When a Seller employs the help of an Estate Agent to sell a property, the Seller is liable to pay commission to the Estate Agent who was the effective cause of the sale of their property.
According to Bruce Forrest, managing partner at KwaZulu-Natal legal firm, Meumann White, there are many instances where Sellers are eager to sell their property and thus bring in more than one Estate Agent to sell their property as quickly as possible.
In this instance the Seller runs the risk of paying double commission.
Double commission applies when a Purchaser is shown the property by more than one Estate Agent.
All of the Estate Agents who show the prospective Purchaser the property can be regarded as the effective cause of the sale.
For example, both an Agent who concludes the sale and an Agent that originally introduced the Purchaser to the property may be entitled to compensation.
Therefore, it’s important for Sellers to guard themselves against the dreaded ‘double commission’.
According to Gerhard Kotzé, MD of the RealNet estate agency group, the most obvious and safe way to do this is to award a sole mandate to a reputable agency that has the backing of a large national group.
This will help to protect the Seller against double commission claims and will also ensure them of wide exposure through the group’s large referral networks.
Taking this route will also ensure agents work harder to sell the properties on which they hold sole mandates than on properties where there is a possibility that another agent could conclude a sale and reap all the reward.
If more exposure is needed once a sole mandate has expired, the Seller may allow the sole agent to advise on the appointment of other agents as sub-agents.
According to Kotzé another way that a Seller can protect themselves from a double commission claim is, when there is an open mandate, the Seller must insist on a clause in the mandate that specifically provides for commission to be shared in any instance where more than one claim arises. This will indemnify the Seller against a double commission claim when there is more than one agent involved in a sale.
It’s therefore very important that Sellers read all the fine print in order to prepare themselves for any grey areas where they might be at risk of paying double commission, such as when terminating a sole mandate with one agent and signing up another.
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