Sellers, guard against the dreaded 'double commission'
Category Property Advice
Home sellers need to take special care now not to expose themselves to the possibility of having to pay a 'double commission' when their properties are sold.
If you choose an open mandate, you must insist upfront on a clause in the mandate that specifically provides for commission to be shared in any instance where more than one claim arises.
This warning comes from Gerhard Kotzé, MD of the RealNet estate agency group, who says double commission claims most usually arise when sellers award open mandates, or just allow multiple agents to market their property without a formal mandate, in a misguided effort to broaden its exposure to prospective buyers."In such cases, it is easy for a buyer to be introduced to the property by one agent, but to actually conclude a purchase through another - and for confusion and disagreements to arise about which agent was actually the 'effective cause' of the sale and entitled to claim the sales commission," says Kotzé.
"Legal action may eventually be the only way to resolve these disputes, and a recent judgment by the Supreme Court (Wakefields Real Estate v Attree (666/10) [2011] ZASCA 160) underlines the fact that the decision will not automatically go in favour of the agent who finalises the sale. The agent who first showed the buyer a property has in many cases been held to be the effective cause of that sale and entitled to claim commission - even when the home seller had already paid commission to the second agent."
Over the years, he says, the courts have made it clear that each case has to be considered on its own merits, but have also stuck to the principle that agents should not be able to "reap where they have not sown" - and this has in most instances resulted in the property sellers having to pay a second commission without much recourse except further legal action to try to reclaim the first commission.
"Consequently, it is important for sellers to know how to protect themselves from this possibility - especially in the current slow market, when they may be more desperate to get their property sold and more tempted to have several agents working on it at the same time."
Kotzé says the most obvious - and safest - way to do this is simply to award a sole mandate to a reputable agency that has the backing of a large national group. "This step not only protects sellers against double commission claims, but also assures them of wide exposure through the group's referral networks.
"It also stands to reason that agents will work harder to sell those properties on which they hold sole mandates than on those where it is quite possible that another agent could conclude a sale and reap all the reward."
Kotzé says sellers can also try to obtain indemnity against a double commission claim when there is more than one agent involved in a sale, but that this will only be valid if the agent who was in fact the 'effective cause' of the sale grants it - before the sale agreement is signed by themselves and the buyer.
"So in cases where the sellers do decide on an open mandate, they really must insist upfront on a clause in the mandate that specifically provides for commission to be shared in any instance where more than one claim arises. And if they aren't sure whether they are properly covered, they should ask their own attorney to look the mandate agreement over before they sign it."
Author: Harcourts South Africa
