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Entitlement to Agent Commission

Entitlement to Agent Commission

 

Entitlement to Agent Commission

 

To the point article by Allen West:

In instances where an estate agent introduces a prospective purchaser to a seller, but the eventual contract is concluded between the seller and the purchaser through a second estate agent, the first agent would be entitled to commission only if he/she can prove that it was his/her efforts which resulted in the contract being concluded, notwithstanding the intervention of the second agent (see Wakefield and Sons (Pty) Ltd v Anderson 1965(4) SA 453 (N)) .

The general requirements for the entitlement to commission are:

  • existence of a mandate (sole or open)
  • performance of the mandate
  • effective cause

Cognizance must be taken of the fact that where a property is listed with several agents, there is no rule that the estate agent who first introduced the purchaser is entitled to the commission (see Webranchek  v Jacobs and Co Ltd 1948(4) SA 671 (A) ).

Although the first introduction is necessarily an important factor, the real question is whether it was the first or the second agent’s efforts which were the effective cause of the sale.  Where an offer made by a buyer is rejected because it is too low, the estate agent who handled the offer would not be entitled to claim commission if the property is later sold to the same buyer through the efforts of a second estate agent who managed to raise the selling price because he/she could find suitable financing for the purchaser.

On the other hand, where a buyer prefers to buy a property in a particular area, but eventually ends up buying in another area, the wisdom and business acumen of the estate agent who originally introduced the buyer to the property in the latter area may constitute the effective cause of the sale even though another agent negotiated the sale.

There may be situations in which it is impossible to distinguish between the efforts of one agent and another in deciding who the effective cause of the transaction was.  In such situations it may well be that legally the principal is liable to pay commission to both estate agents:  from a legal point of view a principal has only him-/herself to blame if he/she appoints more than one estate agent without ensuring that he/she will be liable for the commission of only one estate agent.

A principal who lists a property with several estate agents should take the necessary precautions to protect him-/herself against the risk of paying double commission.

An estate agent should take great care to avoid a situation where a seller can be held liable to pay double commission.

Although legally it is the seller’s duty to take the necessary precautions to avoid this risk, the estate agent’s code of conduct states clearly that an agent may not introduce a prospective purchaser to any immovable property or to the seller, if he/she knows, or has reason to believe, that such person has already been introduced to the seller by another agent.

It is clear from the above discussion that sellers need to protect themselves from possibly paying double commission by appointing a sole agent to market the property, rather than multiple agents resulting in the dangers and uncertainties as referred to above.  The estate agent must also make the necessary inquiries as to the possible prior intervention by another agent.

 

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Neil

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