Sellers, beware of expired mandates!

Sellers need to be aware that even after a mandate expires, they could still be held liable for commission claims by an estate agent.

Joe van Rooyen, licensee of Seeff Durbanville and Brackenfell, warned that a recent case in the Northern Gauteng High Court (Daubern Properties vs Swart) had confirmed this.

The case revolved around an estate agent who claimed R560k in commission plus interest from the sale of a property previously owned by the defendant. On 15 November 2004, the defendant had given the plaintiff a mandate to sell his property. This was a sole mandate that expired on 30 April 2005. The estate agent introduced the ultimate buyer to the property in March 2005, prior to the expiry of this sole mandate.

Van Rooyen pointed out that this particular case was complicated by the fact that the relationship between the agent who had concluded the initial sole mandate and the seller had soured, and there were various claims regarding numerous verbal agreements. Ultimately, the expiry of the mandate on a specific date as well as the deterioration of the relationship between buyer and seller was seen by the defendant to have rendered the initial agreement null and void.

He said the court found that, even though the written mandate had expired, the agent was entitled to the commission and ordered its payment plus both interest and costs. "This particular judgment demonstrated how an estate agent remained the effective cause of a sale agreement and therefore was entitled to commission as agreed in the initial mandate, even though the buyer and seller ultimately concluded the agreement without the direct involvement of the estate agent. The crucial issue was the fact that the buyer had initially been introduced to the property by the estate agent during the first mandate period."

As he explained, the judgement stipulated that it was not unusual for there to be a delay before a potential purchaser acted on his introduction to a property as well as a delay, while a seller decided between competing offers for his property.

He quoted the following from the judgement: "These facts alone do not disqualify an introduction from being the effective cause of a sale nor does the termination of the mandate of the agent who made the initial introduction."

Van Rooyen also warned that this court finding could be compounded if additional precautions weren't taken by both agents and sellers.

"Luckily, in this case, an agreement was not negotiated by another agent, which could have resulted in a double commission claim. Sellers need to know that, when a mandate expires, they could still be held liable for commission claims on transactions where the purchasers were introduced to the property during the initial mandate period. It is therefore important to exclude all potential purchasers that were introduced to the property by the original agent prior to signing a new or further mandate. This would prevent the possibility of paying out a double commission."

He said that one agent would have a legitimate claim due to the initial mandate and the fact that he or she had introduced the buyer to the property in the first place, while the other had a claim in terms of the current signed contract.

"However, the best news of all is that the Estate Agency Affairs Boards (EAAB) Code of Conduct, which is enforceable on all estate agents in the same way as promulgated regulations, is alive to this possibility and places a responsibility on all agents to warn members of the public of the dangers of double commission claims and to take steps to guard against them."

He said that an agent who failed to take appropriate steps to do so was in breach of the code and subject to legal sanction. "Whenever a property has been on the market and a new agency is to be mandated, then the outgoing agency should be asked to supply a list of potential purchasers that they had introduced during the period of their mandate. This should also include a list of those they believe could be entitled to brokerage, should they purchase the property."

Van Rooyen stressed that the incoming agency should be asked to address the question of a potential double commission claim to the satisfaction of the seller, in the event of any of the listed interested parties buying the property, even before a new mandate was signed.

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Thanks for this article, it is very informative.

I find this rather daunting and concerning. The seller is the one who pays the penalty whereas there are agent, or agents, and the buyer are involved in this situation.

The agent does not give a written record to the seller of the potential buyers whom they took to the property to view. It should be compulsory that a written document be updated all along of the duration of the mandate, with the date, name, ID, contact details and signature of the clients who viewed the property.

However the buyer is the one who unmistakably knows they have broken the law when the first agent introduced them to the property. I have overheard in conversations where a buyer stated he always returns to the owner of the property and offers cash and so obtain a better "deal". There lies the problem!!!! The seller is not always aware of the persons, names contact details etc, whom the agents bring around to the house. They do not supply the seller with a record to inform them in writing of these clients.

So in my opinion, the law should also take into consideration how the buyer is involved in this situation and they should also be held responsible for breaking the law. - Val

Any reputable company will ensure that there is a clause in the sale agreement protecting the seller against the purchaser's duplicity. If a private sale is negotiated then the Seller should have the agreement checked by his attorney before signing the agreement. – Barbara Becker