Last week I discussed alternative dispute resolution in real estate disputes and specifically the use of mediation in such disputes. It is important to note, that as a property practitioner, you have obligations in terms of the Code of Conduct, to prevent disputes. Let us take a look at an example.
Let us assume that you have a mandate from a seller to sell their property. Let us also assume that you are having a show house for this property and in walks a potential buyer. After obtaining the buyer’s details and doing a walk through the property with the potential buyer, this person mentions in passing, that they have actually been to the property previously with another agent. The potential buyer tells you that they had previously seen the property six months ago with an agent whom the seller had given a mandate to sell the property at that point in time, which you are aware of, as the seller had in fact told you about the previous agent and mandate.
Clause 34.6.3 of the Code of Conduct states that, no agent shall:
34.6.3 introduce a prospective purchaser or lessee to any immovable property or to the seller or lessor thereof, if he knows, or has reason to believe, that:
34.6.3.1 such person has already been introduced to such property or the seller or lessor thereof by another estate agent; and
34.6.3.2 that there is a likelihood that his client may have to pay commission to such other estate agent, or to more than one estate agent, should the sale or lease be concluded through his intervention;
You can see that Clause 34.6.3 clearly says that you may not introduce that potential buyer, if that person has previously been introduced to the property or seller and there is a likelihood that the seller may have to pay more than one commission if you sell the property, being commission payable to you and to the previous agent. This leaves you with an interesting debate in your own mind. If you feel that there is no likelihood that double commission would be payable, then you may proceed with that potential buyer. This is not an objective test and ten agents may arrive at ten different conclusions!
Interestingly, my personal belief is that the previous Code of Conduct was far better in this respect.
Clause 8.3 of the previous Code of Conduct said that no agent may introduce a prospective purchaser or lessee to any immovable property or to the seller or lessor thereof, if he knows, or has reason to believe, that such person has already been introduced to such property or the seller or lessor thereof by another estate agent and that there is a likelihood that his client may have to pay commission to such other, or to more than one estate agent, should the sale or lease be concluded through his intervention: Provided that the aforegoing shall not apply if the estate agent has informed his client of such likelihood and obtained his written consent to introduce such party to the property or the seller or lessor thereof;
The caveat to the old Clause 8.3 was very clear. As the second agent, your responsibility would have been to inform your client of the possibility of a double claim for commission and get your client’s permission in writing to introduce the potential buyer.
Although the current Clause 34.6.3 does not require you as the agent to obtain your client’s permission in writing, it is suggested that you do so. You have an ethical obligation to not expose your client to any disputes and obtaining your client’s permission in writing will protect you in the event of a dispute and is also good practice from an ethical perspective.
Remember, that in terms of Clause 34.6.3, if you believe that there is a likelihood of a double claim for commission, you may not proceed with the potential buyer, even if you have the seller’s consent in writing to do so.
Likewise, notwithstanding the fact that you do not believe that there is a likelihood of a double claim for commission and you have obtained your client’s permission in writing to introduce the potential buyer, this does not mean to say that your client won’t face a double claim for commission.
In the event that you sell the property, you would be entitled to be paid your commission and almost certainly, the previous agent will want to claim commission from the seller as well, having also introduced the same buyer to the seller. In such an event, it is suggested that you refer the matter to mediation to attempt to resolve the dispute before any litigation. All three parties (both agents and the seller) could attend the mediation proceedings and given that mediation is voluntary and a far more amicable process than the parties resorting to attorneys and a legal process, the chance of successfully resolving the dispute is quite high.
Sometimes disputes happen in property transactions. What is important is how the dispute is handled once it occurs. If you currently have a dispute that you are dealing with, you are welcome to contact me for any advice regarding mediation or should you wish to appoint a mediator.
You are welcome to email me on graeme@cpmd.co.za
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