The right of an Estate Agent to earn commission is enshrined in keeping law. In general, commission arrives when the Estate Agent has execute a consumer’s require, regardless of the buy to let burnley amount of time or effort it took to perform the require.
In South Africa, there is no limit to the amount of commission an Estate Agent can charge. In the superior end of the market, this often results in impressive earnings. These facts, combined with the public perception that an Estate Agent is often seen to do very little which have a practical the handsome rewards received, has encouraged many people to join the Estate Agency industry. Ultimately count there were more than 72, 000 Estate Agents registered in South Africa. Although, in start doing, not all are try really hard to working as Estate Agents. Many Estate Agents are active only when the property market is buoyant and go dormant when the market slows. Nevertheless, they are qualified to do something as Estate Agents and may resume activity every time they feel, with the provision that they comply with the prerequisites of the Estate Agencies Affairs Act.
Giving rise to commission dispute
Before we go on, it ought to be noted that most property deals go through without dispute. However, this does not mean that of the deals that go through there was no reason for dispute. Not knowing is often a cause for valid claims not being made, mostly quietly of the client. For such cases there is nothing one can do in retrospect, since all wrongs committed by Estate Agents are automatically made right upon date of transfer. No need to repent or visit confession, all sins are just magically wiped away.
In most cases commission disputes arise simply as a result of disbelief by the public as to their liberties and duties when they give an Estate Agent a require. However, dispute also arises due to disbelief of Estate Agents as to their liberties and duties in performing a consumer’s require. Both types of disbelief can be easily avoided if Estate Agents spend more time being “frank” about discussing commission before accepting a require. In start doing, this does not always happen, whether because of forgetfulness, lack of persistance or because of pressure to get the require. Discussion surrounding commission is often relegated to a require form, placed in front of the client with the expectation of signing. This document merely serves to capture the basic details and rarely elaborates on definition of terms, liberties or duties at length.
While it is sound business start doing to record on paper the amount of commission and under what circumstances the require will be considered fulfilled, some mandates leave out small points that are not in the Estate Agency go for or the document itself serves to cover “conditions of absence in agreement” covered by common law. For example, under common law, in the absence of an agreement to the contrary, an Estate Agent is not entitled to commission simply because, over a period of time, there have been a conscientious effort to use a clients require.
We have noted that certain common law principles govern an Estate Agent’s right to commission and that standard contracts are applied to cover such liberties. We have also noted that such documents can fail to explain terms and can be employed to protect the agent from common law principles that are not in the Estate Agents favor. Our remedy to reducing the potential for conflict is to encourage more open discussion and consultation of commission with clients by Estate Agents.
However, assuming such discussion were to occur, how is a person know whether or not an Estate Agent arrives commission when they themselves do not have enough information to ask the right questions during such discussion.
In this section we cover some of the points clients should know, compliance points that are often neglected or forgotten by even the most seasoned and professional of Estate Agents.
The first thing to know is that the Estate Agency Affairs Act and the Code of Conduct both have a direct impact on an Estate Agents right to receive commission. One of the most important fine prints of the act is that an Estate Agent may only receive commissions on transactions concluded during a period which is the Estate Agent is in person of a valid Fidelity Fund Certificate.
Second thing to know is that Estate Agents who have not complied with the prescribed training requirements are not allowed to receive commission on agreements where they have made to last or completed clauses in a sale or rental agreement.
In addition to these requirements section 8 of the [Code of Conduct] sets forth conditions under an Estate Agent would not be eligible for commission.
The significances of these three points are often not explained to clients. Rarely, when, is a client furbished with a copy, or presented, an Estate Agents Fidelity Fund Certificate or a copy of the Code of Conduct. Mind you, the Fidelity Fund Certificate is printed with a business card sized tear-off capable of fitting into a wallet where it can be easily kept like a drivers license and presented when required. There should be no reason why a professional Estate Agent with a valid Fidelity Fund Certificate should not wish to present it.
