Property Network Advice Centre - Legal Brief on Commissions

AGENT COMMISSIONS - BASIC GUIDELINES

An estate agent earns commission on fulfilment of his/her mandate. Unless the mandate stipulates differently, this is when a binding agreement of sale takes place between a willing and able purchaser and the seller and all suspensive conditions, such as obtaining a bond have been met. Payment of said commission takes place on date of transfer.

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In terms of the Estate Agents’ Code of Conduct, the following applies:

An agent may not receive any commission on a sale that is subject to a suspensive condition – until such time as the condition is met (mortgage loan approval or sale of another property) as the agreement only becomes binding once the suspensive condition has been fulfilled. The same applies in the event that the sale contains a resolutive condition - where the sale can still fall away before transfer.
In the event that the parties should agree to payment before conditions have been met, this must be consented to by the party liable for payment of commission in a written document, separate from the agreement of sale, and this document must contain a written explanation of the implications and financial risks and must be signed by the one liable for the payment and the estate agent.
No agent may put a clause in a mandate or agreement that he/she will be paid commission regardless of whether the purchaser is financially able to fulfil his/her obligations in term of the agreement.
In the event that the seller has however agreed to such a practice, this must be put in writing before he signs the mandate or agreement, in a document separate from the mandate or agreement and this document must contain a written explanation of the implications and financial risks and must be signed by the seller and the estate agent.
An agent may not put a clause in the agreement entitling him/her to deduct commission from a deposit before date of transfer.

Further Points to Note :

Please note that the IEASA no longer issues any guidelines on estate agent commissions and fees. They were discontinued in 2004, in view of changes in the competition laws. There are currently no official or unofficial guidelines or tariffs whatsoever. Estate agents are free to charge whatever commissions and fees they choose, and which the market will accept.
Payment of commissions normally happens on registration unless agreed to otherwise between the seller and the agent. The conveyancers will deduct the commission from the proceeds of the sale and pay these monies over.
Sellers can be held liable for double commissions if for instance they sign a mandate with one agent and conclude a sale through another agent without the mandate agents being aware thereof or agreeing to share commissions. The agent holding the mandate will be entitled to take legal action.

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