Prospective property sellers and buyers are warned to be careful when dealing with several estate agents who are marketing the same property.
The court stated it was notoriously difficult where there were competing agents, to determine who was the effective cause and that it may be that more than one agent was entitled to the commission. Sellers could then find themselves liable to pay commission to two agents.
Sellers need to be aware of certain risks or they could end up paying double commission, says Gerhard van der Linde, principal of Seeff Pretoria East.
Van der Linde quotes a recent Supreme Court of Appeal ruling that emphasised that buyers and sellers need to be aware that they could be liable for unexpected estate agent commission claims on property sales.
“The court upheld an appeal against a KwaZulu-Natal High Court decision where an estate agency that had introduced a buyer to a home was not entitled to the agent's commission.”
He explains that an agent from another company had learnt the buyer was interested in the property.
She contacted them when she discovered the seller was willing to reduce the price, the sale was concluded and she was subsequently awarded the sale's commission.
Although the first agency had no mandate to sell the house, the Supreme Court appeal overturned the decision indicating the agency had taken the buyer and her husband to the property.
If that agent had not introduced them to the property, the couple would not have known the property was on the market. The first agent was thus the effective cause of the sale and entitled to the commission.
The court stated it was notoriously difficult where there were competing agents, to determine who was the effective cause and that it may be that more than one agent was entitled to the commission. Sellers could then find themselves liable to pay commission to two agents.
"A seller appoints an agent usually under a written mandate to find a willing and able purchaser in exchange for an agreed commission,” says Van der Linde.
If there is no mandate and several agents from different companies are involved, the eventual sale agreement could contain a warranty by the purchaser that they had not been initially introduced to the property by another agent thus providing indemnity to the seller should another agent successfully claim commission, he says.
It is absolutely essential that buyers and sellers are aware of this possibility, he points out.
“Always clarify this situation with your agent/s and make sure that you are not unwittingly going to end up paying a double commission.”
He adds that a sole mandate is preferable as it protects all concerned and the mandate can be drawn up for any period of time that the seller feels will be suitable.
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