Property Talk

Real life scenarios estate agents deal with

As part of the Estate Agents Affairs Board's (EAAB) continual development programme for registered estate agents several interesting updates are provided as training for agents during the course of the year.

The legal update module provided by high court advocate Debra Vial for 2018 was particularly interesting and addressed several of the typical real life scenarios estate agents deal with.

One of the issues addressed in the principles of case law was the estate agent's mandate, the payment of commission and the concept of effective cause and how this is assessed.

The first important item to note is that an estate agent's claim of commission is based upon the mandate provided to render estate agency services. In the absence of a mandate an estate agent is not entitled to payment of commission, even though that estate agent's efforts might have been the effective cause of a sale transaction.

The EAAB's Code of Conduct specifically requires a sole mandate to be in writing and time bounded. The problem of course occurs with open mandates, which are not specifically required to be in writing. Herein lies the difference between best practice of astute and savvy estate agents and those less experienced to ensure all their mandates, including open mandates, are reduced to writing.

In the event that sellers resist providing written mandates, these home owners should be educated in terms of the real risks they face regarding a double commission claim, and be encouraged to only engage with estate agencies that insist on reducing all to writing.

The estate agent becomes entitled to commission based on his or her performance in being able to deliver a willing and able buyer, to conclude a binding sale agreement, on terms substantially in accordance with the terms of the mandate.

Here is the interesting part. It is not sufficient for the estate agent merely to have been a cause of the sale. The introduction alone is not enough to earn commission when other factors had actually resulted in the conclusion of the sale.

Rushing a prospective client to a viewing or pointing out available properties for sale as you drive past are actions, which simply may not prove sufficient to earn commission.

When deciding effective cause the following important aspects are taken into account:

1. The nature and effect of the estate agent's efforts;

2. The period elapsing between the estate agent's introduction and the conclusion of a sale;

3. The terms and conditions of the sale agreement versus the terms of the estate agent's mandate; and

4. Whether the efforts of the estate agent resulted in the conclusion of the sale agreement notwithstanding the intervention of any other parties. Adv. Vial emphasizes that where a property is listed with a number of competing estate agents there is no rule entitling the estate agent first introducing the buyer to the property to receive commission.