Will I still get my commission? Part 2

Last week we were discussing the case of Golden Rewards 120 CC t/a Remax Marine v M3 Holdings (Pty) Ltd.  Please read last week’s post for more details.  In simple terms, Remax Marine introduced a tenant to a landlord, but did not have a signed mandate with agreed commission in place.  The landlord then signed a lease with the tenant and refused to pay Remax Marine commission.

 1.     The issues that the Court had to decide were as follows:

(a) whether the lease agreement entered into between the defendant (landlord) and the plaintiff (estate agent) was as a direct result of the estate agent having introduced the tenant to the defendant;

(b) whether there was an agreement on the amount of commission due to the

plaintiff, either expressly, alternatively;

(c) whether it may be found that a tacit term regarding the usual rate of commission would apply as a direct result of the role of the plaintiff in the introduction of the tenant; the subsequent conclusion of the lease agreement and the usual commission structure in the area of Richards Bay;

(d) what the commission structure would be in a case like this;

(e) whether the plaintiff is entitled to any commission and, if so, the amount of such

commission; and

(f) Whether Mrs. Van der Vlies (the principal of Remax Marine), was an expert witness whose opinion would be admissible.

2.     The Judge said that the main questions that arose in this case, would be firstly whether, it could be inferred from the conduct of the defendant (landlord) towards the plaintiff (estate agent) that it was authorising the plaintiff to act on its behalf in order to find a tenant for the property. Secondly, whether there was consensus between the defendant and the plaintiff that the latter should act on behalf of the former. It would also be important to consider if in the course of their dealings, the plaintiff had made it clear to the defendant that it would expect the defendant to pay commission should the mandate be fulfilled.

3.     The Judge went on to say that the facts established from the interaction of the defendant and the employees of the plaintiff include that, there was substantial performance by the estate agent, in terms of the mandate. For instance, after the estate agent found the potential tenant, she was instrumental in presentation of the property to the potential tenant, and she facilitated the meeting of the tenant with the landlord. After the tenant had inspected the property, the estate agent continued to interact with the landlord in communicating the specification and requirements for alterations and other needs of both parties. The role played by the estate agent was therefore not limited to the introduction of the tenant but went much further.

4.     The Judge made the interesting point, that it was clear from the various emails and communications between the landlord and the estate agent, that it could be gathered that the defendant (landlord) was conscious of its responsibility to pay the remuneration of the plaintiff for the services they had rendered towards the leasing of its property. The Judge also said that it was interesting to note that in the various communications, the landlord attempted to misrepresent the period of the lease agreement that had been concluded. The Judge indicated that the defendant was always “alive” to the reality that it was liable to remunerate the plaintiff for the services rendered.

5.     Importantly, the Judge discussed the issue of EFFECTIVE CAUSE.  The Judge was quite clear in saying that if the estate agent was the effective cause of the transaction, then there would be no basis upon which it can be said that the estate agent did not earn its remuneration. Although the estate agent was not present when the lease was entered into, or informed when the lease agreement was signed, after she introduced the tenant, she was always involved and engaged with the parties during the negotiations. Clearly, if it was not for the plaintiff finding the tenant, the defendant would not have known that the tenant had an interest in its property.  In this case, the Judge was of the view that the estate agent had a mandate, performed the mandate and although commission was not agreed, it had been discussed, negotiated and contemplated by the defendant, being the landlord.

6.     The Judge accepted that the principal (Mrs Van der Vlies) of Remax Marine could be considered to be an expert and give expert testimony.  The Judge referred to the qualifications she (the principal) possessed, coupled with her extensive experience and exposure in the industry.  The Judge concluded that it would be safe to rely on her opinion in reaching a conclusion on what could be the customary and accepted rate of commission for commercial property transactions, applicable to estate agents, within the Richards Bay area.

7.     The Judge referred to other court cases and indicated that the opinion and decision of the Judges in these court cases, as to what amounts to reasonable remuneration, was that, “as a general rule, where nothing is said about the remuneration an estate agent is to receive there is nonetheless a tacit promise to pay commission at the usual rate.”

8.     The Judge also indicated that the commission calculations provided by the estate agent and the calculations provided by the landlord (as per the various communications between the landlord and the estate agent), were not significantly different.

AND THE PART THAT YOU ARE WAITING FOR:

The transaction and initial dispute occurred in 2017 and judgement was handed down in May 2024.  You will be pleased to learn that the Judge ruled in favour of the estate agent and made the following award:

a.     The landlord was ordered to pay Remax Marine commission amounting to

R407 402.34, calculated as at March 2024;

b.     Further commission calculated for each and every month after March 2024 that the tenant continues to remain in occupation of the property;

c.      Interest on the amount of R407 402.34 at the legal rate from 1 December 2017 (10.25% per annum) to the date of final payment;

d.     Interest on further commission calculated for each month that the tenant remains in occupation of the property after March 2024 at the legal rate; and

e.     Legal costs of the court case.

NOTWITHSTANDING THE FACT THAT THE ESTATE AGENT WON THE CASE, WHAT ARE THE IMPORTANT LESSONS THAT WE LEARN FROM THIS CASE:

1.     Ensure that you obtain a written mandate from your client, before commencing working on, and marketing a property; and

2.     Ensure that you have agreed the rate of commission with your client, in your mandate, as it is best to avoid lengthy and costly legal battles, such as this case.

You are welcome to email us on graeme@cpmd.co.za

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