News & Views

Don’t forget the Estate Agents Act 1979

Omitting to issue written terms and conditions can prove to be a very costly mistake indeed for any estate agent.  Regardless of the circumstances, you must ensure that you follow the so-called “information requirements” contained in the relevant legislation, otherwise you put at risk your prospects of receiving your commission.

At the outset of any relationship with a client, and before entering into any contract, an estate agent must provide certain information in writing, such as the amount of commission the estate agent will charge, and the circumstances in which it will be payable. So say (primarily) the Estate Agents (Provision of Information) Regulations 1991. If you don’t, you cannot enforce payment without first obtaining an Order of the Court.

Sherrards recently represented two prominent property developers. It was alleged that they instructed an agent – Mr X – to find a buyer for one of their development properties and that a specific fee was verbally agreed. This was strongly disputed.

The sale completed to a buyer Mr X claimed to have introduced to the property. Mr X sought to recover a fee, and did so in the most aggressive manner permissible by law, serving a statutory demand.

Sherrards promptly wrote to Mr X pointing out not only that it was denied that there was ever a contractual agreement to pay him any fee, but that regardless it was clear that there was a dispute between the parties. This meant that the statutory demand route Mr X had taken was wholly inappropriate and that, without applying to Court for an Order, he could not pursue his claim.

Sherrards urged Mr X to withdraw the statutory demand but he did not. In fact he did not even respond.

Faced with the threat of bankruptcy, on behalf of the property developers Sherrards were therefore forced to apply to the court to have the statutory demand set aside. They did so on the basis that there was demonstrably a substantial dispute, and relying in the main on section 18(1) of the Estate Agents Act (and the relevant provisions of the Regulations). At the hearing, the Judge agreed and found that Mr X was wrong to have pursued the matter in the aggressive way that he did, since it was beyond all question that there was a dispute between the parties. In particular, the Judge noted that Mr X could not pursue the matter without first obtaining a Court Order, which he had of course failed to do. For this Mr X was heavily penalised in costs running to many thousands of pounds.

It is of paramount importance that estate agents ensure they comply with the statutory information requirements. Also, think very carefully and take specialist legal advice before making use of the statutory demand procedure, because it is only in tightly-controlled circumstances that it can be deployed.

The case was handled by litigation Partner Barney Laurence and solicitor Hannah Jones.  For further information please contact Barney or the dispute resolution team.



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