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When is a Sale Not a Sale

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In the recent case of Estafnous v London & Leeds Business Centres Limited [2009], an estate agent sued its client for payment of £2 million in commission that it claimed was due following a deal for the sale of Regent House Business Centre, London for £15.6 million.

The agreement between the agent and its client stated that the £2 million commission was payable to the agent "upon the Intending Buyer (or any other party related to or associated with the Intending Buyer) completing a purchase of the property".

The transaction was later restructured in order for the buyer to make a significant stamp duty land tax saving. Instead of proceeding with a straightforward sale of the property, the buyer set up a new company that then acquired the entire issued share capital of London & Leeds Business Centres Limited.

The High Court held that there was no question that agent had introduced the buyer but the agent was not entitled to commission, because the wording of the agreement did not specifically state that the commission would be payable if an alternative deal structure was used.

The decision may be surprising to some, especially considering that the property was the only asset of London & Leeds Business Centres meaning that the share sale could have had no other purpose than giving effect to the sale of the property. Despite this, the High Court took a very strict interpretation of the contract.

It is fair to say that the agreement was not a typical estate agent's agreement but the decision in this case highlights the necessity for the clear and detailed drafting of all terms and conditions.

In particular, agents should ensure that when acting for a corporation, their terms and conditions contain specific wording to make the company liable for paying commission on a sale of its own shares or those of its parent company.

For further information please contact Paul Gibbon at
Tel: 0114 290 6203

Or Rosemary Downs at
Tel: 0114 290 6206

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