Lessons from a Recent Property Practitioner Dispute
Securing a property sale is no small feat for Property Practitioners. From tirelessly networking and arranging countless viewings to handling tough negotiations and managing client expectations, every successful deal is the result of dedication, persistence, and skill. Yet, despite these efforts, disputes over commission can still arise, casting a shadow over a Property Practitioner's hard-earned success. A recent case in the Western Cape High Court, City and Atlantic Real Estate CC t/a RE/MAX Living v. Smith and Others, offers valuable lessons for Property Practitioners on how to protect their rights and avoid similar challenges.
The case centred on two property agencies, RE/MAX Living and Kapstadt International Properties, both of whom claimed entitlement to commission on the sale of a high-value property. The dispute involved the legal principle of "effective cause," which determines which Practitioner's efforts led directly to the sale.
RE/MAX Living had introduced the buyer, Mr James Pears, to the property during the validity of their joint mandate with Kapstadt. They facilitated multiple viewings, engaged in negotiations, and remained in contact with the buyer throughout the mandate period. However, the buyer ultimately concluded the transaction through Kapstadt almost a year later. The sellers, aware of RE/MAX Living's initial involvement, had indemnified themselves against potential claims from both agencies. This created a complex situation, requiring the court to determine which agency's actions were the primary and effective cause of the sale.
The court ruled in favour of RE/MAX Living, finding that their efforts during the mandate period were the causa causans — the dominant and effective cause — of the sale. The judgment highlighted several key principles Property Practitioners should keep in mind:
- Clarity in Mandates: The joint mandate between the parties played a pivotal role in the court's decision. Its language clearly established the conditions under which commission would be due. Property Practitioners should ensure their mandates are unambiguous and explicitly address scenarios such as shared mandates, overlapping efforts, and time limits. Legal advice is invaluable when drafting these agreements.
- Documenting Efforts: The court relied heavily on evidence of RE/MAX Living's actions — introducing the buyer, facilitating viewings, and engaging in negotiations. Property Practitioners should maintain detailed records of their interactions with potential buyers and sellers. This includes emails, meeting notes, and even WhatsApp messages, as these may prove crucial if disputes arise.
- Understanding Effective Cause: The judgment reiterated that a Property Practitioner's entitlement to commission depends on whether their efforts were the dominant factor in achieving the sale. Introducing a buyer is not always enough; Practitioners must demonstrate that their involvement significantly contributed to the transaction. Discussing this concept with a legal adviser can help clarify how it applies in different contexts.
- Risk of Litigation: While the court ultimately sided with RE/MAX Living, the process of litigation was lengthy and expensive. The judge noted that this dispute may have been better suited for mediation, a faster and more cost-effective alternative. Property Practitioners should consider including mediation clauses in their agreements as a first step in resolving conflicts.
- Avoiding Overlaps: The role of Kapstadt in the sale complicated the matter significantly. When engaging in joint mandates or working alongside other agencies, it is essential to establish clear rules of engagement. Sellers, too, should understand their obligations to avoid inadvertently creating liabilities for double commissions.
This case underscores the importance of aligning operational practices with legal frameworks. Property Practitioners, who often rely on commission as their primary income source, cannot afford to overlook the finer points of their legal arrangements.
By ensuring that mandates are clear, actions are well-documented, and potential conflicts are anticipated, Practitioners can safeguard their interests and focus on what they do best: connecting buyers with their dream properties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
