An unwary seller may have to pay estate agents' commission twice over
Estate agent's commission - identifying the agent who was the "effective cause" of the sale
The purchase and sale of a residence is, for most people, the biggest financial transaction of their life. Such transactions are fraught with legal hazards.
Yet, many sellers take no legal advice, sign contracts (drawn up by estate agents) that they do not really understand, and then - knowingly or unknowingly - act inconsistently with their obligations under the contract.
It is notorious that as soon as the owner of a desirable property makes it known that he is thinking of selling, estate agents descend in droves. When the property is eventually sold, it is common for quarrels to break out between the agents as to which of them is entitled to commission on the sale. It is not uncommon for the seller who has paid commission to one agent to discover that another agent was in fact entitled to the commission, and he is then obliged to pay commission a second time.
The recent Supreme Court of Appeal decision in Wakefields Real Estate (Pty) Ltd v Attree 2011 (6) SA 557 (SCA) illustrates how a naive seller may find himself embroiled in litigation and end up having to pay commission to more than one estate agent.
At the outset, it may be noted that the term "estate agent" is a misnomer. An estate agent is not an "agent" in the true sense of the word in that he has no authority to sign a contract on behalf of either the purchaser or the seller.
All that an estate agent does is to introduce a willing seller to a willing buyer and, having done so, is then entitled to be paid commission by the seller on the selling price - provided that his efforts were the effective cause of the sale.
It is not uncommon for several estate agents to be involved to varying degrees in the introduction of the eventual buyer to the seller. For example, a prospective buyer, introduced to a property by agent A, may later buy it through agent B when the latter persuades the seller to drop his price.
When the property is eventually sold, it can then be difficult for a court to determine which of the various estate agents was the "effective cause" of the sale. As van den Heever JA said in Webranchek v LK Jacobs and Co Ltd 1948 (4) SA 671 (A) -
'Situations are conceivable in which it is impossible to distinguish between the efforts of one agent and another in terms of causality or degrees of causation. In such a situation it may well be ... that the principal may owe commission to both agents and that he is only himself to blame for his predicament, for he should protect himself against that risk.'
Thus, for example, the seller may have given a sole agency to agent A, but may then allow agent B to introduce prospective purchasers to him, and eventually sell to one of those persons. The seller may then be liable to agent A for commission on the basis of the sole agency agreement (for such an agreement will usually stipulate that the sole agent is entitled to commission if the property is sold during the currency of the agreement, even if the purchaser was introduced by another agent) and may also be liable for commission to agent B as being the effective cause of the sale.
Where a property is sold, it is not necessarily the case that the agent who first introduced the purchaser to the seller will have been the effective cause of the sale, for subsequent events may outweigh the effect of that initial introduction.
The Wakefields case is, in many respects, an illustration of the many pitfalls that a prospective seller can fall into. Thus, for example, the seller in this case gave a sole mandate to one firm of estate agents, Remax, and then foolishly phoned other agents to tell them about the property. One of those other agents brought someone to see the property, who then made an offer through that agent, which the seller accepted.
In the Wakefields matter, the question of which of the various agents had been the "effective cause" of the sale balanced on a knife-edge.
The High Court decided that Wakefields, who had made the initial introduction of the eventual purchaser, had not been the effective cause of the sale, but this decision was reversed by the Supreme Court of Appeal which held that Wakefields had indeed been the effective cause of the sale (despite the significant role played by other agents) and were entitled to the sales commission, amounting to over
In the result, the seller who had already paid commission of R150 000 to another agent, found himself having to pay commission again to Wakefields - plus the costs of the litigation