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Commission for Unregistered Estate Agents

Commission and Unregistered Estate Agents

Previously, there was a court case which made rulings related to the payment of commission to unregistered estate agents who concluded a sale of property on behalf of the estate agency.

Commission Paid to Unregistered Estate Agents

Agent “A” claimed that he was employed by “Property Group X” as an agent who had not obtained his fidelity certificate from the Estate Agency Affairs Board and could therefore not trade or operate as an accredited agent under the Act.

For this reason, agent “A” entered into an informal arrangement with agent “B” of the estate agency who was an accredited estate agent and was therefore entitled to claim agents commission from his sales.

Therefore, the agents agreed that agent “B” would conclude the transactions as an accredited agent but they would combine their efforts and property listings while working together on the successful conclusion of those sales. The conclusion of those sales by agent “B” ensured the sales were secured in accordance with the Property, Estate Agents and Consumer Protection Acts terms of sale.  The two agents would then share the commission paid to the agency by the property seller or owner.

During the proceedings, the estate agency argued the fact that both agents were employed under the same conditions and agent “A” had failed to attain a valid licence to operate as a registered estate agent during his term of office at Property Group X and was therefore not entitled to claim or receive commission payments during his term.

Unregistered Estate Agents Commission

It was there concluded that section 26 did not have the effect of invalidating the contract of mandate of an estate agent who acts in contravention of its terms.

Consequently, this conclusion led to the enactment of section 34A which originally provided that: “Any person acting contrary to the provisions of section 26 shall not be entitled to remuneration in respect of a transaction concluded by him as an estate agent while failing to comply with the provisions of section 26.”

At the time, section 26 of the Act as read with section 34A and said: “In terms of section 26 it is a distinct and separate condition for performing the acts of an estate agent that a valid fidelity fund certificate should have been issued to the person concerned. The consequence of contravening that section is that the person concerned is not entitled to remuneration from the performance of the act, and he or she also commits an offence in terms of section 34.”

Agent “A” argued that the property group was aware of the fact that he was unregistered when they employed him and therefore suggested he work with agent “B” (a licenced agent) and that their sales be concluded by agent “B” in favour of both agents to ensure the transactions were secured in accordance with the terms of the Act.

The agency was also aware of their arrangement and had previously paid shared commissions to both agents on successful transactions during agent “A”’s employment at the agency.

Unregistered Estate Agents

After agent “A” left the agency, the arrangement between agents A and B continued until their relationship soured and agent B terminated the agreement in order to sever the partnership.

Agent B agreed to pay agent A for transactions already in process, only once they were concluded and the agency had received payment for their services rendered.

Agent A issued summons against the estate agency and agent B claiming commission for 3 separate property transactions.

He claimed that transaction X and transaction Y were indeed covered by the termination agreement and that, according to their arrangement, the two agents were entitled to a 50% split of the commission payable in respect of these transactions where the seller or property owner had paid the estate agency for services provided.

Transaction Z’s commission received was split in this manner. However, the agency argued that even though transaction fell outside of the termination agreement, agent A was still the effective cause of the transaction and should be reimbursed his portion of the agent’s commission paid to agent B.

The original court ruling found in favour of the estate agency and agent B in respect of transactions Y and Z and ruled in favour of agent A for transaction X.

This gave rise to agent A’s appeal that the original court ruling be overturned in his favour even though he agency had set a precedent by paying him commissions during the time he represented the agency, and he had fairly earned his share of commission for transactions Y and Z.

Estate Agency Affairs Board

Agent A argued that the court wasn’t provided a complete insight into his arrangement with agent B as the agency had spoken on his behalf and were vague regarding the exact terms and conditions of the arrangement.

The agency agreed that agent A had some expertise with regard to property matters and that he was in effect acting on behalf of the agency as a principal, and not for his own account.

The agency introduced agent A as their representative and benefitted immensely from his efforts.

Section 26 of the Real Estate Agency Act

Agent A argued that he had fulfilled his requirements and therefore earned the commission he was claiming from the estate agency. The agency argued that according to them “Any person acting contrary to the provisions of section 26 shall not be entitled to remuneration in respect of a transaction concluded by him as an estate agent while failing to comply with the provisions of section 26.”

Property Group X further argued that the Supreme Court of Appeal consider the purpose of the enactment of section 34A and that it was not enacted for the benefit of client but for the agency and estate agent to be fairly paid for their services rendered which secured the effective transaction provided they were not in breach of section 26. They further argued that estate agents in breach of section 26 would forfeit their sales commission.

Agent B argued although terminated, the arrangement still allowed for payment of commissions to agent A only if he had received his commission payment from the estate agency.

However, agent B was never reimbursed for the concluded transaction Y and therefore he could not pay commission to agent A for this particular transaction.

The agency argued that the purchaser in transaction Y had never paid for the services rendered and since the agency had not received payment, neither agent was entitled to commission in this instance.

However, the agency failed to follow up on and receive this payment as was agreed since owner of Property Group X did not want to upset the client.

The agency was not entitled to make a decision which would prevent the agents from receiving their commission in this instance and the court found that since the agency had chosen not to pursue payment from the client, they would have to pay agent A his commission for services rendered for transaction Y.

Agent A’s appeal was successful and the judgement issued upheld that he would be fully compensated for commissions owing on the said transactions, including all legal costs.

Van Deventer & Van Deventer Incorporated – Property Attorneys Cape Town

For more information about property law and how it affects unregistered estate agents, contact our property attorneys in Johannesburg and Cape Town.

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