The absence of a written agreement could mean no commission, warns Knight Frank SA Md

21 October 2013

Once again, a court case has come up where there is a dispute over commission paid on the sale of a property and it has become quite clear that sellers must be prepared to sign a mandate with their estate agent and should not think it unreasonable for the agent to ask for this, says Lanice Steward, managing director of Knight Frank Residential SA.

In line with the Consumer Protection Act and the need for complete disclosure, a seller must be willing to give complete information on the state and condition of the property he is selling, she said.

It is prudent, because the CPA has not been tried and tested in court with regard to a seller, who is an individual selling his property and not a vendor, i.e. a developer, to ensure that there is complete and honest information given to the buyer on the condition of the property, she said.

At the same time, it is not unreasonable of an agent to insist on the signing of a mandate and discussing the commission payable on the sale of the property before he starts marketing it, she said.

Although agents work on risk, there has to be reward if they are the effective cause of the sale as they will have incurred costs, said Steward.

In the case Tekenpraktyk CC v Erf 2720 Tzaneen (Pty) Ltd, an estate agent could not prove that he was entitled to commission because there was no written mandate and no agreed-to commission rate.

The estate agent (Human) testified that he had been given an oral mandate to sell a property and was contacted by a prospective buyer, Kalan, who was interested in a property close to the one which Human was selling.

They agreed on a price and as the seller, van der Laan, said he wanted a net amount of R5 million, the price given to Kalan for the property by Human was R5,5 million, which would mean that the commission was R500 000, as per the supposed agreement between the seller and himself. There, however, seemed to be no specific agreement on the commission.

While the courts acknowledged that Human had been the effective cause of the sale, because there was no written mandate and therefore no firm commission arrangement, he was not entitled to payment of commission on the sale of the property.

"No one works for nothing" said Steward, "and it is only fair and just for sellers to agree to sign a mandate, whether it be a sole, dual or a joint mandate, so that you know exactly who you are dealing with.

If a seller is shying away from a sole mandate, there are the other options available to him, where two, three or more agents could be given the mandate to sell the property and he does not need to feel that giving an agent a mandate is restrictive.

On the other hand, she said, a mandate also ties the agent to the seller in that they must perform. They will have committed to marketing the home and will ensure that it is advertised and shown to all the prospective buyers on their buyers' list, she said. 

"This is your biggest asset and it should be treated with the same professionalism as in any other line of business."


For further information contact Lanice Steward on 021 671 9120021 671 9120 or email lanice@res.za.knightfrank.com.