An "effective cause" refers to the cause that led to a successful outcome or transaction. In the context of claiming estate agent commission, it would refer to the actions or efforts of the estate agent that directly led to the successful sale or rental of a property. In order for an estate agent to be entitled to commission, they must have been the effective cause of the transaction. This means that they must have played a direct and significant role in bringing the buyer or tenant and the seller or landlord together and in facilitating the successful completion of the transaction.
To be eligible for commission, the following criteria must be met:
In a scenario where a seller gave multiple agents mandates to find a buyer for a property at an asking price of 40,000 pounds, the court will consider which agent's actions directly led to the successful sale of the property. Agent 1 introduced a buyer who was interested in purchasing the property at a price between 39,000 and 40,000 pounds. However, the buyer also contacted Agent 2, who also had a mandate, and after negotiating, Agent 2 reduced their commission, making it possible to conclude the sale at 39,500 pounds.
The court found that although many factors contributed to the sale, Agent 1's efforts were the effective cause as it was through their actions that the situation was right for the sale to be completed and real sales resistance had already broken down. Additionally, if the buyer simply wanted a better deal and negotiated the transaction through another agent who was willing to reduce their commission, this does not make the latter the effective cause.
In another case, Agent 1 introduced a buyer to a property on August 1, 1988. The seller wanted a net price of R500,000 while the buyer was only prepared to pay a gross amount of R525,000. If the commission was paid according to the recommended tariff of 5.5%, which was R28,875, the seller would have received a net price of R496,125. The buyer, who was introduced to the property through Agent 1, then submitted a formal offer through Agent 2, who successfully negotiated a sale of R525,000 after agreeing to cut their commission to R25,000, leaving the seller with R500,000.
The court found that Agent 1 told the buyer about the dry wall, and this was the decisive factor that caused the buyer to purchase the property, and Agent 1 would have undoubtedly also have been prepared to drop its commission to make the sale possible if the need to do so had arisen. The court upheld Agent 1's claim for commission on the grounds that it was the effective cause.
In January 1991, the owner of a property in Uitenhage, known as G, gave Agent 1 (A1) an open mandate to find a buyer for the property at an asking price of R250,000, excluding the agent's commission. On March 17, 1992, more than a year after the mandate was given, a buyer named P submitted a written offer through A1 for R245,000 gross. G informed A1 that they would accept R235,000 net, so A1 attempted to persuade P to increase their offer by R3,000 so that A1 could earn at least R10,000 commission. However, before the deal was concluded, P withdrew their offer and told A1 that they were looking at other houses.
A little later, A1 received advice from G that the property had been temporarily withdrawn from A1's agency and that the sole agency had been given to Agent 2 (A2). The following day, A1 learned that the property had been sold through A2. A1 sued for 6% commission. The Magistrate Court ruled that A1 had been effectively pipped at the post by A2 who had slipped in the back door at the most opportune moment and concluded the sale without much effort at all. The High Court, however, held that the act of lowering the commission was the effective cause of the sale and that A1 did not seize the opportunity to reduce their commission to make the deal possible when P advised that they would be looking at other houses.
The High Court's reasoning is that in order for an estate agent to be considered the effective cause of a transaction, they must show that it was their efforts that resulted in the sale being concluded. This is determined by identifying the factors and/or efforts that played a role in bringing about the transaction and determining which of those played the most significant role.
The case of Wakefields Real Estate (Pty) Ltd v Attree revolved around a dispute over who was the effective cause of the sale of a property in Monteith Place, Durban North and therefore who was entitled to commission. The sellers, Mr. and Mrs. Attree, had already paid commission to Pam Golding Properties, which they shared with Remax who had the sold mandate at the time of the sale. The KwaZulu Natal High Court found that the Pam Golding agent was the effective cause of the sale, but Wakefields Real Estate (Pty) Ltd appealed the decision to the South African Supreme Court of Appeal. The Supreme Court of Appeal found that when there are competing estate agents, it is notoriously difficult to determine who the effective cause of the sale is, and it is possible that more than one agent is entitled to commission.
The Court also found that Wakefields Real Estate (Pty) Ltd was entitled to their commission at 6% plus VAT and that the fact that the sellers found themselves liable to pay more than one estate agency was of their own making. It is clear that sellers need to protect themselves by appointing a sole agent to market their property, rather than have multiple agents with the attendant dangers as outlined above.
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