The right of an Estate Agent to earn commission is enshrined in common law. In general, commission is due when the Estate Agent has perform a client’s mandate, regardless of the amount of time or effort it took to perform the mandate.
In South Africa, there is no limit to the amount of commission an Estate Agent can charge. In the upper end of the market, this often results in impressive earnings. These facts, combined with the public perception that an Estate Agent is often seen to do very little in comparison with the handsome rewards received, has encouraged many people to join the Estate Agency industry. At last count there were more than 72,000 Estate Agents registered in South Africa. Although, in practise, not all are actively working as Estate Agents. Many Estate Agents are active only when the property market is buoyant and go dormant when the market slows down. Nevertheless, they are qualified to act as Estate Agents and may resume activity whenever they feel, with the provision that they comply with the requirements of the Estate Agencies Affairs Act. commercial estate agents
Giving rise to commission dispute
Before we go on, it should be noted that most property deals go through without dispute. However, this does not mean that of the deals that go through there was no reason for dispute. Simply not knowing is often a cause for valid claims not being made, mostly on the side of the client. For such cases there is nothing one can do in retrospect, since all wrongs committed by Estate Agents are automatically made right upon date of transfer. No need to repent or visit confession, all sins are just magically wiped away.
In most cases commission disputes arise simply as a result of misconception by the public as to their rights and duties when they give an Estate Agent a mandate. However, dispute also arises due to misconception of Estate Agents as to their rights and duties in performing a client’s mandate. Both types of misconception can be easily avoided if Estate Agents spend more time being “frank” about discussing commission before accepting a mandate. In practise, this does not always happen, whether because of forgetfulness, lack of diligence or because of pressure to get the mandate. Discussion surrounding commission is often relegated to a mandate form, placed in front of the client with the expectation of signing. This document merely serves to capture the basic details and rarely elaborates on definition of terms, rights or duties at length.
While it is sound business practise to record in writing the amount of commission and under what circumstances the mandate will be considered fulfilled, some mandates omit small points that are not in the Estate Agency favour or the document itself serves to cover “conditions of absence in agreement” covered by common law. For example, under common law, in the absence of an agreement to the contrary, an Estate Agent is not entitled to commission simply because, over a period of time, there has been a conscientious effort to carry out a clients mandate.
We have noted that certain common law principles govern an Estate Agent’s right to commission and that standard contracts are employed to cover such rights. We have also noted that such documents can fail to explain terms and can even be employed to protect the agent from common law principles that are not in the Estate Agents favor. Our remedy to reducing the potential for conflict is to encourage more open discussion and consultation of commission with clients by Estate Agents.
However, assuming such discussion were to take place, how is a person know whether or not an Estate Agent is due commission when they themselves do not have enough information to ask the right questions during such discussion.
In this section we cover some of the points clients should know, compliance points that are often neglected or forgotten by even the most seasoned and professional of Estate Agents.