – treated leniently.
  • Clients – may not be greatly protected.
  • Courts –  a wide discretion.

Section 18 of the Act

Estate agents are compelled to provide their clients with certain information and section 18(2) of the Act sets out of what that information must comprise.  It includes:  “…particulars of the circumstances in which the client will become liable to pay remuneration to the agent for carrying out agency work…” and “particulars of the amount of the agent’s commission…or particulars of the manner in which the remuneration will be calculated”.   

Under section 18(5) of the Act an estate agent’s contract will not be enforceable if the agent fails to comply with the obligation to supply the required information, except if the court permits it.  The power to permit enforcement of a contract in such circumstances is granted by section 18(6) of the Act.  The court can, of course, refuse an application by an agent to enforce his contract. It can also use its discretion to reduce the amount payable by a client, depending on the degree of the failure to comply by the agent.

The case of  Wells v Devani [2016] EWCA. Civ 1106; [2017] Q.B. 959; [2017] 2 W.L.R. 139; B2/2015/0597, in which Wedlake Bell acts for Mr Wells,  explores these issues.

What is enough for an agent to enforce a contract?

Mr Wells (W) was selling an number of flats.  Someone referred W to Mr Devani (D) whom W said he believed was a potential buyer, not an agent.  W and D spoke briefly.  D effected an introduction of buyers. It was not until after this that  W received D’s terms and conditions. D claimed commission of £42,000.  W said he did not appoint D as an agent.

Was D entitled to enforce the contract and receive the commission?  The County Court thought he was – but reduced the commission by ⅓.  It allowed D’s application even though it was possible D was silent on the subject of fees when speaking to W, there was no written agreement, D’s terms did not arrive until later and there had been a significant failure to comply with the Act. This outcome suggests a lenient approach towards agents in instances of non-compliance and that the Court’s discretion under section 18 (6) is wide. Although there had been little communication between W and D, the circumstances were enough to create a contract.

W successfully overturned this decision on appeal. The Court of Appeal (by a majority) allowed W’s appeal on the ground that no contract at all had been made. The event which would give rise to the agent’s entitlement to a commission had not been sufficiently specified.  There was no bargain enforceable by D, although one judge thought there was a contract capable of being enforced.  The case’s history suggests that little may needed to create an agreement under which clients incur liabilities to agents.

What will be decided next?

The Supreme Court’s decision, depending on which way it goes, could present an appreciable boon for estate agents by interpreting the requirements of the Act leniently and by showing the court being more willing to find the existence of a contract.  Or it could emphasise the prime importance of  clients’ rights, in an estate agency context, to know exactly what they are potentially in for, and when, before becoming liable.

What to look out for.

The case highlights:

  • the importance (from a client’s point of view) of establishing exactly the status of who they are dealing with, however seemingly casual the introduction, from very first contact;
  • the necessity of promptly recording at an early stage what has (and what has not) been agreed, especially in relation to commission;
  • that very little may be required for a commission agreement to come into existence;
  • that some leniency may be extended to agents, even where there has been a significant degree of non-compliance with the Act.