The position of those who, in return for a fee or a commission, introduce potential property buyers to an estate agent needs to be carefully defined, put in writing and signed by both parties.
There has been more than one court case in recent years on this subject. Although such deals appear to be straightforward, the role and remuneration of the referee/middle man in estate agency work has often led to difficulties, which is perhaps one reason why so few estate agents enter into this type of agreement.
Position of middle man in relation to estate agency: A case
Recently, our firm represented a German client who did a deal with a local estate agency, in terms of which he undertook to introduce potential clients from Europe to the estate agency in question. Should any of these introductions result in the sale of a property, it was agreed that the middle man would be paid a commission of 3,5% of the sale price on the first three sales, after which his position would be reviewed. He had, moreover, to operate on an exclusive basis, which precluded him from taking buyers to any other estate agency or no buyer already known to the estate agency and on their database could be introduced by the middle man.
The agreement was finalized by email and when the middle man suggested that the arrangement be put into a more formal format, the estate agency replied that there was no need for this as the email was sufficient evidence.
On account of health problems, the middle man’s client for some two years hesitated before considering a home purchase in South Africa. However after a lengthy break he then went directly to the estate agency and bought a Cape Peninsula home for a price of R3,8 million. In going directly to the estate agency he stressed at the time that this did not mean in his view that the agency’s obligations to the middle man had fallen away. It should be recognized, he said, that the middle man had brought about the original meeting and he expected the estate agency to honour their agreement with him.
The estate agency, however, denied this. They said that during the interim period the middle man had lost touch with them on this matter and as the buyer had now come to them of his own accord, there were no longer any ties to the middle man. They also raised (for the first time) the issue that because the middle man had no Fidelity Fund Certificate he was not a registered estate agent and was therefore banned from collecting sales-related commissions. Needless to say, this point had not been raised when the original agreement was being drawn up.
A clause in the Estate Agency Act broadens the definition of an estate agent to include any person involved in the canvassing for property or advising purchases. Such people are deemed to be employed by the estate agency.
Position of middle man in relation to estate agency: Analysis
Because the middle man lacked a Fidelity Fund Certificate, in our opinion, two points apply. (A) The estate agency should not have entered into the agreement in the first place, but, in doing so, they should have had to maintain the agreement. (B) If they did not raise this issue at the time of the original agreement it was unethical to have done so at this stage; they should at the outset have discussed the implications of the lack of a Fidelity Fund Certificate. The maxim of the law is that any original agreement will always stand unless both parties agree subsequently to a change and put this in writing. We feel strongly that the estate agency was ducking their obligations and did not have a valid case.
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