The act goes one step further. In addition to an individual Estate Agent having to hold a valid Fidelity Fund Certificate, the Agency Company, all participating directors and any person promoting or canvasing immovable property are also required to hold a valid Fidelity Fund Certificates. In the event that an agency does not have valid Fidelity Fund Certificate, or any of the Estate Agents or employees of the Agency, all people employed with such agency are not entitled to claim commission.
In an industry with more than 72, 000 agents, the public can easily be convinced to require the services of non-valid Estate Agents. Such persons, while operating illegally are not bound to operate under the Estate Agency Affairs Act or the Code of Conduct. As a result the Estate Agency Affairs Board, the organisation responsible for protecting the consumer, can only bring a criminal case against such persons and has no power to sanction any conduct. Whereas, if the Estate Agent is operating with a valid Fidelity Fund Certificate, failure to comply with requirements indicates conduct worthy of sanction that may see the Estate Agents license to operate revoked.
Performance of the require
Terms of require differ, but in general terms a require is seen to be fulfilled when:
- A buyer is introduced to the seller who is both legally and financially able to buy the property.
- A executed contract of sale is concluded. It is worth noting that a contract with suspensive conditions is not executed until such time so conditions have been met.
- A transaction and its terms are substantially in accordance with the clients require.
Point 3 is interesting. The word “substantially” gives rise to a special twist. Since it means that, unless a client makes express note that commission will only be paid when the contract is concluded on “exact terms stipulated”, a stimulus is not required to execute a require to the exact letter. For example, if the client wants 500, 000 for a property and the highest offer attainable is 450, 000, the client cannot refuse to pay the full commission agreed.
A further twist of this case can grow where an introduced buyer does not enter into a sale, but instead enters into a rental agreement. In this case, despite a rental agreement being in place, the Estate Agent is not deemed to have substantively completed the require and is not due commission as a different transaction to this which was mandated has lead.
In practice we see this problem occurring all the time. An Estate Agent concludes a contract of sale at a price less that what the consumer was able to accept. Then the seller wishes to negotiate the commission down.
Many people believe that all they need do to qualify for commission is introduce a buyer and seller from wish a contract of sale is concluded. This is possibly one of the most common misconceptions shared by both Estate Agents and clients alike.
In fact an Estate Agent is required to do the above and manage to signifying that he or she was the effective cause of the resulting transaction, north withstanding other factors. In reality many factors must be considered in order to demonstrate effective cause, including:
- How much effort did a stimulus put in. Simply giving a buyer and seller each others telephone numbers is not enough.
- The time between introduction and sale. If buyer and seller conclude a sale soon there after introduction, the argument that the Estate Agent was the effective cause is strong. However, if the sale agreement was held from considerable period of time, the argument would be more difficult to prove.
- The extent of consultation offered by the estate agent. If through an Estate Agents consultation one or more obstacles to conclusion of the sale where removed, then the effective cause is in favor of the Estate Agent. However, if the obstacles were removed without aid from the Estate Agent, then the effective cause is most certainly likely to lay with the buyer and seller.
- Frequency of interaction. How often did the Estate Agent communicate with the consumer and did the agent cease negotiations on prices with the buyer at any point in time.
This article has temporarily highlight a few of the main points concerning the liberties and duties of Estate Agents and clients using their services. While some could see the information provided as an approach to try avoid paying Estate Agents commission, the ability to do so legally is not easy. However, clients that feel they have genuinely not been served by an Estate Agent are not without option, if they have the information pertaining to their liberties and duties as clients.
Having said this, it ought to be noted that Estate Agents are not paid for good goals or hard work, only for bottom-line results. As a result it is not possible to measure an Estate Agents performance by the amount of work they put into a deal. Many Estate Agents do put a tremendous amount of work into their deals and take great pride in adhering to professional conduct. By the same token, an Estate Agent can earn huge amounts of commission for relatively little work, but in this case runs the risk of getting nothing whatsoever if the require is neglected.
In closing it could be quarreled that the expectations and needs of clients would be better served if clients were better informed about both their own liberties and duties and those of Estate Agents. However, in order for service levels to be improved, clients must also be able to enforce their liberties and not accept poorly Estate Agents or negligent service.