For an estate agent to have a valid claim for commission under an open mandate that is not recorded in writing (where common law applies) the agent must prove:
- The existence of a mandate.
- The introduction of a willing and able buyer to the seller and/or to the property.
- That the person introduced ultimately purchased the property as a consequence of that introduction.
Understanding “Introduction” and its role in commission claims
The concept of “introduction” is often the cause of disputes, particularly when one agent introduces the buyer, but another agent concluded the sale. The key question is:
What caused the buyer’s interest in the property that led to the sale?
Example 1: First Agent is the Effective Cause
- The first agent informs a prospective buyer that a particular property is for sale.
- The buyer expresses interest as he knows the property likes it and wants to view it.
- Before the first agent can arrange a viewing, the buyer goes out with a second agent, and mentions the property, and the second agent manages to secure a viewing and facilitates the sale.
Here the first agent created the interest by informing the buyer about the property’s availability. The second agent merely facilitated the sale but was not the cause of the interest.
Example 2: Second Agent is the Effective Cause
- The first agent mentions the property, but the buyer dismisses it due to it being unsuitable (e.g. too few bedrooms; the lounge is too small etc)
- Later, the second agent persuades the buyer to view the property, highlighting potential modifications (where to add rooms; how the lounge can be extended etc)
- The buyer sees the potential, makes an offer, and the sale is concluded
Here the second agent created the interest that led to the sale, making them the effective cause.
Key Takeaways:
- The agent claiming commission must be the effective cause of the sale. Each case depends on its specific facts.
- An agent is paid for results, not for effort.
Considerations from Case Law:
- If an agent introduces a buyer who proceeds to purchase the property privately, there is little dispute – the agent’s introduction was the effective cause of the sale.
- If multiple agents claim to be the effective cause, the facts must be closely analysed to determine if an intervening factor influenced the sale.
- A change in purchase price or the second agent reducing their commission to secure the sale is not considered a new intervening factor.
The Importance of a Willing and Able Buyer
At the time of the introduction, the buyer must be both willing and able to purchase.
For example:
- The first agent introduces a buyer who loves the property (willing) but lacks funds (unable).
- Months later, the buyer inherits money and proceeds with the purchase through a second agent.
- In this case, the first agent introduced a willing buyer, and the second agent introduced an able buyer – neither can claim to have introduced a willing and able buyer. Depending on the facts, the seller could be liable for double commission.
How Sellers Can Protect Themselves from Double Commission Claims
Open mandates create a risk of disputes and potential double commission claims. The best way for sellers to protect themselves is by granting a sole mandate- but it must be
- In writing.
- Clearly understood in terms of conditions and consequences.
Written by Maria Davey