Agency awarded £75,600 after being cut out of property deal

An estate agency that was cut out of a property deal after finding a prospective buyer has been awarded its £75,600 commission in full.

The High Court heard that the agency was hired by a company wanting to sell a commercial property. The agency found a purchaser in Cyprus. The purchaser agreed to pay a finder’s fee.

Contracts were then exchanged between the purchaser and the seller. However, on the agreed completion day, the seller telephoned the agency to say that unless it agreed to waive the finder’s fee, the purchaser would pull out of the deal.

The agency refused. The next day, the purchaser formed a new company. A week later, the seller agreed to release the ‘original purchaser’ from any obligation and sold the property to the new company, which was to all intents and purposes made up of the same people.

The seller retained the original buyer’s 10% deposit and the new company paid the 90% balance. Both the seller and the purchaser then refused to pay any commission because the agency had not introduced the new purchaser.

The High Court ruled in favour of the agency. The judge was satisfied that on the balance of probabilities, the seller and the original purchaser had got together to avoid paying commission. The purchaser could have gone on and completed the original deal but chose not to do so.

The reason for that was to deprive the agency of its commission. The agency was therefore entitled to its commission plus interest, which amounted to a total of £75,600.

Please contact Sing Li if you would like more information about the issues raised in this article or any aspect of contract law.