Many people think that estate agents’ commissions are due to be paid on the completion of a sale – which is, after all, when they are normally paid – but when the commission becomes due depends on the wording of the contract.

In a recent case involving well-known London agents Foxtons, the court agreed that they were due a commission after they introduced a prospective buyer who paid a deposit and exchanged contracts but who then prevaricated and did not complete the purchase. After another buyer was introduced (offering a lower price), the homeowner rescinded the original contract, forfeiting the deposit, and made a contract to sell to the new buyer.

The new buyer had been introduced by another firm of agents which had a joint agency agreement. Once that sale was in hand, Foxtons claimed their three per cent commission based on the original sale price. Clauses in their contract with the vendor stipulated that ‘if at any time unconditional contracts for the sale of the property are exchanged... with a purchaser introduced by us.….all Foxtons’ fees become payable upon exchange of contracts’.

In the lower court it was ruled that no commission was payable, because it was considered that a ‘purchaser’ is a person who completes a purchase. However, on appeal, the judges considered that a purchaser is someone who enters into a binding contract for purchase (i.e. exchanges contracts) and that actual completion of the sale is not necessary for the commission to be payable.

We will be pleased to advise you on any matter relating to land or property.