Commission disputes: A comprehensive guide for sellers
18 Aug 2023
Introduction
When sellers enter into a mandate agreement with estate agents for the sale of their property, it is crucial to understand the potential remedies available to estate agents in case of disputes over commission payments. This comprehensive guide aims to educate sellers on the various causes of action and legal requirements that estate agents may rely on to enforce their claims for commission. By gaining knowledge about these remedies, sellers can make informed decisions and mitigate the risks of disputes arising during or after the sale process.
The importance of commission claims to estate agents
Estate agents play a pivotal role in facilitating property transactions, investing their time, resources and expertise to find suitable buyers and negotiate successful deals. Commission serves as the primary form of remuneration for estate agents, making the ability to claim commission crucial for their financial viability. Sellers must recognise the significance of commission claims and the potential legal implications when engaging estate agents.
Claim for payment of commission based on performance of mandate
Estate agents are generally entitled to commission if they have fulfilled the terms of their mandate agreement with the seller. The specific terms of the mandate agreement, including when commission is earned and payable, determine the estate agent’s entitlement to commission. It is important for sellers to clearly define these terms in the agreement to avoid ambiguity or disputes.
Claim for payment of commission based on commission clause in sale agreement
Many estate agents use standard pre-printed contract documents containing commission clauses that stipulate the conditions for commission payment. These clauses, often considered agreements for the benefit of the estate agent, enable the estate agent to enforce commission payment against the party liable for payment as specified in the clause. Sellers should carefully review and understand these clauses before signing any sale agreements.
Claim for damages due to seller’s breach of mandate
If a seller prevents an estate agent from fulfilling their mandate by breaching the agreement, the estate agent may have a claim for damages. This claim is based on the seller’s breach of contract and the resultant loss suffered by the estate agent. Sellers should be aware of their contractual obligations and potential liability for damages if they interfere with the estate agent’s performance.
Enforcement of penalty clauses
Some mandate agreements or sale agreements may include penalty clauses that impose financial consequences on sellers in case of specified breaches. These clauses, governed by the Conventional Penalties Act 15 of 1962, allow estate agents to claim a predetermined amount as a penalty for the seller’s non-compliance. Sellers should be cautious of the terms and implications of such penalty clauses.
Claims based on third-party rulings
In certain cases, sellers may agree to abide by a third-party ruling to resolve disputes between multiple estate agents regarding their entitlement to commission. While these rulings may not be binding on the sellers themselves, failing to implement the ruling could lead to further legal action by the aggrieved estate agents. Sellers should carefully consider the potential consequences before agreeing to third-party rulings.
Claims based on enrichment for quantum meruit
In exceptional circumstances, estate agents may pursue an enrichment claim based on quantum meruit, seeking payment for the value of their services even if they did not meet all the requirements for commission under common law. However, the scope for such claims is limited, and sellers should exercise caution when confronted with such demands.
The effective cause requirement
Under common law, estate agents are typically entitled to commission only if they can establish that their efforts were the effective cause of the transaction between the seller and the buyer. Proving effective causation can be challenging, particularly when multiple estate agents or the seller’s own efforts are involved. Sellers must understand the legal requirement for effective causation and its potential impact on commission claims.
Conclusion
When engaging estate agents for the sale of a property, sellers should be aware of the remedies available to estate agents in case of disputes over commission payments. By understanding the different causes of action and legal requirements discussed in this comprehensive guide, sellers can enter into mandate agreements with clarity and make informed decisions throughout the sale process. Taking proactive steps to address potential disputes can help sellers and estate agents maintain a positive working relationship and ensure a smoother transaction.
Contact an expert at SchoemanLaw for your conveyancing and property law needs.
Written by Johan de Lange, Senior Professional Assistant – Attorney at SchoemanLaw Inc.
See also:
- Cancellation of a property sale agreement. What are the implications?
- Property law changes expected
- New rules for the property sector
- The Property Sector Transformation Code: Estate agent’s take note
- Drafting Sale of Immovable Property Agreements – Part 1
