Homeowners struggling to sell their property despite falling house prices and a shortage of buyers have been reminded by the Court of Appeal that they can only give one estate agent sole rights to the sale – or be forced to pay twice for the service.

It has ordered one homeowner to pay an extra £10,883 commission after she granted one firm sole agency status but failed to revoke this before the property was eventually sold by another estage agent. Lawyers say the case of Nicholas Prestige Homes v Sally Neal has important lessons for other homeowners, including the legally binding nature of contracts created verbally or by email.

Sonal Gandhi, a partner in the residential property group at solicitors Mishcon de Reya, said: "Anyone embarking upon the sale of their home must ensure that they fully understand the extent of the commitments they are entering into with their selling agents. A sole agency in these circumstances places a contractual entitlement on the agent to a commission even if it has played no role in the sale. In this case the Court of Appeal stood by the strict terms of the contract.

"The seller should have ensured that the previous agents she had appointed had stopped all marketing efforts in respect of her property as was her contractual obligation.

"This was a costly mistake. Had Ms Neal sought legal advice on the effect of the agreement she was being asked to enter into, she would, for a small fee, have saved herself over £10,000 in double commission as well as many months of stress during the litigation."

Lisa Shenton, head of conveyancing at Irwin Mitchell, added: "Market conditions for sellers remain difficult and while they may be tempted to list their property with more than one agent in order to increase chances of a sale, they should double-check the fees they will be charged.

"Our experience suggests that sellers in London sometimes list with more than one agent, whereas outside London, sellers list with a sole agent and if they do not find a buyer within a few months, may try another agent instead."

Jeremy Raj, a partner and head of residential property at law firm Wedlake Bell, added: "This case is also a reminder that even by agreeing to a contract in a relatively informal way – Ms Neal replied 'fine' to the agent's emailed proposal but a verbal agreement is just as strong - you are entering into a legally binding contract.

"With the housing market moving relatively slowly at the moment, the question of 'sole agency' is something that sellers should give careful to consideration to. If your property doesn't sell as fast as you hope or attract the price you expect, getting another agent in may be an expensive fix.

"Sellers also need to be aware that if you appoint a sole agent you will still need to pay commission if you organise a private sale, and similar conditions will apply for landlords who sell to their tenants. The good news for property owners is that this is an area where the Office of Fair Trading (OFT) has stepped up its activity in the last year or so, so agents should have taken steps to review, and if necessary, improve the clarity of their contracts."

Last year the OFT took some estate agents to court over terms and conditions that were held to be unfair. The court found evidence of commissions that were disproportionate to the services offered, and took issue with the wording and the way terms and conditions were printed – as well as the way services were advertised.

So homeowners who feel they have been unfairly treated can call on the OFT but they are also under a legal obligation to deal with estate agents fairly. Trevor Kent a former president of the National Association of Estate Agents said "Sole agency means just what it says – a firm so instructed is due their fee even if another firm sells and claims a fee. Sellers should be very careful to consider the terms of the contract with their existing agent when contemplating widening the field to bring other firms on board.

"By all means use more than one agent to market a home – a greater selection of buyers and an element of inter-agent competition can often speed a sale and sometimes even increase the sale price, but make sure that no agent believes they are the sole agent when others are offering the home too. The phrase to look out for is 'multiple agent' to avoid falling into the double fee trap."

Paul Tonkin, an associate at law firm Hogan Lovells, warned vendors not to be penny-wise and pound-foolish: "While the lower commissions offered on sole agency agreements can be tempting, estate agents struggling in a sluggish market are more likely than ever to go to court over lost fees where sellers have broken the terms of their agreements."

(Published by Telegraph - December 6, 2010)