A sole mandate and double commission. How is this possible? | Legal Articles

 

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A sole mandate and double commission. How is this possible?

The presence of several agents can lead to confusion about which agent introduced the buyer in the first instance. 

This could lead to the possibility of the seller paying for double commission, and so they should be aware of this when they select an open mandate. 

How does double commission arise?

Even with a sole mandate in place a seller could be liable for double commision. This is because when one sole mandate expires, and another is awarded to a new agent, there could be a period during this time when the previous agent is still eligible for commission if the property is sold to someone who was introduced by the first agent.

If one agency can prove that it's agent introduced the buyer to a property, then the court would find the initial agent in favour of receiving the due commission.

In a commission dispute, the Judge of Appeal ruled that the sellers (Mr and Mrs Attree) liable for commission to more than one agent and added that the situation was “of their own making”.

The buyers (Mr and Mrs Howard) were introduced to the house by an agent from Wakefields Real Estate however the initial offer was too expensive. Later, another agent became involved and managed to persuade the sellers to lower their price which resulted in the buyers purchasing the house. 

As Wakefields’ introduction of the buyer was the effective cause for sale, they were able to claim commission. The sellers also had to pay commission to the agency who sold the property and another agency which had a sole mandate at the time of sale. 

The courts tend to be of the opinion that while it can be difficult to distinguish between the efforts of one agent and another in terms of initial causality, the seller may owe commission to both agents and legal precedent has stated that they have only themselves to blame for this predicament, for they should protect themselves against that risk.

The benefits of a sole mandate

A sole mandate is fundamentally designed to protect seller and agent as only one agent is mandated to deal with the property and commission is only payable in terms of the mandate, without agents having to prove effective cause.

A sole mandates strength of security for both sellers and agents lies in the fact that it is a legally binding document comprising a set of legal controls backed by the Estate Agency Affairs Board (EAAB) Code of Conduct.

By comparison, there may be some aspects to an open mandate that are vague, leading to the probability of questions as to which agency was in fact the effective cause of the sale. 

It is advisable to always have a clear, written contract in place to protect all the parties concerned.

This truly highlights the importance of open communication between a seller and agent, and to ensure all the clauses are acknowledged and understood, they should go through the sole mandate together.

Sellers might argue that several agents mean more potential buyers. But, when a property appears week after week in the local newspaper under every estate agency’s banner, and if numerous ‘for sale’ signs, bearing the names of various estate agents are littering the pavement, the common perception will be that there is something wrong with the property since nobody appears to want to buy it.

Seller checklist to avoid commission pitfalls

One suggestion is that sellers make use of a checklist before they sign a sole mandate. Besides the agreed-to time period, the sole mandate should comprise of: 

  • The price of the property
  • The rate of brokerage
  • The terms of the mandate with regard to exclusive marketing and selling rights
  • The obligations of the agents in regard to marketing and advertising 
  • The obligation of the seller during and after the expiry of the sole mandate with regard to buyers introduced while the mandate is current.

Van Deventers & Van Deventers Incorporated - Property Conveyancers Sandton

Contact us for advice in wording your sales mandate.

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