When is an estate agent’s commission payable?

BY DEBORAH DEAN - JANUARY 12, 2016

When selling a house, there is generally value in appointing an estate agent to market the property and to negotiate the terms of the agreement, which terms are then confirmed by the seller and purchaser. The estate agent’s commission is usually paid by the seller, which amount can be negotiated between the estate agent and the seller. A question that is sometimes raised is, ‘when is an estate agent’s commission payable?’.

When considering the payment of an estate agent’s commission, it is important to consider both the common law and the Estate Agency Affairs Act, Act 112 of 1976 ( “the Act”).

In terms the Act, an estate agent must be registered with the Estate Agency Affairs Board and must have been issued with a fidelity fund certificate, before such agent will be entitled to commission. Once the commission has been paid to the estate agent, it cannot, however, be claimed back on the grounds that the estate agent had not been in possession of a fidelity fund certificate.

In terms of the common law, there are three requirements that must be met before an estate agent will be entitled to commission. Firstly, the estate agent must have a mandate to conclude the transaction on behalf of his or her principal. A mandate can be given impliedly or expressly. An implied mandate can be inferred from the conduct of the agent and the principal, however it is not easily assumed and the mere fact that the agent was the effective cause of the sale, or that the agent was under the impression that a mandate was given, are not sufficient to constitute an implied mandate. It is therefore advisable for a mandate to be clearly set out in writing and signed by both parties.

The second requirement is that the estate agent must have performed in terms of the mandate. This requirement will be deemed to have been fulfilled if, firstly, the estate agent introduced a willing and able purchaser. Secondly a binding agreement must have been concluded between the seller and purchaser, and if any suspensive conditions exist, such as bond approval, then such conditions must be fulfilled. Thirdly, the terms of the sale agreement must be substantially in accordance with what the principal actually envisaged.

Finally, the estate agent must have been the effective cause of the transaction, which means that it must have been predominantly the estate agent’s activities that resulted in the purchaser deciding to purchase the property.

Should you have any queries regarding estate agent’s commission or require our assistance with any property law related needs, please do not hesitate to contact one of our conveyancers at Goldberg & de Villiers Inc., namely Adri Ludorf, Tracey Watson-Gill, Nicholas Mitchell and Deborah Dean.

It will be our pleasure to do your business.

Call 041 501 9800 or email [email protected] or visit www.goldbergdevilliers.co.za

 

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