Help for sellers when estate agents fall out: Sue Fieldman on a court ruling that settled the fight over who collects the fee

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The Independent Online
THE property market is picking up, and 'sold' boards are springing up everywhere.

Estate agents hungry for their commissions after a long, lean winter will be sending their fee accounts to successful sellers post-haste.

Some of these sellers may become caught in a financial battle between rival agents, both claiming commission on the sale of the property. However, a recent decision in the Court of Appeal will make life easier for home-owners.

When property is difficult to sell, owners often change estate agents. A purchaser may view the property through the first agent but take no further action. Then he sees it again through the second agent and a sale proceeds.

The problem then arises of which agent is entitled to the commission. Before the recent case, it was thought sufficient for the first agent to show he had originally introduced the purchaser.

However, the appeal judges have decided that if the initial introduction does not lead to anything and a new agent reintroduces the property, the first agent may not be entitled to commission.

The case, Chasen Ryder & Co v Hedges, will have a familiar ring for many sellers.

The vendor, Mr Hedges, instructed the agent, Chasen Ryder, to sell his property - a nursing home in Dorset. The asking price was pounds 750,000.

The agent produced a series of purchasers, several of whom made offers, but none exchanged contracts.

One of the people introduced was a Mr Wilson. He visited the property, but made no offer and expressed no interest. In fact, he made an offer on another property.

The following year, the owner instructed a new agent on a sole agency basis. The new agent contacted Mr Wilson, who was known to the firm, and told him he was likely to be able to obtain planning permission for redevelopment.

He immediately agreed to pay the new asking price of pounds 935,000 and the sale was completed soon afterwards.

Both agents then claimed their fees. Mr Hedges paid the second agent, but disputed the claim of Chasen Ryder.

The Court of Appeal held that the second agent was the 'effective cause' of the transaction to the exclusion of the first agent, which was not entitled to commission.

Once an agent has demonstrated it was first on the scene, it will normally follow that it is entitled to commission. The seller must then show the sale was not attributable to an introduction by the first agent. Before the case, it had been thought the first agency would receive the commission, unless it could be shown that the interest it had generated in the sale had disappeared.

John Samson, the editor of Property Law Bulletin, said: 'All that you now need to do is prove, basically, that but for the work of the second agent, the transaction would not have taken place.'

Mr Samson has some practical advice for sellers who want to change agents. 'There is a safety route for the seller who wishes to switch from one agent to another. You should ask the first agent to produce a list of his introductions,' he said.

'Then ask both agents to agree a fee-sharing arrangement if the eventual sale is to anyone on the list.

'It sounds fine in theory but whether or not it would be workable in practice is another question. However, it is always worth asking,' he added.

'An alternative approach is not to grant a sole agency but to appoint a second firm as joint agents with the first. The terms of the joint agency need to cover the basis of commission.'

If you try to sell a house through an agent and then sell the property privately, you should be careful about purchasers who reappear on the scene after being introduced by the agent.

An estate agent will be entitled to the fee if it is the 'effective cause' of the transaction. In most cases, the effective cause is the original introduction.

More often than not, therefore, a seller is liable for the agent's fees.

(Photograph omitted)

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