The Sole Agency That Became a Chain
You are sole agent for the sale of a freehold retail investment at a guide price of £1.4m, reflecting a net initial yield of 6.2%. The tenant is a national coffee chain on a 15-year lease with 11 years unexpired, a tenant-only break at year 10, and a rent review in two years. Your agency agreement is sole agency at 1.5% plus VAT, with a 12-week term and a 14-day 'protected period' after termination. Six weeks in, a buyer introduced by you offers £1.35m; the owner rejects it. The owner then, without telling you, negotiates directly with a different buyer introduced by a rival agent and agrees £1.38m. The owner terminates your agency and claims no commission is payable because 'you didn't find the buyer'. Your file shows you introduced the eventual buyer to the property (they viewed with you) but they subsequently dealt through the rival agent.
1. Advise on whether commission is payable and on what basis.
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Commission depends on the terms of the agency agreement and the law on introduction.
Sole agency: under a sole agency, the owner is liable to pay the sole agent's commission if the property is sold during the term, even if the buyer was introduced by another agent - unless the agreement expressly provides otherwise. That is the commercial purpose of sole agency: the owner cannot bypass the sole agent by using a rival. If the sale completes within the 12-week term, the sole agent is likely entitled to commission on the £1.38m.
But the facts matter: the owner terminated the agency and the sale was agreed with a buyer the rival agent introduced. If the sale completes after termination, the protected period (14 days) may still capture it if the buyer was introduced by you during the term. Here the eventual buyer was introduced by you (they viewed with you), so the protected-period clause is engaged - commission is likely payable even post-termination.
Quantum: 1.5% + VAT on £1.38m = £20,700 + VAT = £24,840. If the rival agent also claims, the owner may face a double-commission argument; the sole agency clause is what protects you. Check the agreement for a 'ready, willing and able' clause - if the owner rejected your £1.35m offer, that clause may not help, but the introduction/protected-period route does.
Advise the owner in writing, citing the clauses, and be prepared to pursue the debt.
2. The owner argues the yield was misstated because the guide price implied 6.2% but the sale at £1.38m produces a lower yield. Does this affect your commission?
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No. The guide price and indicative yield are marketing estimates, not a warranty of value or return. A yield is a function of price and rent; if the sale price is £1.38m rather than £1.4m, the yield moves mechanically - that is not a misstatement by the agent, it is arithmetic. The owner agreed the guide price and the marketing, and the eventual price was negotiated by the owner.
Commission is calculated on the actual sale price, not the guide price, unless the agreement says otherwise. So the commission is 1.5% of £1.38m, not of £1.4m. The owner cannot use the yield point to avoid commission; at most it is a negotiation point on price, which the owner controlled.
Advise the owner that the yield was clearly stated as indicative, that the guide price was a marketing figure, and that the commission clause operates on the achieved price. Keep the correspondence factual and refer to the agency agreement.
3. What should you have done differently to protect the agency's position?
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- Confirm the sole agency in writing at the outset, with clear clauses on: commission trigger (introduction vs completion), the protected period, and what happens if the owner deals with a buyer introduced by another agent during the term.
- Log every introduction - date, buyer name, viewing, particulars sent - so the protected-period and introduction arguments are evidenced.
- Put the guide price and yield in writing as indicative, with the basis of calculation, so there is no later dispute.
- Follow up the rejected offer in writing, noting the owner's decision and the risk that a lower offer may not be matched.
- On termination, confirm the protected period in writing and identify any buyers introduced during the term who fall within it.
- Keep the file so that if commission is disputed, the introduction trail is documented. This is the difference between a recoverable debt and an unprovable claim.