Effective cause is not enough for estate agent commission | Legal Articles

 

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Effective cause is not enough for estate agent commission

Estate agent commission depends largely on the recording, clearly in writing and without leaving room for doubt, the exact circumstances in which the seller must pay the real estate agent his or her commission.

The importance of a written sale agreement

There was a recent case brought before the High Court where an estate agent claimed to have a verbal agreement with a seller to sell the property for R5m.

The agent was under the impression that if he found a buyer for R5,5m that he would be paid the R500k as commission. There was no official written agreement which made such a provision.

A buyer for the amount of R5,5m was found, however the buyer and the seller decided to cut out the agent and proceeded to conclude a private sale for R5m without the payment of commission.

As a result, the agent sued the seller for the R500k commission.

The law regarding estate agent commission

During the proceedings, the estate agent successfully convinced the Court that he was ultimately responsible for the sale.

However, his claim for commission was denied because he was unable to prove the basis of his entitlement to commission as well as the manner in which the commissions should have been calculated.

Unfortunately, there are some grey areas in the law related to estate agent commission. Therefore, as an estate agent, it’s not enough to simply prove that you were the “effective cause” of a sale.

Furthermore, each case will be treated individually but in general, an estate agent should be able to show and prove that:

  • They are in possession of a mandate from the seller
  • They have performed the mandate
  • They are in fact the “effective cause” of the sale
  • The commission claimed is set or calculated as agreed

Risks involved with a sale

As an estate agent, you are in no way guaranteed payment of commission, despite the time and effort you put into the sale.

As a seller, you may have to pay commission that you did not budget for. There is even the risk of paying double commission when you have had more than one estate agent working on your property.

What is the solution?

As both the seller and the agent, in order to avoid any risk involved with estate agent commission, make sure that you have a clearly written, comprehensive mandate agreement which has been signed by both parties before any marketing of the property commences.

Van Deventer & Van Deventer Incorporated – Property Attorneys South Africa

For legal assistance with securing estate agent commission or any other matters pertaining to property law in South Africa, contact us.

 

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