Don’t get into a double bind over commission

The agent, notes Jan Davel, MD of the RealNet estate agency group, must be the “effective cause” of the sale. “In other words, the buyer must be attracted to the property, or alerted to the fact that it is for sale, by that estate agent’s own marketing efforts – including, for example, the placement of advertisements or the holding of showdays.

“However this principle, which has been upheld by the courts many times over the years, can easily lead to home sellers having to pay ‘double commission’ if they do not take great care when they change their mandate from one agency to another or allow their homes to be marketed by several agents at a time.”

It also quite often happens, he says, that a seller whose property is being marketed by one agent or agency will be contacted by another agent offering to “deliver” – for a lower commission - a buyer who has become interested in the property as a result of the efforts of the first agent.

“But if a sale materialises in such a situation, the first agent will be in a strong position to claim that he or she was actually the ‘effective cause’ of sale and to claim the commission on the sale - even if the second agent has negotiated the actual sales agreement, and even if the seller has already paid commission to the second agent.”

And the ‘effective cause’ concept goes even further, says Davel. “If a person who views a property through an estate agent then tells someone else about the property and that person buys the property through a second agent, the first agent may still be regarded as the ‘effective cause’ of the sale, and the seller will most likely still be liable to pay him or her a commission on the transaction.”

The proper course of action in such instances, he says, is for the second agent to first reach an agreement with the first agent about how they will divide the commission – and to then indemnify the property seller, in writing, against any further commission claims or claims for damages by the first agent.

Indeed, any agent who does not follow this procedure and thus exposes his or her client to the risk of a ‘double commission’ claim will be contravening the statutory Code of Conduct for Estate Agents and subject to disciplinary action by the Estate Agency Affairs Board.
“In most cases, though, property sellers would be much better off if they just award a sole mandate and refuse to allow anyone else to interfere with this, or failing that, make sure that they have a written indemnity and a copy of the commission split agreement before they sign any offer to purchase where there are multiple agents involved.
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