Estate agents commission disputes:

A comprehensive guide for sellers

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.