Bruce & Company v. William and Elizabeth Ferguson, 28 May 2013 – estate agent’s entitlement to fee under sole selling agreement

Sheriff Court case in which commercial estate agents sought payment of fees under a sole selling agreement they entered with Mr and Mrs Ferguson in respect of the sale of licensed premises (known as “the Lounge”) in Bathgate. In terms of the agreement the estate agents were entitled to payment “upon conclusion of a contract for the sale of or other disposal of the business and premises…”.

The estate agents were initially instructed (in October 2010) to sell the premises at offers over £300k with sitting tenants. However no offers were received and the tenant of the downstairs bar area gave up his tenancy. The Fergusons decided to refurbish the whole premises and the tenant of the upstairs music venue (a Mr Ward, who had continued to trade for a short time after the bar stopped trading) relocated to other premises owned by the Fergusons. The premises were then remarketed without a sitting tenant at offers over £200k.

Discussions took place between the Fergusons and the estate agents to the effect that it was preferable to sell the premises with a sitting tenant which led to a belief, on the part of the estate agents, that the Fergusons wished to dispose of the premises by lease rather than sale. A former barman also intimated interest in the premises. The estate agents prepared further sales particulars (which were not approved by the Fergusons) advertising the premises for let.

The estate agents then (in July 2011), in the mistaken belief[1] that the former barman had, or was to, acquire an interest in the premises stopped marketing the property and invoiced the Fergusons for fee of £5k plus VAT. The Fergusons then entered missives for a 5 year lease of the premises with Mr Ward in August 2011.

The sheriff found that the estate agents were not entitled to payment in terms of the sole selling agreement finding that the existence of missives of let between the Fergusons and Mr Ward was not an event which gave rise to the estate agent being entitled to remuneration in terms of the agreement.  In particular the word “disposal” in the agreement related to the disposal of the sellers’ interest in land and that the missives entered into between the Fergusons and Mr Ward did not constitute a disposal of an interest in land nor was it a long lease and therefore did not trigger any entitlement to payment under the contract.

Appealing that decision, the estate agents argued (amongst other things) that the sheriff had been wrong to read the words “interest in land” into the agreement after the word disposal and that the word “disposal” should be given it’s plain and ordinary meaning which was the “rearranging of affairs”. The estate agents also contended that the missives of let were not simply a renewal of the existing lease: the missives referred to both parts of the property (upstairs and downstairs); there was a change in rent and a new date of entry. In coming to his conclusions the sheriff, it was argued, had placed an interpretation on the contract which was contrary to commercial sense or reality.

Those arguments were rejected by the sheriff principal who refused the appeal finding that, against the factual and statutory background[2], the sheriff had not erred in coming to his conclusions. The Sheriff Principal also took the view that the ordinary meaning of the word “disposal” was “alienation” and, with regard to the commercial purpose of the agreement, said the following:

“The suggestion that the commercial purpose of the agreement is to ensure the [the estate agent’s] remuneration in circumstances which include the other party entering into missives of let with the sitting tenant is, in my view, absurd. That contention disregards completely the fact that there are two parties to the contract and in respect that the purpose of the contract is to achieve either a sale of the premises or, as contended for by [the estate agents], a lease of the premises. The commercial reality or purpose of the contract is for both parties to achieve such a result. Without achieving the sellers’ purposes the estate agent will not receive remuneration. The commercial purpose contended for on behalf of [the estate agents] would be to have the other party as a “hostage” for the duration of the contract. It would mean that the seller would be unable to conduct and regulate their business affairs by renewing a lease or renegotiating a lease with an existing trading tenant without triggering liability to pay a fee to the estate agent”.

 The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.


[1] The Sheriff Principal noted that it appeared that the estate agents true position was that they thought the Ferguson’s had been going behind their back by entering into a lease with another individual without their knowledge.

[2] Section 2 of the Estate Agents Act defines the “disposing of an interest in land” as (amongst other things) the “transferring or creating in Scotland any estate or interest in land which is capable of being owned or held as a separate interest and to which a title may be recorded in the Register of Sasines” (A lease of 20 years or less cannot be recorded in the register of Sasines.)

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