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Its all in the Drafting!

The recent case of Estafnous v London and Leeds Business Centres Ltd (LLBC) showed what can happen where an agreement is drafted which does not cover the way the sale is finally concluded. In this case, LLBC wished to sell a property known as Regent House. In this regard, Mr Estafnous, an agent, introduced an interested purchaser, Mr Kapoor, to LLBC.

An agreement was drafted between Mr Estafnous and LLBC which set out that in consideration for introducing the buyer and seller and on completion of the purchase of the Property, the agent would be entitled to £2 million commission.

Following negotiations it was decided that Mr Kapoor would purchase the company that owned the leasehold interest in the property, rather than the property itself, in order to save on stamp duty. The purchase proceeded on a Share Sale Agreement between the purchaser and the seller.

When Mr Estafnous claimed his commission payment from LLBC it refused on the grounds that the property itself had not been sold and therefore the agreement did not apply. Unfortunately for Mr Estafnous, the Court of Appeal held in favour of LLBC.

The lesson to be learned from this is that agents should ensure commission agreements are drafted to cover all possible outcomes if they don’t want to be paid for the work undertaken.

One Comment

  • Aidan 26th November 2011 at 10:12 pm

    Another lesson to be learned is how UK judges seem willing to avoid exercising discretion even at the expense of justice itself.

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